2025 (1) TMI 807 - AT - Income Tax

Deduction u/s 80IA - development of infrastructure facilities v/s mere execution of works contracts - AO disallowed the claim of the assessee by holding that Hence it is crystal clear that the assessee company has not carried out any work of development of new infrastructure facility in these cases and that Simply relying of an existing road would not be classified as a new infrastructure facility for the purpose of section 80IA(4)(i)' - HELD THAT - Deduction u/s 80-IA is declined on the ground that the assessee had merely entered into an agreement with the Govt. and/or the assessee had received payments from Government, then in that eventuality an assessee who is only a developer will never be entitled to deduction u/s 80-IA. Therefore in our view, merely because the assessee was paid by the Government for development work, it cannot be denied deduction u/s 80- IA(4) of the Act. Similarly, an assessee cannot be declined the deduction on the ground that the assessee has not himself conceived the idea of infrastructure but has merely entered into a contract with the Govt.; entering into a contract with the Govt. is a sine qua non for claiming the deduction u/s. 80-IA(4) in this regard we rely upon the decision in the Adhunik Infrastructure 2018 (6) TMI 89 - ITAT KOLKATA and the same view was also adopted by the Coordinate Bench of the Tribunal in the case of Bhinmal Contractors Property Land Developers P. Ltd. 2018 (5) TMI 244 - ITAT MUMBAI even the recent decision of Montecarlo Construction Ltd. 2024 (1) TMI 383 - GUJARAT HIGH COURT also supports the case of the assessee Thus we are of the view that the facts, nature of contracts, nature of works in the present years are same identical to the facts before the Hon'ble ITSC. And the eligibility of the assessee to claim deduction u/s. 80IA of the Act is squarely covered in favour of the assessee, by the order of the Hon'ble ITSC in the assessee's own case. Department has not brought anything on record to disturb the order of the Settlement Commission for the prior years and the order of the CIT(A) for A.Y 2018-19 both allowing the claim of the assessee for claiming deduction under section 80IA - Decided in favour of assessee.

1. ISSUES PRESENTED and CONSIDERED

The core legal questions addressed in this judgment are:

Whether the CIT(A) was justified in allowing the claim of deduction under Section 80IA of the Income Tax Act for the assessee.
Whether the assessee fulfilled the conditions necessary for claiming the deduction under Section 80IA.
Whether the activities undertaken by the assessee qualify as the development of infrastructure facilities, as opposed to mere execution of works contracts.
Whether the CIT(A) erred in considering additional evidence without following the statutory procedure under Rule 46A of the Income Tax Rules.
Whether the relationship between the assessee and the government is that of a developer or merely a contractor.

2. ISSUE-WISE DETAILED ANALYSIS

Issue 1: Justification of Deduction under Section 80IA

Legal Framework and Precedents: Section 80IA provides tax benefits to enterprises engaged in developing, maintaining, and operating infrastructure facilities. The provision aims to encourage private sector investment in infrastructure development.
Court's Interpretation and Reasoning: The Tribunal examined whether the assessee qualified as a developer and not merely a contractor. The Tribunal relied on precedents like CIT v. ABG Heavy Industries Ltd., which clarified that the conditions for development, operation, and maintenance are not cumulative.
Key Evidence and Findings: The Tribunal noted that the assessee undertook substantial investment, bore risks, and executed development work, which qualified as infrastructure development under Section 80IA.
Application of Law to Facts: The Tribunal applied the legal principles to the facts, concluding that the assessee's activities met the criteria for development of infrastructure facilities.
Treatment of Competing Arguments: The Tribunal considered the Revenue's argument that the assessee was merely a contractor but found that the evidence supported the assessee's claim as a developer.
Conclusions: The Tribunal upheld the CIT(A)'s decision to allow the deduction under Section 80IA.

Issue 2: Fulfillment of Conditions for Deduction

Legal Framework and Precedents: Section 80IA requires specific conditions to be met for claiming deductions, including the nature of the work and the relationship with the government.
Court's Interpretation and Reasoning: The Tribunal examined whether the assessee's work constituted the development of new infrastructure facilities or mere rehabilitation.
Key Evidence and Findings: The Tribunal found that the assessee carried out road widening and other infrastructure development activities, supported by certificates from government agencies.
Application of Law to Facts: The Tribunal applied the legal requirements to the evidence, concluding that the assessee fulfilled the necessary conditions.
Treatment of Competing Arguments: The Tribunal addressed the Revenue's concerns about the nature of the work and found them unsubstantiated.
Conclusions: The Tribunal concluded that the assessee met the conditions for claiming deductions under Section 80IA.

Issue 3: Additional Evidence Consideration

Legal Framework and Precedents: Rule 46A of the Income Tax Rules governs the admission of additional evidence at the appellate stage.
Court's Interpretation and Reasoning: The Tribunal considered whether the CIT(A) followed the appropriate procedure in considering additional evidence.
Key Evidence and Findings: The Tribunal found that the CIT(A) had appropriately considered the evidence, which was crucial for determining eligibility for deductions.
Application of Law to Facts: The Tribunal applied Rule 46A and found no procedural lapses in the CIT(A)'s actions.
Treatment of Competing Arguments: The Tribunal dismissed the Revenue's argument that the CIT(A) erred in considering additional evidence.
Conclusions: The Tribunal upheld the CIT(A)'s decision to consider additional evidence.

Issue 4: Relationship Between Assessee and Government

Legal Framework and Precedents: The distinction between a developer and a contractor is crucial for claiming deductions under Section 80IA.
Court's Interpretation and Reasoning: The Tribunal examined the nature of the contractual relationship and the responsibilities assumed by the assessee.
Key Evidence and Findings: The Tribunal found that the assessee assumed significant responsibilities and risks, typical of a developer.
Application of Law to Facts: The Tribunal applied the legal distinction to the facts, concluding that the assessee was a developer.
Treatment of Competing Arguments: The Tribunal considered the Revenue's argument that the assessee was a contractor but found it unconvincing.
Conclusions: The Tribunal concluded that the assessee was a developer, not merely a contractor.

3. SIGNIFICANT HOLDINGS

Verbatim Quotes of Crucial Legal Reasoning: "The applicants have satisfactorily established the admissibility of the above deduction on the facts of the cases."
Core Principles Established: The Tribunal reaffirmed that the deduction under Section 80IA is available to entities that develop, operate, or maintain infrastructure facilities, and these conditions are not cumulative.
Final Determinations on Each Issue: The Tribunal upheld the CIT(A)'s decision to allow the deduction under Section 80IA, finding that the assessee fulfilled the necessary conditions and acted as a developer.

The Tribunal dismissed the Revenue's appeals for all assessment years under consideration, affirming the CIT(A)'s order in favor of the assessee.

← Previous Next →