2021 (8) TMI 559 - AT - Income Tax

Deduction u/s 80IA - denial of deduction of as Assessee Company was merely a contractor - HELD THAT - CIT(A) after taking note of the Tribunal s decision in assessee s own case 2018 (1) TMI 1571 - ITAT KOLKATA and the ratio laid by the Tribunal in Simplex Somdutt Builders 2013 (6) TMI 813 - ITAT KOLKATA has allowed the claim of the assessee u/s. 80IA of the Act which we find to be as a plausible view and, therefore, we confirm it and Revenue s ground of appeal is dismissed. Deduction u/s. 80IB - AO was of the opinion that the hot mixing plant used for mixing the raw material for construction of road and chips of different sizes and minerals filler are mixed with Bitumen in the hot mix plant as per the required temperature for laying the base course for construction of road is nothing but mixing of basic ingredients for laying at the top layer of the road, therefore, it is not a manufacturing or is production of article or thing, so the assessee did not satisfy the condition of section 80IB - HELD THAT - In view of the ratio laid by the Hon ble Supreme in Court Empire Industries Ltd. 1985 (5) TMI 215 - SUPREME COURT we do not agree with the view of the AO that the assessee s Hot Mixed Plant is not engaged in the activity of manufacturing or production. Since the view of the Ld. CIT(A) is a plausible view, we confirm the same that the assessee is eligible for deduction u/s. 80IB of the Act which does not require any interference from our part. Therefore, ground no. 2 of both the appeals are dismissed.

Summary

Issues Involved:
1. Deduction under section 80IA of the Income Tax Act, 1961.
2. Deduction under section 80IB of the Income Tax Act, 1961.

Detailed Analysis:

Issue 1: Deduction under section 80IA of the Income Tax Act, 1961

The primary issue was whether the assessee was entitled to claim deductions under section 80IA for its "Contract Unit" engaged in infrastructure development. The Assessing Officer (AO) disallowed the deduction on the grounds that the assessee, being a contractor, did not meet the conditions stipulated under section 80IA. The AO argued that the assessee was merely executing contract work and not involved in developing, maintaining, or operating any infrastructure facility. Additionally, the AO noted that the undertaking was formed by reconstructing an existing business.

The assessee appealed to the Commissioner of Income Tax (Appeals) [CIT(A)], who allowed the claim, referencing the Tribunal's decision in the assessee's favor for AY 2006-07. The Tribunal had previously ruled that the assessee was developing infrastructure facilities such as roads and railway lines and thus eligible for the deduction under section 80IA. The Tribunal emphasized that "Development encompasses within its contract work the agreement between the assessee and the customer being the Government is for the development of the infrastructure facility being roads and rail system by participating through tenders."

Upon review, the ITAT upheld the CIT(A)'s decision, stating that the assessee's activities qualified as infrastructure development, thus satisfying the conditions for deduction under section 80IA. The ITAT referenced similar cases, including DCIT Vs. Simplex Somdatt Builders JV, where it was held that such activities qualify for the deduction. Consequently, the ITAT dismissed the revenue's appeal on this ground.

Issue 2: Deduction under section 80IB of the Income Tax Act, 1961

The second issue concerned the deduction claimed under section 80IB for the "Hot Mix Plant Unit." The AO disallowed this deduction, arguing that the hot mixing plant did not constitute manufacturing or production of an article or thing and thus did not meet the conditions under section 80IB.

The CIT(A) overturned the AO's decision, noting that the assessee had satisfied all conditions stipulated in the Act and had provided all necessary documentation. The CIT(A) found that the hot mixing plant was registered as a Small Scale Industry and located in a remote area of North East India, and the eligible unit was not formed by splitting up an existing business. The CIT(A) concluded that the activities of the hot mixing plant qualified as manufacturing, referencing the Supreme Court decision in Empire Industries Ltd. Vs. Union of India, which defined manufacturing as any process that transforms raw materials into a new product with distinct characteristics.

The ITAT upheld the CIT(A)'s decision, agreeing that the assessee's hot mixing plant was engaged in manufacturing or production. The ITAT found the CIT(A)'s view plausible and dismissed the revenue's appeal on this ground as well.

Conclusion:

The ITAT dismissed both appeals by the revenue, confirming that the assessee was entitled to deductions under sections 80IA and 80IB of the Income Tax Act, 1961. The judgments emphasized the assessee's role in infrastructure development and manufacturing, aligning with the statutory requirements for the claimed deductions. The Tribunal's reliance on previous decisions and detailed factual analysis played a crucial role in affirming the CIT(A)'s orders.