2024 (8) TMI 1164 - AT - Income Tax

Deduction u/s. 80IA(4) - claim denied as assessee is not a developer of any infrastructure project, but a simple works contractor executing civil construction work for various government and semi-government departments - Arguments of the assessee is that, the AO has simply disallowed claim of deduction u/s. 80-IA(4) for the impugned assessment year based on the findings of the AO for the assessment year 2009-10 and nature of agreement entered into by the appellant in the assessment year 2009-10 and for the impugned assessment year may be different and further, on the basis of agreement entered by the appellant for the assessment year 2009-10, conclusion cannot be drawn against the assessee to hold that the assessee is a works contractor, but not a developer. HELD THAT - We find merit in the arguments of assessee, because in order to ascertain the nature of works executed by the assessee, the basic documents required to be examined is an agreement entered into with the principals. The terms and conditions and the nature of work specified in the agreement can only decide whether the assessee is a developer of an infrastructure project or a simple work contractor who executes civil construction work for a developer. Since, the AO has not examined the agreement entered into by the appellant with various government and semi-government departments, in our considered view, the matter needs to go back to the file of the AO for fresh examination. Thus, we set aside the order of the CIT(A) on this issue and restore the issue back to the file of the AO and direct the AO to re-examine the claim of deduction u/s. 80IA(4) of the Act, in light of necessary evidences including agreement entered into by the appellant with various departments and ascertain the nature of works executed by the assessee, in order to consider for the purpose of section 80IA(4) - Appeal filed by the assessee is allowed for statistical purposes.

Issues Involved:
1. Disallowance of claim for deduction under Section 80-IA of the Income-tax Act, 1961.
2. Classification of the appellant as a developer versus a works contractor.
3. Examination of agreements entered into by the appellant with government and semi-government departments.

Issue-wise Detailed Analysis:

1. Disallowance of Claim for Deduction under Section 80-IA of the Income-tax Act, 1961:

The appellant contested the disallowance of their claim for deduction under Section 80-IA of the Income-tax Act, 1961, which pertains to infrastructure development. The appellant argued that they qualify for the deduction as they are a developer of infrastructure projects. They cited various decisions, including those of the ITAT and High Courts, which support their eligibility for the deduction. The appellant emphasized that the CIT(A) failed to appreciate the binding decisions and the plain language of Section 80-IA, which should entitle them to the relief.

2. Classification of the Appellant as a Developer versus a Works Contractor:

The Assessing Officer (AO) disallowed the deduction on the grounds that the appellant is a works contractor rather than a developer. The AO referenced the provisions of Section 80-IA(4) and the legislative intent, concluding that simple civil contractors executing works for government undertakings do not qualify for the deduction. The CIT(A) upheld this view, stating that the appellant executes various infrastructure projects awarded by the state government or other government undertakings, thus classifying them as a works contractor.

3. Examination of Agreements Entered into by the Appellant with Government and Semi-Government Departments:

The appellant argued that the AO disallowed the deduction without verifying the agreements entered into with government authorities. They submitted that the agreements and the nature of the work should be examined to determine whether they qualify as a developer. The appellant provided sample copies of agreements to support their claim. The ITAT noted that the AO had based the disallowance on findings from a previous assessment year (2009-10) without examining the specific agreements for the current assessment year (2011-12).

Judgment:

The ITAT concluded that the AO had not adequately examined the agreements entered into by the appellant with various government and semi-government departments. The ITAT noted that the nature of the agreements is crucial to determining whether the appellant is a developer or a works contractor. Therefore, the ITAT set aside the order of the CIT(A) and remanded the matter back to the AO for fresh examination. The AO was directed to re-examine the claim for deduction under Section 80-IA(4) in light of the agreements and other relevant evidence to ascertain the nature of the works executed by the appellant.

Conclusion:

The appeal filed by the assessee was allowed for statistical purposes, and the case was remanded back to the AO for further examination. The AO is to verify the agreements and determine whether the appellant qualifies for the deduction under Section 80-IA(4) based on the nature of the work executed.

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