TaxTMI 
TaxTMI 
2026 (9) TMI 1965
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....y contracts company in the field of water, sewage and Industrial effluents and filed its return of income for AY 2017-18 on 27.10.2017 by declaring total income as Rs. 4,75,79,620/- and Book Profit of Rs. 6,54,81,808/- u/s. 115JB of the Act. Later the case was selected for scrutiny under CASS and the statutory notices were issued. The Assessing Officer concluded the assessment by making the following additions vide the Assessment Order dated 27.11.2019: Sl.No. Particulars of Disallowance Amount 1. Disallowance of deduction u/s. 80IA Rs.1,96,78,063/- 2. Disallowance u/s. 2(24)(x) r.w.s. 36(1)(va) Rs.12,38,233/- 3. Aggrieved by the additions made in the assessment order, the assessee preferred an appeal before the Ld.CIT (A) on 24.12.2019. The Ld.CIT(A), upon consideration of the facts and submissions on record, partly allowed the appeal by deleting the disallowance u/s. 80IA of the Act amounting Rs. 1,96,78,063/-, while confirming the disallowance made u/s. 2(24)(x) r.w.s 36(1)(va) of the Act. 4. Being aggrieved by the order of the ld.CIT(A) dated 19.11.2025, the Revenue is in appeal before us by raising the following grounds of appeal:- "1.....
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....ss total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (4) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this Section, be allowed, in computing the total income of the assessee, a deduction of an amount equal to hundred per cent of the profits and gains derived from such business for ten consecutive Assessment Year. (4) This Section applies to- (i) any enterprise carrying on the business of (i) developing or (ii) operating and maintaining any infrastructural facility which fulfils all the following conditions, namely: - (a) It is owned by a company registered in India or by a consortium or any other body established or constituted under 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 operat....
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....O erred in concluding that the respondent has not used his funds as capital whereas the respondent has deployed its funds in carrying out the project. Further, the assessee has been awarded for the only reason that it has the infrastructure and expertise in that field and the projects are executed by the respondent and alongwith JV partner for certain projects. Under these circumstances the AO erred in concluding that section 80IA(4) of the Act is not applicable to the assessee. Further the AO in his Assessment order vide para 4.12 has summarised that the assessee has not fulfilled the conditions stipulated u/s. 80IA of the Act and rejected the claim of the assessee. 12. The assessee also relied on the ITAT Mumbai in the case of ACIT vs. Bharat Udyog Ltd. (2008) 118 ITD 336 held that: "A person who enters into a contract with another person will be a contractor no doubt; and the Respondent having entered into an agreement with Government of Maharashtra and also with APSEB for development of the infrastructure projects, is obviously a contractor but that does not derogate the Respondent from being a developer as well. The term 'contractor' is not essentially contradictor....
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....is carrying on the business of maintaining and operating the infrastructure facility cl.(c) of sub-section (4) is not applicable to the present assessee". 13. The above principle has also been rendered by Hon'ble Chennai Tribunal in ACIT vs. B. Dhanasekaran in ITA No.620/Mds/2013 and 320/Mds/2015 in East Coast Constructions & Industries Ltd. vs. DCIT in ITA No.544/Mds/2010 and by Hon'ble Bombay Tribunal in Patel Engineering vs DCIT 94 ITD 411 (Mum). 14. The Hon'ble Bombay High Court in the case of CIT vs. M/s. ABG Heavy Industries Ltd. (ITA No.1687/2009) held that "After Section 801A was amended by the Finance Act 2001, the section applies to an enterprise carrying on the business of (i) developing, or (ii) operating and maintaining; or (iii) developing, operating and maintain any infrastructure facility which fulfills certain conditions. The requirement that the operation and maintenance of the infrastructure facility should commence after 1st April 1995 has to be harmoniously construed with the main provision under which a deduction is available to an respondent who develops; or operates and maintains an infrastructure facility. Unless both the provisio....
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....and nature of business remain identical in the present year, the principle of judicial consistency requires that the same view be adopted unless there is a change in facts or law, which has not been demonstrated by the AO. Accordingly, it is held that the appellant is engaged in developing infrastructure facilities within the meaning of section 80-IA(4) of the Act and is entitled to deduction thereunder. Therefore, all the grounds raised upon this issue are treated as allowed and the AO is directed to delete the disallowance of Rs. 1,96,78,063/- made for the AY 2017-18." 18. The ld.DR for the revenue reiterating the grounds of appeal filed, supported the order of the AO and prayed for setting aside the order of the ld.CIT(A). 19. Per contra, the ld.AR for the filed a paper book consisting of 89 pages, wherein the ld.AR filed with written submissions, note on eligibility of deduction, break up of turnover from projects, Form CCB, order of the Tribunal, Circular No.717 dated 14.08.1995, Assessment order for the A.Y.2018-19 dated 21.08.2019 and letter of intent with Govt. authorities. The ld.AR submitted that the ld.CIT(A) has rightly followed the order of the Chennai Tribunal f....
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....s the assessee is concerned. The assessee has specifically relied upon the decision of the co-ordinate Bench of this Tribunal in its own case for AYs 2013-14 and 2014-15 in ITA Nos.2148/Chny/2017 & 1023/Chny/2018 dated 11.04.2019, wherein, on similar facts, the Tribunal had considered the assessee's eligibility for deduction u/s. 80-IA of the Act and decided the issue in favour of the assessee as under : 8. of At the outset, in respect of the issue of the deduction u/s. 80 IA(4) in respect of the contract entered into by the assessee with government agencies, it is noticed that the issue is now squarely covered by the decision of the Hon'ble Jurisdictional High Court in the case M/s.V.A.Tech Wabag Pvt. Ltd., in T.C.A.Nos.196 to 201 of 2019 dated 07.03.2019 as also the decision of the Hon'ble Jurisdictional High Court in the case of M/s. Chettinad Lignite Transport Services Pvt. Ltd., in TCA Nos.741, 1266 of 2009 and 162 of 2015 dated 06.03.2019, wherein, the Hon'ble Jurisdictional High Court has held as follows: 6. Having heard the learned counsel for the parties, we are satisfied that the findings of facts rendered by the learned Tribunal as well ....
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....y Private Limited, had undertaken the work of developing the said railway sidings and was operating and maintaining the same. The only ground on which, the Assessing Authority denied the said benefit was that the Assessee himself did not enter into any such contract with the Railways or with the Central Government. 9. The learned Tribunal, however, in our opinion, rightly applied the Proviso to Section 801A(4) of the Act and held that since the Assessee was recognised as contractor for these railway sidings, which undoubtedly fell under the definition of "infrastructure facility", it was entitled to the said benefit under Section 80IA of the Act. The grounds on which the Assessing Authority denied the said benefit to the Asessee ignoring the effect of Provisos to Section 801A(4), therefore, could not be sustained. The learned Tribunal, in our opinion, has rightly held that the Proviso does not require that there should be a direct agreement between the transferee enterprise and the specified authority for availing the benefit under Section 80IA of the Act. There is no dispute before us that the Assessee was duly recognised as transferee or assignee of the principal contrac....
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....e case M/s.V.A.Tech Wabag Pvt. Ltd., & M/s.Chettinad Lignite Transport Services of Pvt. Ltd., referred to supra, the findings of the Ld.CIT(A) on this issue, which are as under: 4.7 In the context of these factual parameters, let us examine the stipulations as per Section 801A(4) of the Act. The deduction under Section 801A is allowable to any enterprise carrying on the business of (i) Developing or (ii) Operating and maintaining (iii) Developing, operating and maintaining any, infrastructure facility. 4.7.1 The factual matrix as it emerges dearly establish that the appellant company has undertaken risks and not only designed and executed the project, but also made substantial investments in terms of skilled manpower as well as plant and machinery and raw materials. I find the reasoning of the AO to be erroneous when he states that the appellant company is a mere contractor and that it is not the owner of the infrastructure projects. If the interpretation of the AO is taken to its logical culmination, it would only be the Governments or local bodies that can claim deduction under Section 801A of the Act. This is dearly not the intention ....
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....orrection and liability period. The design of the project, the procurement of materials, payment to labour and other personnel are all appellant's responsibilities. In my considered view, these are not simple works contract, but come within the perimeter of "developing an infrastructure facility" within the meaning of Section 80IA of the Act. 4.7.2 Two peripheral arguments have been made by the AO in disallowing the claim under Section 80ΙΑ. i. That the profit has not been "derived from" the business of developing infrastructure projects. ii. That the appellant has itself accepted that it is a contractor by accepting tax to be deducted as per the provisions of Section 194C of the Act. 4.7.3 On examination of the financial statements as well as the Auditors' Certificate in Form 10CCB, I find that the appellant company has claimed deduction under Section 801A only From the projects eligible for the claim. The details are mentioned as below: a) Total Turnover of the Appellant Rs. 57,84,65,1 07/- b) Eligible Turnover of the Appellant Rs. 9,48,46,926/- c) Profit as per the Profit & Loss Account Rs. 3,01,12....
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.... order of the Tribunal in the assessee's own case and other relevant material concerning the eligibility of the deduction. 27. We further note that the assessee has been claiming deduction u/s. 80-IA of the Act from AY 2013-14 onwards and such claim was upheld by the Tribunal in the assessee's own case. The ld.AR has also brought to our notice that in the immediately subsequent assessment year, i.e. AY 2018-19, the AO, in the assessment completed u/s. 143(3) of the Act, accepted the assessee's claim u/s. 80-IA of the Act. 28. In the present year also, the assessee has demonstrated that the profits in respect of which deduction has been claimed arose from specified infrastructure projects undertaken for Government/Government agencies. The details placed on record show gross receipts from the eligible projects aggregating to Rs. 32,01,08,637/- and deduction u/s. 80-IA claimed at Rs. 1,96,78,063/-. The assessee had also furnished Form 10CCB within the prescribed time. 29. The Revenue has not brought before us any material to demonstrate that the facts obtaining in the year under consideration are materially different from those considered by the co-ordinate Bench ....