2021 (9) TMI 101 - AT - Income Tax

Revision u/s 263 - as per CIT assessment framed u/s 143(3) as erroneous insofar prejudicial to the interest of revenue on account of the deduction granted by the AO under section 80IA(4) - assessee is acting as a works contractor and not the developer and as there was no agreement between the assessee and the Government of Gujarat which is one of the prerequisite for claiming the deduction under section 80IA(4) - HELD THAT - There remains no ambiguity that there was the agreement between the assessee and the Government of Gujarat, Road Building department. It is also pertinent to note that this fact was brought to the notice to the learned principal CIT during the proceedings by the assessee. Principal CIT in his order has not assailed the contention raised by the assessee before him. Thus, in the given facts and circumstances, there is no violation by the assessee of the provisions specified under section 80IA(4) of the Act. There was no charge of the learned Principal CIT suggesting that the activities performed by the assessee were in the nature of works contract except the allegation that there was no agreement between the assessee and the Government of Gujarat, Road Building Department. As such, in the absence of agreement between the assessee and the Government of Gujarat, Road Building Department, the Principal CIT assumed that the assessee was acting as the works contractor. However, the finding of the learned Principal CIT is not correct in the light of the above discussion. Whether the assessee is acting as a works contractor or a developer as provided under explanation to section 80IA(4) of the Act is the debatable issue - once the AO has taken a view that the assessee is eligible for deduction 80IA(4) of the Act, the view taken by the AO is one of the possible view. Thus on this reason as well the order of the AO cannot be termed as erroneous insofar prejudicial to the interest of revenue - order passed by the learned Principal CIT is not sustainable and liable to be quashed - Decided in favour of assessee.

Summary

Issues Involved:
1. Jurisdiction and legality of the order passed under section 263 of the Income Tax Act, 1961.
2. Eligibility of the assessee for deduction under section 80IA(4) of the Act.
3. Whether the assessee acted as a developer or a works contractor.

Detailed Analysis:

1. Jurisdiction and Legality of the Order Passed Under Section 263:

The assessee contended that the order passed by the Principal Commissioner of Income Tax (Pr. CIT) under section 263 of the Income Tax Act, 1961, was without jurisdiction and bad in law. The Pr. CIT had held the assessment framed under section 143(3) of the Act as erroneous and prejudicial to the interest of revenue due to the deduction granted under section 80IA(4). The assessee argued that all details were furnished during the assessment proceedings, and the order was passed after due inquiry and verification by the Assessing Officer (AO). The Tribunal found that the AO had indeed conducted a thorough verification and had taken one of the possible views, which cannot be termed erroneous or prejudicial to the interest of revenue.

2. Eligibility for Deduction Under Section 80IA(4):

The Pr. CIT held that the assessee was not entitled to claim deduction under section 80IA(4) of the Act, asserting that the assessee was merely executing civil construction work as a sub-contractor and not acting as a developer. The Tribunal found that the project was awarded to a joint venture between M/s. Avadh Infrastructure Pvt. Ltd. (AIPL) and M/s. Narnarayan Infrastructure Pvt. Ltd. (NIPL). The joint venture formed a partnership firm, which was later clarified by the Government of Gujarat to be the contract holder. The Tribunal noted that the assessee had carried out all activities related to the project and had issued RA bills approved by government engineers, fulfilling the conditions specified under section 80IA(4).

3. Developer vs. Works Contractor:

The Pr. CIT argued that there was no agreement between the assessee and the Government of Gujarat, suggesting that the assessee acted as a works contractor. However, the Tribunal found that a clarification letter from the Government of Gujarat indicated that the contract was indeed in the name of the joint venture, Avadh-NIPL (JV). The Tribunal held that this clarification established the presence of an agreement between the assessee and the government. Furthermore, the Tribunal emphasized that the issue of whether the assessee acted as a developer or a works contractor was debatable. Since the AO had taken a plausible view that the assessee was a developer, the Tribunal concluded that the order could not be revised under section 263.

Conclusion:

The Tribunal quashed the order passed by the Pr. CIT under section 263, holding that the AO had taken a possible and reasonable view after due verification. The Tribunal allowed the appeal of the assessee, affirming their eligibility for the deduction under section 80IA(4) of the Act. The Tribunal emphasized that the issue of whether the assessee acted as a developer or a works contractor was debatable and that the AO's view was one of the possible views, which could not be termed erroneous or prejudicial to the interest of revenue.