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2019 (3) TMI 477 - AT - Income TaxEligibility for deduction u/s 80IA(4)(i) - Manufacturing activity - whether the assessee is a developer or mere works contractor? - whether the assessee engaged in construction of a dam cannot be said to be engaged in manufacturing or production of an article inasmuch as a dam is constructed and not manufactured? - CIT-A allowed the claim - HELD THAT - We note that the contention of the assessee for eligibility for deduction under section 80IA(4) is fortified by certificate from the Superintendent Engineer Municipal Engineering Directorate of the West Bengal Govt. in which it was clarified that the assessee is developing a new infrastructure facility/project of public interest meant for Drinking Water Supply Project to improve health & sanitation and to provide civic amenities for local people. The Co-ordinate Bench of this Tribunal 2017 (3) TMI 1050 - ITAT KOLKATA held on the similar facts that the assessee is not a work contractor but he is a developer therefore eligible to claim the deduction u/s 80IA(4)(i) of the Act. From the perusal of the terms and conditions in the agreement it is abundantly clear that the assessee is not a works contractor. The assessee company is a developer. Thus clearly the assessee is eligible for deduction under section 801A(4)(i) of the Act. No reason to interfere in the order of ld. CIT(A). Hence this ground of appeal of the Revenue is dismissed.
Issues Involved:
1. Whether the assessee is a developer or a mere works contractor and eligible for deduction under section 80IA(4)(i) of the Income Tax Act, 1961. Detailed Analysis: Core Issue: - The primary issue is whether the assessee qualifies as a "developer" or a "works contractor" and is eligible for deduction under section 80IA(4)(i) of the Income Tax Act, 1961. Facts of the Case: - The assessee claimed a deduction of Rs. 70,07,818/- under section 80IA(4)(i) for a water treatment system plant. - The Assessing Officer (AO) denied the deduction, categorizing the assessee as a "works contractor" rather than a "developer." Assessing Officer's Findings: - The AO reviewed various documents, including audit reports and work orders, and concluded that the assessee was engaged in "works contract" and not eligible for the deduction. - The AO noted that the assessee's business was described as "civil contractor" in the audit report. - The AO cited the lack of ownership and the nature of the contracts as reasons for denying the deduction. Assessee's Arguments: - The assessee argued that it met all conditions under section 80IA(4)(i) and should be considered a "developer." - The assessee provided various legal precedents and detailed the scope of work, which included planning, design, construction, and maintenance of infrastructure facilities. - The assessee emphasized that it utilized its funds, expertise, and bore the risks associated with the projects. Tribunal's Analysis: - The Tribunal examined the provisions of section 80IA(4)(i) and noted that the deduction is available to entities involved in developing, operating, and maintaining infrastructure facilities. - The Tribunal clarified that the definition of "work" under section 194C is not applicable for determining eligibility under section 80IA(4)(i). - The Tribunal reviewed the scope of work and projects undertaken by the assessee, noting that the assessee was responsible for comprehensive development activities, including planning, design, construction, and maintenance. Tribunal's Conclusion: - The Tribunal concluded that the assessee fulfilled all conditions for being classified as a "developer" under section 80IA(4)(i). - The Tribunal noted that ownership of the infrastructure facility is not a prerequisite for claiming the deduction. - The Tribunal highlighted that the assessee undertook significant entrepreneurial and investment risks, further supporting its classification as a "developer." Supporting Judgments: - The Tribunal referenced several judgments, including those from the Bombay High Court and various ITAT benches, which supported the view that entities involved in comprehensive development activities qualify as "developers" and are eligible for deductions under section 80IA(4)(i). Final Decision: - The appeals filed by the assessee for assessment years 2011-12 and 2012-13 were allowed. - The appeal filed by the Revenue for assessment year 2013-14 was dismissed. - The Tribunal affirmed the order of the Commissioner of Income Tax (Appeals) and upheld the assessee's eligibility for the deduction under section 80IA(4)(i). Conclusion: - The Tribunal's consolidated order clarified that the assessee is a "developer" and not a mere "works contractor," thus eligible for the deduction under section 80IA(4)(i) of the Income Tax Act, 1961. The decision was based on a detailed analysis of the scope of work, legal precedents, and the specific conditions outlined in the relevant section of the Act.
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