2023 (10) TMI 195 - AT - Income Tax

Deduction u/s 80IA - claim denied on profits derived from the projects/works executed as a of constituent of AOP/Joint Ventures - whether assessee has not entered into an agreement with the. Central Government or a State Government or a Local Authority or any other Statutory Body? - Whether assessee herein is not a developer but merely a contractor in respect of the project not directly awarded to it? - whether constituent is eligible for deduction u/s. 80IA(4)? - HELD THAT - From the perusal of section 80IA(4) of the Act, it is abundantly clear that for the purpose of claiming deduction, it is essential for the assessee to prove that the agreement has been entered by the assessee with the government / statutory body. Admittedly, in the present case, the agreement was not entered between the assessee with the government body and the agreement was entered into by the Joint Venture company namely, HES-MEIL-ZVS, whereas the deduction was claimed by assessee which happens to be one of its constituent member. In our view, the statue is unambiguous and clear which only provides that the enterprise in whose favour the work has been allotted or agreement has been entered shall alone be entitled to claim deduction under section 80IA(4) of the Act. Therefore, in our view, the contention raised by the ld. DR for the Revenue is in accordance with the law and therefore, this legal issue is required to be decided in favour of the Revenue. However, the co-ordinate Bench of the Tribunal in the case of M/s. KNR Constructions 2021 (5) TMI 724 - ITAT HYDERABAD has decided the issue in favour of the assessee. In our view, the above said proposition cannot be said to be binding on this Bench in view of the fact that in later decision of Dilip Kumar and Company 2018 (7) TMI 1826 - SUPREME COURT Thus it is clear that in case a person seeking the deduction under the provisions of the Act, then onus is on the assessee to prove strictly that assessee fulfills all the parameters laid down by the statute for claiming the deduction. In the present case, admittedly, the agreement was not entered between the assessee and the Government / Statutory Government and there was a violation laid down by the statute and therefore, the assessee is not entitled to claim deduction. In light of the above, with respect to the binding nature of the co-ordinate Bench of the Tribunal, it will be suffice to say that the co-ordinate Bench of the Tribunal has not had the benefit of applying the decision of the Hon'ble Supreme Court in case of Dilipsingh (supra), which was later on followed in many cases. Therefore, the decision of the co-ordinate Bench of the Tribunal in the case of M/s. KNR Constructions Limited (supra) is not binding on this Bench. Therefore, the grounds raised by the Revenue are required to be allowed.

Summary

Issues Involved:

1. Eligibility for deduction under section 80IA(4) of the Income Tax Act.
2. Status of the assessee as a developer or a contractor.
3. Binding nature of ITAT decisions on lower authorities.

Summary:

Eligibility for Deduction under Section 80IA(4):

The Revenue contended that the assessee was not eligible for the deduction under section 80IA(4) because the assessee had not entered into an agreement with the Central Government, State Government, or any statutory body. The agreement was entered into by the Joint Venture (JV), and the deduction was claimed by the assessee as a constituent member of the JV. The Tribunal noted that section 80IA(4) requires the enterprise claiming the deduction to have an agreement with the government or statutory body. Since the agreement was with the JV and not directly with the assessee, the Tribunal concluded that the assessee did not meet the statutory requirements for the deduction.

Status of the Assessee as a Developer or Contractor:

The Revenue argued that the assessee was merely a contractor and not a developer, which is a requirement under section 80IA(4). The Tribunal referred to previous decisions where it was held that constituents of a JV could claim deductions if they were involved in the development, operation, and maintenance of infrastructure projects. However, the Tribunal emphasized that the statutory language is clear and unambiguous, requiring the agreement to be directly with the assessee, thus disqualifying the assessee from claiming the deduction.

Binding Nature of ITAT Decisions:

The assessee argued that the decision of the ITAT, Vishakhapatnam in the case of M/s. Transtroy India Ltd. should be binding on the lower authorities. The Tribunal acknowledged that ITAT decisions are binding unless stayed or reversed by a higher court. However, it also cited the Supreme Court's decision in Commissioner of Customs (Import) Vs. M/s. Dilip Kumar and Company, which mandates strict interpretation of exemption clauses in favor of the Revenue. Therefore, the Tribunal held that the earlier ITAT decisions were not binding in this context due to the Supreme Court's ruling.

Conclusion:

The Tribunal allowed the Revenue's appeal, concluding that the assessee was not entitled to the deduction under section 80IA(4) because the agreement was not directly with the government or statutory body, and the statutory requirements were not met. The Tribunal's decision in ITA No. 184/Hyd/2018 applied mutatis mutandis to ITA No. 185/Hyd/2018, resulting in both appeals being allowed.