2013 (9) TMI 556 - AT - Income Tax

Deduction under section 80IA Infrastructure facility Whether the contractor was synonymous with the developer within the meaning of section 80IA (4)(i) of the Act - Whether the condition placed in clause (c) was applicable to the case of a developer, who was not carrying on business of operating and maintaining the infrastructural facilities - The assessee claimed special deduction under section 80IA - The assessing officer rejected the claim but the commissioner (Appeals) Tribunal allowed it - Held that Assessee was engaged in the civil construction work like construction of flyover, bridge underpass, sewerage, water supply etc. for various local bodies, railways, Central/State Governments - Following COMMISSIONER OF INCOME-TAX Versus ABG HEAVY INDUSTRIES LIMITED 2010 (2) TMI 108 - BOMBAY HIGH COURT - The main thrust of the decision was that a developer need not be the owner of the land on which development was made - Although that decision was rendered in the context of a developer of buildings and the deduction was in respect of 80IB(10), but the definition of developer given in that case is also relevant for this purpose - Moreover, we are in agreement that in incentive provisions, the construction should be liberally given as held by the Hon ble Supreme Court rendered in the case of Bajaj Tempo Ltd vs CIT 1992 (4) TMI 4 - SUPREME Court . When the assessee makes investment and himself executes development work and carried out civil works, he was eligible for tax benefit u/s 80IA of the Act - the assessee was entitled to deduction u/s 80IA(4) of the Act. Entering into a lawful agreement and thereby becoming a contractor should in no way be a bar to the one being a developer - The assessee had developed infrastructure facility as per the agreement with Maharashtra Government/APSEB, therefore, merely because in the agreement for development of infrastructure facility the assessee was referred to as a contractor or because some basic specifications are laid down, it does not detract the assessee from the position of being a developer ; nor will it debar the assessee from claiming deduction u/s 80IA(4) - Section 80IA(4)(i)(b) required development of infrastructure facility and transfer thereof as per agreement and it cannot be disputed in view of the material on record that the assessee had transferred the infrastructure facility developed by it by handing over the possession thereof to the concerned authority as required by the agreement - The handing over of the possession of developed infrastructure facility/project is the transfer of the infrastructure facility/project by the assessee to the authority. The handing over of the infrastructure facility/project by the developer to the Government or authority takes place after recoupment of the developer s costs whether it be BT or BOT or BOOT because in BOT and BOOT this recoupment is by way of collection of toll therefrom whereas in BT it was by way of periodical payment by the Government/Authority - The land involved in infrastructure facility/project always belongs to the Government/Local authority etc., whether it be the case of BOT or BOOT and it is handed over by the Government/Authority to the developer for development of infrastructure facility/Project. The same has been the position in the given case as well - So, deduction u/s 80IA(4) is also available to this assessee which had undertaken work of a mere developer - Decided against Revenue.

Issues Involved:
1. Eligibility for deduction under section 80IA(4) of the Income Tax Act.
2. Classification of the assessee as a 'developer' versus a 'contractor'.
3. Interpretation of the provisions of section 80IA(4) regarding infrastructure development.
4. Validity of the CIT(A)'s decision in light of past judicial decisions and legislative intent.

Detailed Analysis:

1. Eligibility for deduction under section 80IA(4) of the Income Tax Act:
The primary issue revolves around the eligibility of the assessee for claiming a deduction under section 80IA(4) of the Income Tax Act. The assessee firm, engaged in civil contract works, claimed a deduction of Rs. 1,58,06,032/- under section 80IA(4) for the assessment year 2007-08. The Assessing Officer disallowed this claim, but the CIT(A) subsequently allowed it. The Revenue's appeal challenges this allowance on the grounds that the assessee is not eligible for the deduction.

2. Classification of the assessee as a 'developer' versus a 'contractor':
The Revenue contends that the assessee is merely a 'contractor' and not a 'developer' as required under section 80IA(4). The section applies to enterprises engaged in (i) developing, (ii) operating and maintaining, or (iii) developing, operating, and maintaining infrastructure facilities. The Revenue argues that the assessee, being a contractor, does not qualify for the deduction intended for developers of infrastructure projects. The CIT(A), however, concluded that the assessee is eligible for the deduction, interpreting the term 'developer' to include those who undertake the development of infrastructure facilities even if they do not operate or maintain them.

3. Interpretation of the provisions of section 80IA(4) regarding infrastructure development:
The judgment delves into the interpretation of section 80IA(4). The Tribunal observed that merely because the assessee is paid for the development work by the government does not disqualify it from being considered a developer. The Tribunal emphasized that the legislative intent behind section 80IA(4) is to encourage infrastructure development, and this includes entities that develop infrastructure facilities even if they do not operate or maintain them. The Tribunal cited various judicial precedents, including the case of Patel Engineering Ltd. vs. DCIT, to support the view that a contractor who develops infrastructure facilities can be considered a developer eligible for the deduction.

4. Validity of the CIT(A)'s decision in light of past judicial decisions and legislative intent:
The Tribunal upheld the CIT(A)'s decision, noting that it aligns with the legislative intent and judicial precedents. The Tribunal referenced several cases, including the ITAT Mumbai decision in Patel Engineering Ltd. and the ITAT Pune decision in Laxmi Civil Engg. P. Ltd vs Addl. CIT, which support the interpretation that developers of infrastructure facilities are eligible for deductions under section 80IA(4). The Tribunal also highlighted the need for a liberal interpretation of tax incentive provisions, as established by the Supreme Court in Bajaj Tempo Ltd vs CIT.

Conclusion:
The Tribunal dismissed the Revenue's appeal, affirming the CIT(A)'s decision that the assessee is eligible for the deduction under section 80IA(4). The Tribunal concluded that the assessee qualifies as a developer of infrastructure facilities, and the legislative intent supports granting the deduction to such entities. The judgment reinforces the principle that tax incentive provisions should be interpreted liberally to promote infrastructure development.

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