2012 (10) TMI 1089 - AT - Income Tax

Irrigation project - whether qualifies for deduction under Section 80IA - Held that - the infrastructure is developed and handed over to the Government - it cannot be considered as a mere works contract but considered as a development of infrastructure facility - assessee is a developer and not a works contractor - the contracts involves development, operating, maintenance, financial involvement, and defect correction and liability period - the assessee satisfied two conditions - investment in eligible projects and execution of project by itself - and hence eligible for deduction u/s 80IA - Decided in favor of assessee

Issues Involved:
1. Erroneous order of the Commissioner of Income Tax (Appeals).
2. Disallowance of deduction under Section 80IA for profits from developing a new infrastructure facility.
3. Non-allowance of credit for Tax Deducted at Source on Mobilization Advance.

Issue-wise Detailed Analysis:

1. Erroneous Order of the Commissioner of Income Tax (Appeals):
The assessee contended that the order of the CIT(A) was erroneous in law and facts. This was a general contention without specific elaboration in the judgment text.

2. Disallowance of Deduction under Section 80IA:
The assessee argued that the CIT(A) erred in confirming the disallowance of deduction under Section 80IA for profits from developing an irrigation project. The assessee referenced the Larger Bench decision in B T Patil Belgaum Construction P. Ltd. Vs. ACIT, which was allegedly no longer valid after the Bombay High Court Judgment in ABG Heavy Engineering (2010) 322 ITR 323.

The Tribunal reviewed similar cases, including the assessee's own case for the A.Y. 2007-08, and found that the provisions of Section 80IA(4) applied to enterprises involved in developing, operating, and maintaining infrastructure facilities. It was clarified that the deduction is available to entities that undertake entrepreneurial and investment risks, not merely those executing works contracts. The Tribunal cited multiple precedents, including M/s. Koya & Co. Construction (P) Ltd. v. ACIT and GVPR Engineers Ltd. v. ACIT, which supported the eligibility of developers for the deduction under Section 80IA.

The Tribunal highlighted that the contracts involving design, development, operation, maintenance, financial involvement, and defect correction should be considered as development contracts eligible for deduction. The Assessing Officer was directed to examine the records and grant deductions on eligible turnover accordingly.

3. Non-allowance of Credit for Tax Deducted at Source on Mobilization Advance:
The assessee contended that the CIT(A) erred in not allowing credit for Tax Deducted at Source (TDS) on Mobilization Advance. The assessee argued that Mobilization Advance represents a repayable obligation without income, and thus, tax should not have been deducted. Nevertheless, since tax was deducted, credit should be given for the financial year in which it was deducted.

The judgment did not provide a detailed analysis or conclusion on this issue, focusing primarily on the Section 80IA deduction issue.

Conclusion:
The Tribunal remitted the issue back to the Assessing Officer to examine whether the assessee carried out the development of infrastructure facilities, including design, development, operation, maintenance, financial involvement, and defect correction. If these conditions were met, the assessee would be eligible for the deduction under Section 80IA. The appeal was allowed for statistical purposes, directing a fresh examination of the records by the Assessing Officer.

Order Pronouncement:
The order was pronounced in the open court on 31st October 2012.

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