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2022 (10) TMI 650 - AT - Income TaxDeduction u/s 80IA(4) - Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc. - CIT-A treating the assessee as a Developer of infrastructure projects instead of Work Contractor as treated by the A.O.- HELD THAT - To sum up, (i) first to see any new infrastructural facility has been put in place (and not mere repairs/ restoration/ upgradation/ strengthening etc. is done of the existing facility) (ii) In addition to works contract, the assessee undertakes addition responsibilities and risks attached to the project being undertaken, both financial risk as well as undertaking responsibility towards various other obligations attached towards successful completion and handling over the project including post completion performance guarantee, then he would, in our considered view, be eligible to deduction u/s 80-IA(4) of the Act. Deduction u/s 80-IA (4) in respect of project Number 6 Sabli Dam work - We are of the considered view that the assessee is not acting as a mere works contractor in respect of this project. The assessee has taken the responsibility of complete handholding of the project and also additional maintenance after 12 months post completion of project. Accordingly, we are of the view, that Ld. CIT(Appeals) has not erred in facts and in law in holding that the assessee is eligible for claim of deduction under section 80-IA (4) of the Act in respect of project Number 6. Contract No. 7 Tapi River, Kathor PKG-6 Irrigation - From the terms of the contract, primarily the work seems to involve restoration/upgradation/strengthening/maintenance of existing flood protection earthern embankment on the bank of river Tapi. The scope of work, in our view does not involve development of an infrastructure facility, as envisaged within the meaning of section 80-IA (4) of the Act. The work primarily has upgraded/strengthened the existing projects, but no development of infrastructural facility, in our view has taken place. Although, the assessee has undertaken responsibility of maintenance of the safer. 12 months after completion of the project, however, looking into the totality of facts, we are of the considered view that the assessee is not eligible for deduction under section 80-IA (4) of the Act We are of the view that Ld. CIT(Appeals) has erred in facts and in law in holding that the assessee is eligible for claim of deduction under section 80-IA (4) of the Act in respect of contract number 7 as mentioned above. Accordingly, we are of the view that the assessee is not eligible for claim of deduction under section 80-IA (4) of the Act in respect of contract number 7. Contract number 8 Tapi River, Kathor PKG-3 Irrigation - From a perusal of the contention of the order passed by Ld. CIT(Appeals), the scope and contents of contract number 8 and contract number 7 mentioned above are similar. Accordingly, observations in respect of contract number 7 would apply to contract number 8 as well. Accordingly, Accordingly, we are of the view that Ld. CIT(Appeals) has erred in facts and in law in holding that the assessee is eligible for claim of deduction under section 80-IA (4) of the Act in respect of contract number 7 as mentioned above.Thus assessee is not eligible for claim of deduction under section 80-IA (4) of the Act. Contract number 9 Bharuch 4, Lane Road - In this case, it may be useful to refer to CIRCULAR NO. 4/2010 F.NO. 178/14/2010-IT(A-I) , DATED 18-5-2010, wherein Board considered the issue as to whether widening of existing roads constitutes creation of new infrastructure facility for the purpose of section 80-IA(4)(i) of the Income-tax Act, 1961. Vide the above Circular, CBDT clarified that widening of an existing Road by constructing additional lanes as a part of a highway project by an undertaking would be regarded as a new infrastructure facility for the purpose of section 80-IA(4)(i). However, simply relaying of an existing Road would not be classifiable as a new infrastructure facility for this purpose. Accordingly, in view of the above circular and in light of the observations made by ld. CIT(A), we are of the view that Ld. CIT(Appeals) has not erred in facts and in law in holding that the assessee is eligible for claim of deduction under section 80-IA (4) of the Act in respect of contract number 9 as mentioned above. CONTRACT NUMBER 10 GIDC CHEMICAL ZONE DAHEJ ROAD - As per terms of the contract, we are of the considered view that the assessee is not acting as a mere works contractor in respect of this project. The assessee has taken the responsibility of complete handholding of the project and also additional maintenance for 60 months post completion of project.Accordingly, we are of the view, that Ld. CIT(Appeals) has not erred in facts and in law in holding that the assessee is eligible for claim of deduction under section 80-IA (4) of the Act in respect of contract number 10 mentioned above. C ontract number 11 GIDC Dahej Road - Assessee is not acting as a mere works contractor in respect of this project. The assessee has taken the responsibility of complete handholding of the project and also additional maintenance after 60 months post completion of project. In this case, it may be useful to refer to CIRCULAR NO. 4/2010 F.NO. 178/14/2010-IT(A-I) , DATED 18-5- 2010, wherein Board considered the issue as to whether widening of existing roads constitutes creation of new infrastructure facility for the purpose of section 80-IA(4)(i) of the Income-tax Act, 1961. Vide the above Circular, CBDT clarified that widening of an existing Road by constructing additional lanes as a part of a highway project by an undertaking would be regarded as a new infrastructure facility for the purpose of section 80-IA(4)(i). However, simply relaying of an existing Road would not be classifiable as a new infrastructure facility for this purpose. CIT(Appeals) has not erred in facts and in law in holding that the assessee is eligible for claim of deduction under section 80-IA (4) of the Act in respect of contract number 11 mentioned above. Contract number 13 Bhopal Vidisa Road - We are of the considered view that the assessee is not acting as a mere works contractor in respect of this project. The assessee has taken the responsibility of complete handholding of the project and also additional maintenance for 12 months post completion of project. We would like to further add that in respect of the mobilisation advance received by the assessee, subject to certain conditions - CIT(Appeals) has not erred in facts and in law in holding that the assessee is eligible for claim of deduction under section 80-IA (4) of the Act in respect of contract number 13 mentioned above. Morbi Maliya Rural P-2 Road - It is evident that the assessee has not developed any infrastructure facility but only rendered services of civil work in the form of repairing and restoration of the existing road. A clear distinction can be made between widening an existing road by constructing additional lanes as part of the highway project vis- -vis improving, maintaining and refurbishing an existing road. For a specific patch of road, as the taxpayer was only operating and maintaining an already existing four lane road by strengthening it, no new infrastructure facility came into existence. Laying a service road and laying a main line were two different activities and laying a service road could not be termed as a new infrastructure facility, to claim deduction under section 80-IA of the Act. See GMR Tambaram Tindivanam Expressways Ltd 2018 (11) TMI 1794 - ITAT BENGALURU . We find no infirmity in the order of Ld. CIT(Appeals) with respect to Contract Number 1. Accordingly, in our view, the assessee is not eligible for claiming deduction under section 80-IA of the Act in respect to Contract number 1. Contract No. 2 KKS RJTI-A Road, Contract No. 3 Morbi Malaiya KP/RAJ/P-2 ROAD, Contract No. 4 Morbi TankaraKP/RAJ/P-3 ROAD, Contract No. 5 Nabard/RAJ/P-4WMT ROAD AND Contract No. 12 GKA KM42 TO 248 NH-8 NHAI ROAD - From perusal of the observations made by Ld. CIT(Appeals), it is evident that the assessee has not developed any infrastructure facility but only rendered services of civil work in the form of repairing and restoration of the existing road. In this case, it may be useful to refer to CIRCULAR NO. 4/2010 F.NO. 178/14/2010-IT(A-I) , DATED 18-5-2010, wherein Board clarified that widening of an existing Road by constructing additional lanes as a part of a highway project by an undertaking would be regarded as a new infrastructure facility for the purpose of section 80-IA(4)(i). However, simply relaying of an existing Road would not be classifiable as a new infrastructure facility for this purpose. Accordingly, in our view, we find no infirmity in the order of Ld. CIT(Appeals) with respect to Contracts as not eligible for claiming deduction under section 80-IA(4).
Issues Involved:
1. Eligibility for deduction under section 80-IA(4) of the Income Tax Act. 2. Classification of the assessee as a "Developer" vs. "Work Contractor". 3. Validity of the order passed under section 153A read with section 143(3). Detailed Analysis: Department's Appeal: Contract No. 6: Sabli Dam Work: The CIT(A) allowed the deduction under section 80-IA(4) for this project, observing that the contract involved comprehensive development of an earthen dam, including maintenance responsibilities for 12 months post-completion. The terms indicated that the assessee was responsible for all aspects of the project, including quality assurance, safety, and insurance, establishing the assessee as a "developer" rather than a mere "work contractor." Contract No. 7: Tapi River, Kathor PKG-6 Irrigation: The CIT(A) allowed the deduction, but the Tribunal found that the work primarily involved restoration, raising, and strengthening of an existing flood protection embankment. Since the project did not involve the development of new infrastructure, the Tribunal held that the assessee was not eligible for the deduction under section 80-IA(4). Contract No. 8: Tapi River, Kathor PKG-3 Irrigation: Similar to Contract No. 7, the Tribunal concluded that the project involved restoration and strengthening of existing infrastructure, and thus, the assessee was not eligible for the deduction under section 80-IA(4). Contract No. 9: Bharuch 4 Lane Road: The CIT(A) allowed the deduction, noting that the project involved the construction of additional lanes, which constitutes the development of new infrastructure. The Tribunal upheld this decision, referencing CBDT Circular No. 4/2010, which clarifies that widening of existing roads qualifies as new infrastructure development. Contract No. 10: GIDC Chemical Zone Dahej Road: The CIT(A) allowed the deduction, observing that the project involved comprehensive development of roads, stormwater drains, water supply networks, and effluent collection systems, with a maintenance period of 60 months post-completion. The Tribunal upheld this decision, noting that the terms of the contract indicated significant responsibilities and risks undertaken by the assessee, establishing it as a "developer." Contract No. 11: GIDC Dahej Road: The CIT(A) allowed the deduction, noting that the project involved widening and strengthening existing roads, developing new lanes, and constructing stormwater drains, with a maintenance period of 60 months post-completion. The Tribunal upheld this decision, referencing CBDT Circular No. 4/2010 and the comprehensive responsibilities undertaken by the assessee. Contract No. 13: Bhopal Vidisa Road: The CIT(A) allowed the deduction, observing that the project involved the construction of a new road, with the assessee responsible for design, development, and maintenance for 12 months post-completion. The Tribunal upheld this decision, noting the significant responsibilities and risks undertaken by the assessee. Assessee's Appeal: Contract No. 1: Morbi Maliya Rural P-2 Road: The CIT(A) disallowed the deduction, noting that the project involved repairing and restoring existing roads, which does not qualify as new infrastructure development. The Tribunal upheld this decision, referencing ITAT Bangalore's decision in GMR Tambaram Tindivanam Expressways Ltd v DCIT. Contract No. 2: KKS RJTI-A Road: The CIT(A) disallowed the deduction, noting that the project involved repairing and resurfacing existing roads. The Tribunal upheld this decision, referencing CBDT Circular No. 4/2010. Contract No. 3: Morbi Malaiya KP/RAJ/P-2 Road: The CIT(A) disallowed the deduction, noting that the project involved repairing and restoring existing roads. The Tribunal upheld this decision, referencing CBDT Circular No. 4/2010. Contract No. 4: Morbi Tankara KP/RAJ/P-3 Road: The CIT(A) disallowed the deduction, noting that the project involved repairing and restoring existing roads. The Tribunal upheld this decision, referencing CBDT Circular No. 4/2010. Contract No. 5: Nabard/RAJ/P-4 WMT Road: The CIT(A) disallowed the deduction, noting that the project involved repairing and restoring existing roads. The Tribunal upheld this decision, referencing CBDT Circular No. 4/2010. Contract No. 12: GKA KM42 TO 248 NH-8 NHAI Road: The CIT(A) disallowed the deduction, noting that the project involved periodic maintenance and resurfacing of existing roads. The Tribunal upheld this decision, referencing CBDT Circular No. 4/2010. Conclusion: - The Department's appeal is partly allowed, with deductions under section 80-IA(4) disallowed for Contracts No. 7 and 8. - The Assessee's appeal is dismissed, with deductions under section 80-IA(4) disallowed for Contracts No. 1, 2, 3, 4, 5, and 12.
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