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2013 (6) TMI 813 - AT - Income TaxDisallowance of deduction u/s. 80IA - whether engaged in the business of development of infrastructural facility - whether a developer or mere works contractor - Held that - assessee incurred expenditure for purchase of materials himself and executes the development work i.e., carries out the civil construction work - 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 - such activity is eligible for deduction under section 801A (4) of the Act. This cannot be considered as a mere works contract but has to be considered as a development of infrastructure facility - assessee has undertaken the development of the irrigation project within the scope of Explanation to section 80IA(4) - The project is a Turnkey project and it cannot form nor have a character of a works contract - Decided in favor of assessee
Issues Involved:
1. Disallowance of the claim of deduction under Section 80IA(4) of the Income-tax Act, 1961. 2. Determination of whether the appellant was a developer or merely a contractor. 3. Impact of the retrospective amendment to the Explanation to Section 80IA(4) by the Finance (No.2) Act, 2009. Issue-wise Detailed Analysis: 1. Disallowance of the claim of deduction under Section 80IA(4) of the Income-tax Act, 1961: The primary issue in both appeals was the disallowance of the claim of deduction under Section 80IA(4) of the Income-tax Act. The appellant contended that it was engaged in the business of developing infrastructure facilities, specifically an irrigation project, and thus was entitled to the deduction. The Assessing Officer, however, held that the appellant was merely executing civil construction works and was not entitled to the deduction due to the Explanation to Section 80IA(4) introduced by the Finance (No.2) Act, 2009 with retrospective effect from 1-4-2000. 2. Determination of whether the appellant was a developer or merely a contractor: The appellant argued that it was a developer and not just a contractor, citing an agreement with the Government of Andhra Pradesh for the development of an irrigation project. The appellant referred to the ITAT Hyderabad Bench decision in the case of M/s. GVPR Engineers Ltd & Ors, which distinguished between a developer and a contractor based on the nature of the work undertaken. The Tribunal in that case held that enterprises involved in developing infrastructure facilities were eligible for the deduction under Section 80IA(4), whereas those merely executing works contracts were not. The Tribunal found that the appellant was responsible for the entire development of the project, including surveying, designing, construction, and maintenance, which indicated that it was a developer, not just a contractor. 3. Impact of the retrospective amendment to the Explanation to Section 80IA(4) by the Finance (No.2) Act, 2009: The Tribunal considered whether the retrospective amendment affected the appellant's claim. The amendment aimed to exclude businesses engaged in works contracts from availing the deduction. However, the Tribunal noted that the appellant's activities went beyond mere works contracts and involved comprehensive development of the infrastructure project. The Tribunal also referred to the Circular dated 18-05-2010 by the CBDT, which clarified that activities involving the development of infrastructure facilities were eligible for the deduction. The Tribunal concluded that the appellant's work did not fall under the exclusion of works contracts as defined in the Explanation to Section 194C of the Act, and thus, the appellant was entitled to the deduction under Section 80IA(4). Conclusion: The Tribunal directed the Assessing Officer to grant the appellant the benefit of deduction under Section 80IA(4) as claimed. The Tribunal's decision was based on the comprehensive nature of the appellant's work, which involved the development of an irrigation project, and the interpretation of the relevant provisions and amendments to the Income-tax Act. The appeals were allowed in favor of the appellant.
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