2021 (3) TMI 428 - AT - Income Tax

Deduction u/s 80IA(4) - according to AO in view of the explanation inserted below Section 80IA(13) with retrospective effect from 01.04.2008 has over-riding influence and debars the assessee s claim, because, the assessee s claim of deduction u/s 80IA(4) are in relation to business in the nature of works contract - HELD THAT - Since the assessee is a developer in the new as well as existing infrastructural projects as stated above, deduction claimed by the assessee u/s 80IA for the A.Y. 2016- 17, to be allowed as rightly decided by Ld. CIT(A) - Decided in favour of assessee.

Issues Involved:
1. Deduction under Section 80IA(4) of the Income Tax Act, 1961.
2. Nature of the assessee's business as a developer or a works contractor.
3. Application of Explanation to Section 80IA(13) with retrospective effect from 01.04.2008.

Issue-wise Detailed Analysis:

1. Deduction under Section 80IA(4) of the Income Tax Act, 1961:
The sole issue raised by the Revenue was against the action of the Ld. CIT(A) in allowing the deduction of ? 27,31,67,167/- under Section 80IA(4) of the Income Tax Act, 1961, claimed by the assessee. The AO contended that the assessee's claim was in relation to a business in the nature of works contract and was thus debarred by the explanation inserted below Section 80IA(13) with retrospective effect from 01.04.2008. The AO referred to the explanation which states that nothing contained in this section shall apply to a business referred to in sub-section (4) which is in the nature of a works contract awarded by any person and executed by the undertaking or enterprise referred to in sub-section (1).

2. Nature of the Assessee's Business as a Developer or a Works Contractor:
The Ld. CIT(A) allowed the claim by noting that the Tribunal had allowed similar claims for the assessee in previous assessment years (AY 2010-11, 2011-12, 2012-13, 2014-15, 2015-16). For the relevant assessment year 2016-17, the new project was Project No. 3004 with Rail Vikash Nigam Ltd. (RVNL). The agreement involved construction of PSC Viaduct, Embankment, and stations, which falls within the meaning of "infrastructure facility" as contained in clause (a) of the Explanation to Section 80IA(4). The Tribunal noted the various duties and responsibilities of the assessee, including making arrangements for electricity, water, gas, sheds, stores, yards, temporary works, keeping the site clear, engagement of staff and labor, and ensuring health and safety. The Tribunal observed that these activities involved substantial risk, similar to any other entrepreneur who employs material, plant, machinery, and labor in a project.

3. Application of Explanation to Section 80IA(13) with Retrospective Effect from 01.04.2008:
The Tribunal referred to the decision of the Hon’ble Supreme Court in the case of Commissioner of Income-tax-VI v. VRM (India) Ltd., where it was held that the assessee was engaged in development and construction of a housing project and was entitled to deduction under Section 80IB(10) of the Act, despite being awarded contracts as turnkey projects. The Tribunal applied this ratio to the assessee's case, noting that the agreements were for the development of infrastructure facilities as a whole, not for specific works. The Tribunal concluded that the assessee was a developer, not a works contractor simplicitor, and therefore, the explanation to Section 80IA(13) did not apply.

Conclusion:
The Tribunal upheld the Ld. CIT(A)'s order allowing the deduction of ? 27,31,67,167/- under Section 80IA(4) of the Act for the AY 2016-17. It noted that the assessee's claim had been allowed in previous years and that the assessee's activities involved substantial risk and responsibilities, qualifying it as a developer of infrastructure facilities. The Tribunal found no infirmity in the Ld. CIT(A)'s order and dismissed the Revenue's appeal.

Result:
The appeal of the revenue was dismissed, and the order of the Ld. CIT(A) allowing the deduction under Section 80IA(4) was upheld.

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