2024 (10) TMI 1273 - AT - Income Tax

Denial of deduction u/s 80IA - assessee is a works contractor and not developer - return filed in compliance to notice u/s 153A and not claimed the deduction in its regular return filed u/s 139 (1) - CIT(A) concluded that assessee has made a rightful claim u/s 80IA of the Act in the return filed in compliance to notice u/s 153A HELD THAT - As various judgments referred mainly in case of Kirit Dahyabhai Patel 2015 (1) TMI 201 - GUJARAT HIGH COURT where it has been held that the return filed u/s 153A of the Act will be construed to be return filed u/s 139 of the Act. We also observe that CIT (A) rightly taking note of the judicial precedents that the appellant can make or modify the claim at any time before the completion of the assessment. CIT (A) has also rightly observed that apart from the fact that the assessee failed to make claim of deduction u/s 80IA of the Act in its regular / original return filed u/s 139(1) of the Act, the Revenue authorities/ ld. DR failed to bring on record any concrete evidence which could negate the rightful claim made by the assessee u/s 80IA of the Act which is duly supported by the documents demonstrating that the assessee is a developer and has carried out the business of designing, constructing, testing, commissioning, operating and maintenance of water works for Bihar Rajya Jal Parisad (unit of state Government of Bihar) therefore, under the given facts and circumstances of the case the settled judicial precedents, we fail to find any infirmity in the finding of the ld. CIT (A) allowing the claim of deduction u/s 80IA - Decided in favour of assessee.

Issues Involved:

1. Eligibility for deduction under Section 80IA of the Income Tax Act.
2. Classification of the assessee as a developer or a works contractor.
3. Validity of claims made in returns filed under Section 153A.
4. Compliance with audit requirements for claiming deductions under Section 80IA.
5. Procedural fairness concerning the denial of deduction claims.

Detailed Analysis:

1. Eligibility for Deduction under Section 80IA:

The primary issue in the appeals was whether the assessee was eligible for a deduction under Section 80IA of the Income Tax Act. The Revenue contended that the assessee, being a works contractor, was not entitled to this deduction. However, the CIT(A) concluded that the assessee was a developer, not merely a contractor, and thus eligible for the deduction. This conclusion was based on the assessee's role in designing, constructing, testing, commissioning, operating, and maintaining water works for the Bihar Rajya Jal Parishad, which qualified as developing new infrastructure facilities. The Tribunal upheld the CIT(A)'s decision, noting that the assessee had fulfilled all necessary conditions for claiming the deduction under Section 80IA.

2. Classification of the Assessee as a Developer or a Works Contractor:

The Revenue argued that the assessee was a contractor, as evidenced by its declaration as a civil contractor in its income tax return. The CIT(A), however, distinguished between a contractor and a developer, noting that the latter involves a broader role, including planning and execution, rather than merely following pre-decided plans. The Tribunal agreed with the CIT(A)'s assessment that the assessee was a developer, as it undertook comprehensive responsibilities beyond mere construction, such as designing and maintaining the infrastructure.

3. Validity of Claims Made in Returns Filed under Section 153A:

The assessee initially did not claim the deduction under Section 80IA in its original return filed under Section 139(1) but did so in the return filed in response to a notice under Section 153A. The CIT(A) and the Tribunal found that a return filed under Section 153A is treated as a return under Section 139, allowing the assessee to make or modify claims. The Tribunal cited judicial precedents supporting the view that claims can be modified before the assessment is completed, thus validating the assessee's claim for the deduction.

4. Compliance with Audit Requirements for Claiming Deductions under Section 80IA:

The Revenue's contention included the absence of an audit report confirming the eligibility for the deduction. However, the assessee had submitted the necessary audit report in Form 10CCB, fulfilling the audit requirements. The Tribunal noted that the audit report was available to the Assessing Officer (AO) during the assessment proceedings, thereby complying with the statutory requirements for claiming the deduction.

5. Procedural Fairness Concerning the Denial of Deduction Claims:

The Tribunal observed that the AO did not issue specific show cause notices to the assessee before denying the deduction claim, which was against the principles of equity and natural justice. The CIT(A) emphasized that no opportunity for a hearing was provided concerning the disallowance under Section 80IA, further supporting the assessee's position.

Conclusion:

The Tribunal dismissed the Revenue's appeals, affirming the CIT(A)'s decision to allow the deduction under Section 80IA for the assessee, recognizing it as a developer and not a mere contractor. The Tribunal's decision applied to all assessment years in question, from 2018-19 to 2021-22, as the issues and facts were consistent across these years. The Tribunal upheld the procedural and substantive correctness of the CIT(A)'s order, emphasizing compliance with legal standards and principles of natural justice.

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