2020 (11) TMI 469 - AT - Income Tax

Eligibility to claim deduction u/s 80IA - disallowance of deduction as assessee is a contractor not a developer - HELD THAT - As the deduction u/s 80IA of the Act for the relevant projects i.e. Thural and Dehra has already been allowed in the earlier years 2020 (4) TMI 520 - ITAT CHANDIGARH and this year being a subsequent year, the findings arrived for the same project in earlier years will mutatis-mutandis apply to the subsequent assessment year also with the condition that the total number of years for claiming deduction will be subject to the other conditions relating to the time period of claiming deduction and percentage of the deduction as provided u/s 80IA of the Act. Appeal of the assessee stands allowed.

Summary

Issues Involved:
1. Eligibility of the assessee to claim deduction under Section 80IA of the Income Tax Act, 1961.
2. Whether the contracts entered into by the assessee qualify as infrastructure development contracts or mere works contracts.

Issue-wise Detailed Analysis:

1. Eligibility of the Assessee to Claim Deduction under Section 80IA:

The sole issue in this appeal revolves around the eligibility of the assessee to claim a deduction under Section 80IA of the Income Tax Act, 1961. The assessee is engaged in developing Lift Irrigation Schemes and Lift Water Supply Schemes for various state governments. The assessee asserts that these activities fall within the definition of infrastructure development, maintenance, and operation activities, making them eligible for deduction under Section 80IA(4) of the Act.

The Tribunal had previously considered the eligibility of the assessee for similar projects in earlier assessment years. In those cases, the Tribunal had concluded that the works carried out by the assessee fell within the scope of infrastructure development facilities eligible for deduction under Section 80IA of the Act. The Tribunal relied on its decisions for assessment years 2011-12 and 2012-13, where it was held that the contracts were composite in nature, involving both development and subsequent operation and maintenance of the facilities.

2. Whether the Contracts Qualify as Infrastructure Development Contracts or Works Contracts:

The Tribunal examined whether the contracts entered into by the assessee were infrastructure development contracts or mere works contracts. The Tribunal noted that under Section 80IA(4), deduction is allowed to an assessee who enters into an agreement with the government or a statutory body for developing, operating, and maintaining a new infrastructure facility.

The assessee had entered into nine agreements for developing Lift Irrigation Schemes and Lift Water Supply Schemes with various state authorities. These contracts were composite, requiring the assessee to develop, operate, and maintain the facilities for a specified number of years. The Tribunal had previously held that the 'Thural Project' and other similar projects were infrastructure development projects eligible for deduction under Section 80IA(4).

The Tribunal reiterated that the nature of the contracts and development activities had been examined in detail in earlier years. It was found that the contracts were not mere works contracts but involved comprehensive development, operation, and maintenance of infrastructure facilities. The Tribunal emphasized that the contracts were awarded on a turnkey basis, involving significant responsibilities and risks for the assessee, including financing, designing, and executing the projects.

The Tribunal also addressed the argument that since the projects were developed as per government specifications, they should be considered works contracts. It was clarified that infrastructure development projects, even if carried out as per government specifications, qualify for deduction under Section 80IA(4) if the contractor is responsible for the overall development and maintenance of the facility.

The Tribunal referenced various case laws, including decisions from the ITAT Kolkata Bench and the Lucknow Bench, which supported the view that such projects qualify as infrastructure development contracts. The Tribunal concluded that the contracts undertaken by the assessee were infrastructure development projects and not mere works contracts, thus eligible for deduction under Section 80IA(4).

Conclusion:

The Tribunal allowed the appeal of the assessee, holding that the contracts undertaken were infrastructure development projects eligible for deduction under Section 80IA of the Income Tax Act, 1961. The Tribunal emphasized that the nature of the projects and the responsibilities of the assessee in developing, operating, and maintaining the facilities qualified them for the deduction, and the findings from earlier years applied to the current assessment year as well. The order of the Commissioner of Income Tax (Appeals) was set aside, and the assessee's claim for deduction was upheld.