2021 (5) TMI 724 - AT - Income Tax

Deduction u/s 80IA - consortiums and JVs entitlement to claim 80IA deduction relief - CIT(A) held that the provision of deduction u/ s 80IA(4) is applicable to constituent of the JVI Consortia without appreciating that the assessee has not entered into an agreement with the Central Government or a State Government or a Local Authority or any other Statutory Body - HELD THAT - Coming to Revenue s first and foremost argument regarding consortiums and JVs entitlement to claim 80IA deduction relief, we make it clear that the tribunal s co-ordinate bench order in M/s. Transtroy India Limited(supra) has already decided the same issue in assessee's favour and against the department. No contrary judicial precedent has been quoted at the Revenue s behest to rebut the same. We thus, uphold the CIT(Appeals) findings qua this former grievance canvassed from the revenue s side. Assessee's status as a developer or a mere works contractor u/s. 80IA(4) and 80IA Explanation - We note that the Assessing Officer detailed discussion of the assessment order has made it clear that the assessee itself satisfies all the three components of development, operation, and maintenance thereof along with financial involvement and risk factor involved in the corresponding infrastructure projects. Revenue s argument raised before us goes contrary to the assessment findings therefore. We thus are of the opinion that there is neither any irregularity nor illegality in the order of the CIT(Appeals) s identical findings allowing the assessee's sec.80-IA deduction claim. Both these lower appellate orders are upheld therefore.

Summary

Issues Involved:
1. Eligibility of deduction under Section 80IA(4) for constituent members of a Joint Venture (JV) or Consortia.
2. Determination of whether the assessee is a developer or merely a contractor under Section 80IA(4).

Issue-wise Detailed Analysis:

1. Eligibility of Deduction under Section 80IA(4) for Constituent Members of a JV or Consortia:

The Revenue's primary contention was that the CIT(A) erred in allowing the deduction under Section 80IA(4) to the constituent members of a JV or Consortia, as the assessee did not directly enter into an agreement with the Government or a statutory body. The Assessing Officer (AO) disallowed the deduction claimed by the assessee on the grounds that the agreements were entered by the JVs/Consortia, and only these entities were eligible for the deduction, not the constituent members. The AO's decision was based on the interpretation that Section 80IA(4) applies only to enterprises that directly enter into development agreements with the Government or statutory bodies.

The CIT(A) reversed the AO's decision, relying on the ITAT Visakhapatnam's ruling in the case of M/s. Transtroy (India) Ltd Vs ITO, which held that constituent members of a JV executing the work are eligible for the deduction under Section 80IA(4). The CIT(A) emphasized that the profits from the projects executed by the assessee as a constituent of the JV did not form part of the total income of the JVs, and no deductions were claimed by the JVs on such incomes. The CIT(A) also noted that the AO's refusal to allow the deduction was not based on any legal basis but merely on the department's non-acceptance of the ITAT's decision.

The Tribunal upheld the CIT(A)'s findings, noting that the Revenue did not provide any contrary judicial precedent to rebut the ITAT Visakhapatnam's decision. The Tribunal confirmed that the CIT(A)'s order allowing the deduction under Section 80IA(4) to the constituent members of the JV was correct and binding on the AO.

2. Determination of Whether the Assessee is a Developer or Merely a Contractor under Section 80IA(4):

The second issue was whether the assessee qualified as a developer or merely a contractor under Section 80IA(4). The Revenue argued that the assessee was only a works contractor and not entitled to the deduction. The AO's assessment, however, indicated that the assessee satisfied all the criteria for being considered a developer, including development, operation, and maintenance of the infrastructure projects, along with financial involvement and risk factors.

The CIT(A) noted that the AO did not dispute the eligibility of the profits for deduction under Section 80IA(4) but restricted the deduction to profits related to direct projects. The CIT(A) emphasized that the assessee acted as a developer and was compliant with all the statutory norms for claiming the deduction. The Tribunal agreed with the CIT(A)'s findings, noting that the AO's detailed discussion confirmed the assessee's status as a developer, satisfying all components of development, operation, and maintenance.

The Tribunal concluded that there was no irregularity or illegality in the CIT(A)'s order allowing the deduction under Section 80IA(4) to the assessee. Both the lower appellate orders were upheld, and the Revenue's appeals were dismissed.

Conclusion:

The Tribunal dismissed the Revenue's appeals, confirming the CIT(A)'s decision to allow the deduction under Section 80IA(4) to the constituent members of the JV and recognizing the assessee as a developer rather than a mere contractor. The Tribunal emphasized the binding nature of the ITAT Visakhapatnam's decision and the AO's findings supporting the assessee's eligibility for the deduction.