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2023 (9) TMI 325 - AT - Income TaxRevision u/s 263 - Reassessment proceedings concluded - main contention of the assessee, therefore, is this that the status of the assessee claiming as joint venture, the claim of deduction u/s 80IA(4), the disallowance of interest expenditure u/s 40(a)(ia) and exemption of receipt of insurance claim under the Act had been duly verified by the AO in the re-assessment proceeding itself which is clearly evident from the order passed by the Ld. AO u/s 143(3) r.w.s. 147 - HELD THAT - As evident from the records itself that the Ld. AO upon due application of mind verified the four above issues and allowed the same in respect of status of assessee claimed as joint venture, claim of deduction u/s 80IA(4), disallowance of interest expenses under Section 40A(i)(a) of the Act and exemption of receipt of insurance claim under the Act but disallowed on account of interest paid to Citycorp Finance Ltd. u/s 40(a)(ia) of the Act and added to the total income of the assessee out of interest payment GSHP-9A contract work which clearly establishes due application of mind by the Ld. AO. Moreso, the issues in question, as raised by the Ld. PCIT has already been explained by the assessee. The assessee further clarified that the assessee made substantial investment for developing the infrastructure facility with supporting financial documents. It was further mentioned that the entire investments were made by the appellant and no subsidy and/or assistance from any other prescribed authority was received; the explanation rendered by the assessee. There is no iota of doubt that the AO has made a detailed enquiry in the case of the assessee in the scrutiny proceeding, particularly, in regard to the issue raised by the Ld. PCIT in the order impugned. Upon making the exhaustive enquiry and excessive documents so placed by the assessee before the Ld. AO, the return of income filed by the assessee had been accepted. We would like to mention that though the PCIT sought to justify his point of view in holding the order passed by the Ld. AO erroneous so as to prejudicial to the interest of the Revenue due to lack of enquiry, such finding is totally found to be non-application of mind and a colorable exercise of power. We find that in this case proper and adequate enquiry has been conducted by the Ld. AO. Thus, the order passed by the Ld. PCIT quashing the order passed by the Ld. AO holding it erroneous and prejudicial to the interest of the Revenue due to lack of adequate enquiry is not sustainable in the eye of law - Decided in favour of assessee. Deduction u/s 80IA(4) - Disallowance of claim as no development of the infrastructure facility carried away - assessee company engaged in the civil construction work mainly laying roads, dams, bridges, a developer of infrastructural facility upon making investment of its own capital as well as borrowed funds in the form of plant and machinery, structures at sites, working capital, human resources, technical expertise etc. entrusted by the State Government/Central Government on various projects - HELD THAT - As dealt with relevant clauses of the tender documents stipulating various conditions viz. financial involvements, risks, obligations and responsibilities of the assessee in developing, operating and maintaining of infrastructure facilities, which clearly makes out the case of the assessee within the scope and ambit of section 80IA(4) of the Act so as to claim the impugned deduction. The terms and conditions of tender documents / agreements / work order and comprehensive view of the activities undertaken by the assessee as discussed above clearly demonstrates that the assessee-company has undertaken substantial activities in respect of various projects awarded by various statutory bodies, which makes the assessee to qualify as a developer of Infra facility and to make claim necessary benefits under section 80IA(4) of the Act. If the contention of the Revenue is encouraged then possibly none of the developers will be entitled to the claim made under Section 80IA(4) of the Act. Our this view has been strengthened by the observation and the ratio laid down by the Hon ble Delhi High Court in the case of CIT vs. VRM India Ltd 2015 (3) TMI 941 - DELHI HIGH COURT - No doubt in regard to the admissibility of the claim made by the assessee and to entertain the same by giving relief to that effect. Tender documents demonstrate various risks undertaken by the assessee for execution of the project work awarded by the competent authority in terms of financial resources, manpower deployment, both technical and administrative expertise, drawing and designing of the project specifications and getting approval from the competent authority, safety and security of project and human resources, compliances of various statutory rules and laws. Therefore, merely because in the agreement for development of infrastructure facility, the assessee is referred to as contractor or just because some basic specifications are laid down, it does not detract the assessee from the position of being a developer, nor will deprive the assessee from claiming deduction u/s. 80IA(4) of the Act. As such, looking to the overall aspects of work undertaken by the assessee we can safely come to the conclusion that the assessee is engaged in development of the infrastructure facility and therefore, a developer, which confers right of eligibility to the assessee to claim benefits under section 80IA(4) of the Act. Decided in favour of assessee.
Issues Involved:
1. Eligibility of the assessee for deduction under Section 80IA(4) of the Income Tax Act, 1961. 2. Whether the assessee acted as a "developer" or a "contractor" for infrastructure projects. 3. Verification and reassessment of the assessee's claims by the Assessing Officer (AO) and Principal Commissioner of Income Tax (PCIT). Summary: 1. Eligibility for Deduction under Section 80IA(4): The case revolves around the eligibility of the assessee for claiming a deduction under Section 80IA(4) of the Income Tax Act, 1961. The assessee filed its original return declaring NIL income and claimed a deduction under Section 80IA(4) amounting to Rs. 2,43,70,059/-. The AO initially accepted the return but later reassessed it under Section 147, maintaining the NIL income after allowing the deduction. 2. Verification and Reassessment: The PCIT issued a notice under Section 263, questioning the eligibility of the assessee for the deduction under Section 80IA(4), stating that the work executed was a contract work with the National Highway Authority of India and required further verification. The PCIT found the AO's order erroneous and prejudicial to the interest of the Revenue, leading to reassessment. 3. Assessee's Defense and AO's Findings: The assessee argued that all issues raised by the PCIT, including the status as a joint venture, deduction under Section 80IA(4), disallowance of interest expenses under Section 40A(ia), and exemption of insurance claim receipts, were duly verified by the AO in the reassessment proceedings. The AO had considered all relevant facts, evidences, and submissions before allowing the deduction. 4. Tribunal's Analysis: The Tribunal noted that the AO had conducted a detailed inquiry and verified all issues raised by the PCIT. The Tribunal emphasized that the AO had applied due diligence and considered all relevant materials before allowing the deduction. The Tribunal also highlighted that the assessee had made substantial investments for developing infrastructure facilities and bore the financial and operational risks, qualifying as a "developer" rather than a mere "contractor." 5. Legal Precedents and Judgments: The Tribunal referred to several judgments, including those of the Hon'ble Supreme Court and various High Courts, which supported the assessee's claim. The Tribunal cited the case of CIT vs. ABG Heavy Industries Ltd., where it was held that the assessee, involved in developing infrastructure facilities, was entitled to the deduction under Section 80IA(4). 6. Conclusion: The Tribunal concluded that the AO's order was neither erroneous nor prejudicial to the interest of the Revenue. The Tribunal quashed the PCIT's order under Section 263, holding that the AO had made a proper and adequate inquiry. The Tribunal allowed the assessee's appeal and dismissed the Revenue's appeal, affirming the assessee's eligibility for the deduction under Section 80IA(4). Order Pronounced on 31/08/2023.
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