2022 (4) TMI 841 - AT - Income Tax

Disallowance claim of deduction u/s.80- IA - assessee is a partnership firm carrying on the business of civil constructions, contractors, engineers and builder - HELD THAT - As relying on ESHWARNATH CONSTRUCTIONS 2013 (12) TMI 299 - ITAT CHENNAI assessee being a partnership firm in the relevant assessment years is legally not eligible to claim deduction u/s.80IA(4)(i) and also, even on merit, the assessee is found to have executed works contract attracting the explanation to sub-section 13 of 80IA A partnership firm is not a creation of statute but it is a body of individuals regulated by the statute namely Partnership Act - The assessee fails to satisfy the applicability clause of the provision as envisaged under section 80IA(4)(i) - Decided against assessee.

Summary

Issues Involved:
1. Disallowance of deduction claim under Section 80-IA of the Income Tax Act, 1961.

Issue-wise Detailed Analysis:

1. Disallowance of Deduction Claim under Section 80-IA of the Income Tax Act, 1961:

The primary issue in this appeal is the disallowance of the assessee's claim for deduction under Section 80-IA of the Income Tax Act, 1961. The assessee firm, engaged in civil and electrical work contracts, claimed a deduction of ?1,34,41,241/- under Section 80-IA(4) for infrastructure activity. The Assessing Officer (AO) observed that the assessee was merely executing work contracts awarded by clients and not developing any infrastructure facility with its own funds. The AO concluded that the assessee, being a contractor and not a developer, was not eligible for the deduction, relying on the ITAT Chennai Bench's decision in the case of M/s. Eshwarnath Construction for AY 2008-09.

The Commissioner of Income Tax (Appeals) [CIT(A)] upheld the AO's decision, noting that the assessee's activities involved only widening and relaying existing roads, which did not qualify as new infrastructure facilities per the CBDT Circular. The CIT(A) cited several Letters of Acceptance from the Corporation of Chennai, which confirmed that the work involved strengthening, relaying, and forming roads, not developing new infrastructure.

Upon appeal to the Tribunal, the assessee's counsel argued against the disallowance, but the Tribunal found the issue to be squarely covered by its earlier decision in the case of M/s. Eshwarnath Construction. In that case, the ITAT had determined that the assessee, being a contractor for Indian Railways, did not qualify for the deduction under Section 80-IA(4) as it was not engaged in developing, operating, and maintaining infrastructure facilities. The Tribunal emphasized that the statutory provisions of Section 80-IA did not provide a blanket deduction and required the claimant to satisfy all conditions specified in sub-section 4.

The Tribunal reiterated that the assessee, being a partnership firm, did not meet the criteria outlined in Section 80-IA(4)(i), which applies to enterprises such as companies, authorities, or bodies established under Central or State Acts. The Tribunal also noted that the explanation to Section 80-IA(4) clarified that businesses in the nature of works contracts were not eligible for the deduction.

Consequently, the Tribunal upheld the CIT(A)'s order and dismissed the appeal, confirming that the assessee was not entitled to the deduction under Section 80-IA. The decision was pronounced on March 28, 2022, in Chennai.