9911796707
TMI Blog2009 (10) TMI 521X X X X Extracts X X X X X X X X Extracts X X X X ..... b-contractor. Then he took note of the amendment made in section 80-IA by the Finance Bill, 2007 by which an Explanation has been introduced with retrospective effect from 1-4-2000. In the opinion of the learned AM even if there was some lack of clarity in the main provision, the new Explanation clarified the position that no deduction could be allowed. That is how this matter is before the instant Larger Bench. Whether it is reference under sub-section (3) or (4) of section 255? - As the reference stood already made by the members of the Division Bench u/s 255(4) when they shortlisted their difference of opinion by formulating the questions, the constitution of Larger Bench by the Hon ble President under such compelling circumstances was only u/s 255(4) and not u/s 255(3). The reference to sub-section (3) by the Hon ble President in this reference appears to be only with a view to nominate a Larger Bench of three members so that there may not be any problem of majority opinion on the applicability or otherwise of Explanation below section 80-IA(13) inserted by the Finance Act, 2007. We, therefore, clarify that for all practical purposes it is a reference to the Larger Bench compri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provision covering the year in dispute, needs to be given effect to on any matter pending before any authority, notwithstanding the fact that such amendment was carried out after the passing of the assessment order. Therefore, it is not permissible to argue that the Tribunal is incompetent to take cognizance of any provision which comes into existence with retrospective effect, on the issue pending before it. However, it is of paramount importance that before applying such amended provision, aggrieved party must be given an opportunity of hearing. Whether a Bench u/s 255(4) can take note of a provision inserted with retrospective effect having bearing on the issue, coming into existence after the passing of separate orders by the dissenting members but during the pendency of dispute before the Bench under sub-section (4) of section 255? - The very purpose of conducting judicial proceedings by Bench under section 255(4) for hearing on such point or points depicts that the parties are at liberty to advance any legal submission before the Bench on the question before it, even if such submission was not made at the time of hearing before the Division Bench. Making of additional legal s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted from the material on record that the assessee was given civil construction work to be done strictly according to the plan laid down by the State Government/Statutory Authorities. Such authorities have been referred to as the owner and the assessee as the joint venture for executing the contract. The sphere of work assigned to the assessee is simply to do the specified job of civil construction. It is not involved in the planning and development of the infrastructure facility as a whole. Therefore, the claim of the assessee fails on both the counts, viz., it is neither a developer nor it fits into any of the two categories of the eligible businesses of ( i ) developing, ( ii ) maintaining and operating infrastructure facility on one hand or ( iii ) developing, maintaining and operating any infrastructure facility on the other. When we examine the mandate of clause ( i ) of sub-section (4) of section 80-IA it transpires that the eligible enterprise must fulfil all the conditions set out in sub-clauses ( a ), ( b ) and ( c ) of section 80-IA(4)( i ). Here it is important to notice that the transfer of infrastructure facility from one person to another should be only for the purpos ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n makes it crystal clear that the benefit under sub-section (4) cannot be provided to a business referred to in sub-section (4) which is in the nature of works contract awarded by any person including the Central or State Government and executed by the undertaking or enterprise referred to in sub-section (1). From the memorandum explaining the rationale behind the substitution of Explanation it can be easily seen that the Legislature clarified its intention beyond any doubt that the deduction cannot be allowed in relation to an eligible business which is in the nature of works contract. Even if one presumes, for a moment, that all the conditions set out in sub-section (4) clause ( i ) are satisfied, which are actually not fulfilled in the instant case, and the enterprise is covered under sub-section (1), then also deduction cannot be allowed in relation to a business which is in the nature of a works contract. As provision should be strictly construed as regards the applicability to the case of the assessee. It is only when the applicability is found that the process of liberally interpreting the same commences. Here is a case in which the assessee does not satisfy the applicabilit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was engaged in the construction of various projects of Government of Maharashtra, Government of Karnataka and various local authorities. It furnished its returns declaring total income of Rs. 10,41,09,480 for assessment year 2000-01 on 30-11-2000 and Rs. 2,59,55,460 on 29-10-2000 after claiming deduction under section 80-IA to the tune of Rs. 9,55,57,028 and Rs. 7,94,48,125 in relation to assessment years 2000-01 and 2001-02 respectively. These amounts were computed after showing the net profit from the business of "infrastructure project" claimed to have been carried on by the assessee during the relevant years. The project-wise claim of deduction has been reproduced in the assessment orders as well as the order proposed by the learned Judicial Member. To sum up, the assessee claimed deduction in respect of five and seven projects in the years in question respectively. It was claimed that the assessee's gross total income included profit and gains derived from business referred to in sub-section (4) of section 80-IA and, hence, it was entitled to deduction. The Assessing Officer did not allow the deduction as in his opinion the assessee had not fulfilled conditions stipulated in s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee, M/s. Patel Engineering Company and Government of Maharashtra. This agreement was also dated October 1992, that is the period anterior to 1-4-1995, being the date from which the deduction under section 80-IA was available. One project, i.e., Jihe Kathapur Lift Irrigation Project was again found to be a joint venture between the assessee-company and two other non-corporate entities. That was also found to be hit by the pro-visions of section 80-IA(4)(i)( a) of the Act. The learned CIT(A) came to hold that the assessee could not be called as a Developer in the sense of section 80-IA because no agreement was signed by it with the Central Government or State Government or local authorities for development of projects under BOT or BOOT scheme. The assessee was held to be a mere Contractor for executing the projects of various Government authorities. Since in the opinion of the learned CIT(A) the benefit under section 80-IA was available to those enterprises who were engaged in the business of developing, operating or maintaining or developing, operating and maintaining the infrastructure projects, the assessee was held to be not entitled to the same benefit as it did not fall in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re him that the learned Accountant Member had referred to Explanation below section 80-IA(13) which was inserted by the Finance Act, 2007 with retrospective effect from 1-4-2000. It was claimed that the learned Accountant Member unilaterally took Finance Bill, 2007 into consideration and decided the matter against the assessee. This fact was not disputed even by the learned Departmental Representative. Under these circumstances, the Hon'ble President, in his capacity of the Third Member in this case, observed that the entire case was decided by the learned Accountant Member on a point not raised by the parties during the course of hearing. He further noted that if the matter was decided by him after hearing the arguments on the applicability of the Explanation it would amount to decision for the first time and the view so expressed by him might be viewed as solitary expression of opinion on the issue, which would create complications rather than resolving them. Vide para 9 of his order dated 14th March, 2008 he referred the matter in dispute to a Larger Bench comprising of three Members in exercise of his powers under section 255(3) and 255(4) so that there may be no problem of maj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... delving upon to decide the questions referred to us for decision on merits, it is imperative to deal with the preliminary objection taken before us so as to dispel any doubt about the nature of the constitution of this Larger Bench and the sub-section under which it is constituted. It will be imperative to go through the relevant provisions in this regard, which are as under :-- "255(3) The President or any other member of the Appellate Tribunal . . ., and the President may, for the disposal of any particular case, constitute a Special Bench consisting of three or more members, one of whom shall necessarily be a Judicial Member and one an Accountant Member. 255(4) If the members of a Bench differ in opinion on any point, the point shall be decided according to the opinion of the majority, if there is a majority, but if the members are equally divided, they shall state the point or points on which they differ, and the case shall be referred by the President of the Appellate Tribunal for hearing on such point or points by one or more of the other members of the Appellate Tribunal, and such point or points shall be decided according to the opinion of the majority of the members of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here may be certain other circumstances also in which the President can constitute Special Bench under section 255(3) consisting of three or more members for the disposal of any particular case. As against this, sub-section (4) applies only where a Division Bench has heard the matter and there is difference in the opinion on any point or points between the members. It is only under these circumstances that they state the point or points on which they differ and thereafter the President of the Tribunal appoints one or more of the other members so that there may be opinion of the majority of the members. One noteworthy difference between sub-sections (3) and (4) of section 255 is that whereas one or more members are appointed under sub-section (4) only when there is difference between the members who heard the appeal and had stated the point or points of difference, the Special Bench under sub-section (3) is always constituted in the absence of differing opinion expressed by the members in that particular case through their separate orders. There may be a possibility that a particular appeal is heard by a Bench but the members consider it useful for making a reference to the Presiden ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the business is to be disallowed under section 37(4) because this is a special provision overriding the general provision. It, therefore, follows that if a specific provision is made then that matter is excluded from the general provision. From the above discussion it can be seen that a specific provision is made under sub-section (4) to appoint one or more members (may be three or more) for dealing with a situation in which the members, who heard the appeal have passed the dissenting orders. On the other hand, sub-section (3) contains a general provision for appointing three or more members for disposal of any particular case. It boils down that no Special Bench can be constituted under sub-section (3) of section 255 in a particular case where dissenting orders have already been passed by the members constituting the Division Bench. 12. Adverting to the facts of the instant case it is observed that the hearing by the Division Bench was concluded in this case on 12-12-2006. The learned Judicial Member who passed the leading order on 20-2-2007 allowed the assessee's appeals, but the learned Accountant Member vide his separate and dissenting order dated 21-5-2007 held the assessee t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssue, pronounced in the open Court that it is a reference under section 255(4) and the matter may be argued accordingly. To this, the learned Departmental Representative raised objection in allowing the interveners to participate in the proceedings. 14. There is no dispute on the fact that the proceedings under section 255(4) are confined to the point or points on which the members of the Division Bench differ. One or more of the other members appointed under sub-section (4) are supposed to confine himself/themselves only to the facts of the case before the Bench. When the point of difference is restricted only to the evaluation and examination of the factual position prevailing in that case and no substantial question of law is involved, it is not permissible to allow any intervener to jump in the proceedings. Because of the very nature of such proceedings under sub-section (4) confined to the facts of a particular case, ordinarily, the interveners cannot be allowed to participate. It is more so for the reason that each case is based on its own facts and a small variation in the facts of one case from another alters the entire character of the transaction. If the intervener is al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances, we fail to see any reason as to why the interveners be not allowed to participate in the proceedings under section 255(4) provided their arguments are confined to the substantial legal question posed before the Bench under section 255(4). It is further so for the reason that such an order passed under section 255(4) will have bearing on their respective cases if the issue involved is identical. However, it is pertinent to mention that such privilege given to the interveners is not unbridled. The interveners cannot be granted permission to enlarge the controversy before the Bench. The intervention can be allowed only to that aspect of the legal issue which is before the Bench in the proceedings under section 255(4). No other aspect even of the same legal issue which is subjudice before the Bench, can be allowed to be argued. As the decision of the Bench under section 255(4) has to be only on the point or points by which the members of the Division Bench differed, it cannot be called upon to express opinion, either generally or specifically, on any aspect of the matter other than that which is under consideration. We, therefore, permit the interveners to address the Be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s year of every person. Though section 4 is a charging section, but the rates of tax are provided by the relevant Finance Act. Thus, section 4 is a medium for giving effect to the provisions of the Finance Act. It is in this context that section 294 is relevant. Ex consequenti the net effect of section 294, read with section 4 on the one hand and the relevant Finance Bill/Act on the other hand is that if the Finance Bill providing rates of tax has been enacted, then the rates as per the Finance Act as on the 1st day of April in the assessment year shall be applicable, but if the relevant provisions in the Finance Bill have not been enacted then the rates so proposed or those already applicable, whichever are more beneficial to the assessee, shall be applicable. 18. When this position was put across to the learned A.R., he candidly accepted of not strictly relying on but only taking assistance from section 294 in support of his case. He emphasized that the ld. Accountant Member ought to have eschewed from considering the Explanation which was still a proposal at the time of his passing order. We find that even the assistance taken of this section by the learned A.R. to bolster his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessment order, which concerns with the dispute. In the same manner when issue is taken up by the either side before the Tribunal and in the meantime some amendment is carried out to the relevant provision with retrospective effect covering the period under consideration, the Tribunal will be duty bound to abide by such retrospective amendment. 20. At this stage it will be useful to refer to the order passed by the Special Bench of the Tribunal in the case of Aquarius Travels (P.) Ltd. v. ITO [2008] 111 ITD 53 (Delhi). Facts of that case are that the assessee earned, inter alia, some exempt income. The Assessing Officer disallowed interest to the tune of Rs. 12,94,978. The assessee remained unsuccessful before the first appellate authority. In the meantime section 14A was introduced with retrospective effect. It was claimed on behalf of the assessee that the Tribunal was not competent to take recourse to section 14A for the first time. Rejecting this contention it was held that section 14A has to be applied retrospectively by all the Courts before whom the proceedings are pending, i.e., if the issue relates to the subject-matter pertaining to deduction of expenses in relation to e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sum of Rs. 3,31,000 as gratuity liability of the previous year and the remaining sum of Rs. 5,34,000 as liability of the past years. The ITO allowed assessee's claim to the extent of Rs. 3.31 lakhs and disallowed the claim for the balance amount of Rs. 5.34 lakhs. The Tribunal allowed deduction of the entire amount. Section 40A(7) was introduced by the Finance Act, 1975 with retrospective effect from 1-4-1973. The order of assessment, the appellate order of the Appellate Assistant Commissioner and the order of the Tribunal were passed before the insertion of sub-section (7) to section 40A. As a result of that, the new amendment could not be considered by any of the authorities. The Hon'ble High Court held that the entire liability accrued during the previous year. The Tribunal was directed to pass such orders as were necessary to dispose of the issue conformably to the judgment of the High Court as provided under section 260(1) of the Act. When the matter came up before the Hon'ble jurisdictional High Court it was held that, if in the meantime, as had happened in the instant case, certain provisions had been enacted which were applicable to the year under reference, the Tribunal wa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... no party is entitled to re-agitate any of the issues decided by the Division Bench in concurrence or rake up an additional ground on any other fresh issue. For all practical purposes, the proceedings are closed, insofar as the Tribunal is concerned when the hearing is concluded by the Division Bench save and except the point or points on which there arose a difference of opinion. The Jodhpur Bench of the Tribunal in Rameshwar Soni v. Asstt. CIT (Inv.) [2005] 97 ITD 127 , (to which one of us is party), considered a situation in which the Third Member passed the order and when the matter came up before the Division Bench for giving effect to the majority view, the assessee raised an additional ground of appeal. After hearing the parties at length it was held that there was difference in the scope of jurisdiction and powers in the passing of orders under sections 254(1) and 255(4). It was observed that section 254(1) provides that the Tribunal may, after giving both the parties to the appeal opportunity of hearing, pass such order thereon to as it thinks appropriate since the powers and jurisdiction of the Tribunal in passing the order under this sub-section are stated in widest ampl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... missions having bearing on the point of difference which is open before the Third Member. There is a basic difference between 'evidence' and 'submission'. The Law Lexicon by P. Ramanatha Aiyar gives the meaning of 'Evidence' as "the means from which an inference may logically be drawn as to the existence of facts." The meaning of 'Evidence' has further been explained here as : "all the legal means, exclusive of mere argument, which tend to prove or disprove any matter of fact the truth of which is submitted to judicial investigation". Another meaning given is : "any matter of fact which is furnished to a legal Tribunal. . . . otherwise than by reasoning or a reference to what is noticed without proof. . . . as the basis of inference in ascertaining some other matter of fact". Here it will be relevant to note section 3 of the Evidence Act, 1872 which defines "evidence" to "mean and include - (1) All statements which the Court permits or requires to be made before it by witnesses, in relation to matters of fact under inquiry; such statements are called oral evidence, (2) All documents produced for the inspection of the Court; such documents are called documentary evidence." 26. From ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the later amendment in the statutory provision or development of law on the question which is pending in dispute relating to the year, should be ignored. Not following such amendment would give absurd results and the order so passed will be rendered erroneous. The same is true for applying the judgment of the Hon'ble Supreme Court or the Hon'ble jurisdictional High Court coming into place after the passing of orders by the dissenting members. Brushing aside such amendment in the statutory provision or the pronouncement of law by the Hon'ble Supreme Court or the Hon'ble jurisdictional High Court, which is available at the time of passing order under section 255(4), would make the order cryptic. It is trite law that even rectification of the order is permissible within the frame work of the provisions when there is retrospective amendment or adjudication by the Hon'ble Supreme Court or the Hon'ble jurisdictional High Court contrary to what was earlier decided by the concerned authority. In Asstt. CIT v. Saurashtra Kutch Stock Exchange Ltd. [2008] 305 ITR 227 1, the Hon'ble Supreme Court has held that non-consideration of a judgment of the jurisdictional High Court, rendered pri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e, requested that the question so proposed be modified by this Bench so as to substitute the word "project" with the word "projects" and resultantly this Bench should render its decision only on the Koyna Hydro Electric Power Project. The sum and substance of the learned A.R.'s submission was that the learned Judicial Member had allowed deduction under section 80-IA on all the projects undertaken by the assessee whereas the learned Accountant Member disentitled the assessee to deduction only in respect of Koyna Hydro Electric Power Project and hence this Bench should decide the granting or otherwise of deduction only on the Koyna Hydro Electric Power Project as there was concurrence between the Members of the Division Bench as regards the allowability of deduction on the remaining projects. The learned Departmental Representative strongly opposed the view point of the learned A.R. by submitting that the learned Accountant Member had denied deduction under section 80-IA in entirety and as such it could not be presumed that both the Members had allowed deduction in respect of other projects. 28. After considering the rival submissions and perusing the relevant material on record, we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rned A.R. in that para and the same is not his finding, which is amply demonstrated by the use of the sentence : "in other words, it was, therefore, argued that there is no decision on four cases by the learned Accountant Member". When the Hon'ble President has referred the matter to a Larger Bench without expressing his opinion on the questions referred to him under section 255(4), it is wrong to infer any decision having been rendered by the Hon'ble President on any of the projects. 29. Both the sides, in their preliminary objection, have relied on the judgment of the Hon'ble Madras High Court in the case of Dynavision Ltd. (supra). The facts of that case reveal that there was difference between the Judicial Member and Accountant Member. Both the Members formulated their separate questions. When the matter came up before the Third Member he noted that there was no uniformity even in identifying the points of difference amongst the Members. In order to sort out the controversy he formulated his own question and then proceeded to decide accordingly. It was on such framing of question by the Third Member that the Hon'ble High Court held that the President or the Third Member has no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dispute centers around the allowability or otherwise of deduction under section 80-IA in respect of the projects in both the years under consideration. In order to appreciate the rival contentions it is sine qua non to have a quick look at the history of section 80-IA, insofar as it is relevant for our purpose. It was introduced by the Finance (No. 2) Act, 1991 with a view to encourage private sector participation and to attract capital funds on infrastructure development. Later on, this section was amended by the successive Finance Acts. Major changes were brought by Finance Act, 1995 by which for the first time a five-year tax holiday was provided for all infrastructure facilities. Circular No. 717, dated 14-8-1995 clarifies, in this regard, that the industrial modernization requires a massive expansion and qualitative improvement in infrastructure. Additional resources are needed to fulfil the requirement of the country within a reasonable time frame. Keeping this requirement in mind a ten-year concession including a five-year tax holiday was allowed to any enterprise which develops, maintains and operates a new infrastructure facility such as roads, highways, expressways, etc. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t', the words 'thirty per cent' had been substituted. (2) The deduction specified in sub-section (1) may, at the option of the assessee, be claimed by him for any ten consecutive assessment years out of fifteen years beginning from the year in which the undertaking or the enterprise develops and begins to operate any infrastructure facility or starts providing telecommunication service or develops an industrial park or generates power or commences transmission or distribution of power : Provided that where the assessee begins operating and maintaining any infrastructure facility referred to in clause (b) of Explanation to clause (i) of sub-section (4), the provisions of this sub-section shall have effect as if for the words 'fifteen years', the words 'twenty years' had been substituted. (3)****** (4) This section applies to-- (i) any enterprise carrying on the business of (i) developing, (ii) maintaining and operating or (iii) developing, maintaining and operating any infrastructure facility which fulfils all the following conditions, namely:-- (a) it is owned by a company registered in India or by a consortium of such companies; (b) it has entered into an agreement w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . . . [undertaking of generation and distribution of power] (5) Notwithstanding anything contained in any other provision of this Act, the profits and gains of an eligible business to which the provisions of sub-section (1) apply shall, for the purposes of determining the quantum of deduction under that sub-section for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, be computed as if such eligible business were the only source of income of the assessee during the previous year relevant to the initial assessment year and to every subsequent assessment year up to and including the assessment year for which the determination is to be made. (6) ****** (7) Where the assessee is a person other than a company or a co-operative society, the deduction under sub-section (1) from profits and gains derived from an industrial undertaking shall not be admissible unless the accounts of the industrial undertaking for the previous year relevant to the assessment year for which the deduction is claimed have been audited by an accountant, as defined in the Explanation below sub-section (2) of section 288, and the assessee furnishes, alon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uch as constructing the tunnel, etc. Its duty ends when the tunnel, etc., is constructed according to the specifications given by the Government/Statutory Bodies. The infrastructure facility as such will begin to operate only after the assessee has done his job and the other necessary works in connection with the development of infrastructure facility are completed. Since the assessee is out of the sight much prior to the actual operation of the infrastructure facility, the mandate prescribed by sub-section (2) is failing in this case. Sub-section (3) which concerns with the conditions to be satisfied by an industrial undertaking for general and distribution of power, is obviously not applicable to the instant case. 34. Sub-section (1) speaks about the business of an enterprise referred to in sub-section (4). Insofar as the business of the eligible infrastructure facility is concerned, clause (i) of sub-section (4) is applicable here. In order to be eligible for deduction the enterprise must fulfil all the conditions as laid down in sub-clauses (a), (b) and (c ). As per the language of this clause, primarily it should be an enterprise carrying on the business of (i) developing, (i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... First are those who develop the infrastructure facility and after sometime transfer it to someone else [on or after 1-4-1999 as per proviso below sub-clause (c) to sub-section (4)(i)] to operate on their behalf in accordance with the agreement with the Central/State Government or local/statutory authority. Second category comprises of those who develop the infrastructure facility and also themselves operate and maintain the same. The use of punctuation sign coma between clauses (i) and (ii) cannot be substituted with the word "or" as used between (ii) and (iii) of sub-section (4)( i). Each and every word or sign of punctuation used by the Legislature in the language of section carries its own meaning and depicts the intention of the Legislature. It is not as if coma has been accidentally inserted between (i) and (ii) as against the intention of using the word "or", as suggested by the learned A.R. Wherever the Legislature intends to provide for choosing one of the alternatives it uses the word "or" between such options but where the intention is to make operative all the given propositions punctuation sign coma or/and the conjunction "and" is used between or amongst the relevant pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re facility, it does not satisfy the other condition of its transfer for operating and maintaining on its behalf for the obvious reason that there is no transfer at all of any infrastructure facility from the assessee, much less for operating and maintaining on its behalf. 37. Be that as it may it remains to be examined as to whether the assessee can be called as 'developer' within the meaning of section 80-IA(4). The learned counsel submitted that the work done by the assessee made it a developer entitled to deduction. Shri Vijay Mehta, the learned counsel for the intervener contended that the "works contract" has not been defined in the context of section 80-IA and, hence, in the absence of assignment of any definition by the statute, its meaning should be understood in the common parlance. According to him, a developer is a person who develops the facility and such person may or may not be a contractor. On the other hand, a contractor is stated to be a legal term whose rights and duties vis-a-vis contract are determined by way of legal document called the contract. He cited an example that if a contract to construct a highway from Mumbai to Delhi is given to a person he is cont ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Act. It is a settled legal position that ordinarily the meaning or definition of a word used in one statute cannot per se be imported into another as has been held by the Hon'ble Supreme Court in the case of Union of India v. R.C. Jain [1981] 2 SCC 308. Therefore, the meaning of the words 'developer' and 'contractor', as put forth before us by the rival parties from other legislations, be they State or Central enactments, cannot be automatically applied in the present context. In order to ascertain the meaning of a word not defined in the Act, a useful reference can be made to the General Clauses Act, 1897. If a particular word is not defined in the relevant statute but has been defined in the General Clauses Act, such definition throws ample light for guidance and adoption in the former enactment. According to section 3 of the General Clauses Act, the definitions given in this Act shall have applicability in all the Central Acts unless a contrary definition is provided of a particular word or expression. On scanning section 3 of the General Clauses Act, we observe that neither the word 'contractor' nor 'developer' has been defined therein. Thus, the General Clauses Act is also ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... breachable. When the person acting as developer, who designs the project, also executes the construction work, he works in the capacity of contractor too. But when he assigns the job of construction to someone else, he remains the developer simpliciter, whereas the person to whom the job of construction is assigned, becomes the contractor. The role of developer is much larger than that of the contractor. It is no doubt true that in certain circumstances, a developer may also do the work of a contractor but a mere contractor per se can never be called as a developer, who undertakes to do work according to the pre-decided plan. 41. Further it is relevant to note that the word "developing" used in sub-section (4) is with reference to "infrastructure facility". When we further peruse the meaning of the word "infrastructure facility" as per Explanation, it is found to have been defined exhaustively by referring to a road project, airport, port, etc., a highway project, a water supply project and irrigation project, etc. Therefore, the use of word "developing" in juxta-position to infrastructure facility indicates that what is eligible for deduction under this sub-section is the profits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee has been described as 'Joint venture' for execution of the works referred to in this contract. Thus it is noted from the material on record that the assessee was given civil construction work to be done strictly according to the plan laid down by the State Government/Statutory Authorities. Such authorities have been referred to as 'the owner' and the assessee as the 'joint venture' for executing the contract. The sphere of work assigned to the assessee is simply to do the specified job of civil construction. It is not involved in the planning and development of the infrastructure facility as a whole. It is bound to carry out the construction work as per the requirements of State Government(s)/statutory bodies and cannot deviate even an inch from the plan assigned to it. How and under which circumstances can, it be called as 'Developer' is anybody's guess. In the light of the foregoing discussion, it is clear that the assessee is a mere contractor and not developer. We, thus, agree with the view expressed by the Chennai Bench of the Tribunal in Asstt. CIT v. Indwell Linings (P.) Ltd. [2009] 122 TTJ (Chennai) 137 and respectfully differ with the order passed by the Mumbai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0-IA(4)(i). 46. Now we proceed to sub-clause (b) as per which it has entered into an agreement with the Government or Local Authority for (i) developing, (ii) maintaining and operating and (iii) developing, maintaining and operating new infrastructure facility subject to the condition that such infrastructure facility shall be transferred to the Government, Local Authority or such other authority within the period stipulated in the agreement. When we test the conditions set out in sub-clause (b) on the present factual scenario it emerges that the assessee is miserably failing. The assessee merely entered into agreement with State Government or Local Authorities for doing the specified works contract. Neither the assessee can be called as developer of the new infrastructure facility nor there is any stipulation in the agreement by which the infrastructure facility shall be transferred to the Government, Local Authorities or such other Statutory Bodies within the period stipulated in the agreement. A thing can be transferred only when a person holds some ownership or possessory rights over it. In the present context, the point of transferring the infra- structure facility to the Sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ree for operating and maintaining of enterprise on its behalf. This point has been discussed at length above while considering clause (i) of sub-section (4). It is, therefore, lucid that in the years in question, the deduction is available to the one who, in fact, operates the enterprise whether as an owner in his own capacity or for and on behalf of the developer. 48. Here it is important to notice that the transfer of infrastructure facility from one person to another should be only for the purpose of operating and maintaining it on its behalf and that too in accordance with the agreement with Central/State Government or Local Authority or Statutory Body, etc. We find that the assessee has failed to satisfy the condition as enshrined in sub-clause (c) as it had neither started operating and maintaining the infrastructure facility nor it transferred anything to someone else for operating on its behalf and still further there is no question of concurrence of the concerned authority as there is no such clause in any of the agreements with them. Rather there cannot be any question of such operation or maintenance since the infrastructure facility is not at all owned by the assessee. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing, maintaining and operating the infrastructure facility. In order to be eligible for the benefit of this deduction it should be a complete development of the infrastructure facility and not a part of it. In the present case, the infrastructure facilities in respect of which the assessee is claiming deduction, are being set up by the State Government(s) or local/statutory authorities and the assessee is simply engaged in some construction work, thereby contributing partly in the attainment of the object of developing the infrastructure facility. Under such circum- stances, it does not qualify for deduction within the framework of sub-section (4)(i) itself. 51. Now we shall proceed to examine the effect of the insertion of Explanation below section 80-IA(13) by the Finance Act, 2007 which was subsequently substituted with a new Explanation by the Finance Act, 2009 with retrospective effect from 1-4-2000. 52. The Finance Act, 2007 inserted Explanation below section 80-IA(13) with retrospective effect from 1-4-2000 which reads as under :-- "For the removal of doubts, it is hereby declared that nothing contained in this section shall apply to a person who executes a works contrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion to the assessment year 2000-01 and subsequent years." [Emphasis supplied] 55. Thereafter the Finance Act, 2009 substituted Explanation below section 80-IA(13) with retrospective effect from 1-4-2000 as under :-- "For the removal of doubts, it is hereby declared that nothing contained in this section shall apply in relation to a business referred to in sub-section (4) which is in the nature of a works contact awarded by any person (including the Central or State Government) and executed by the undertaking or enterprise referred to in sub-section (1)." 56. We have recorded a conclusion in an earlier part of this order that the law applicable as on the date of passing the order by the Bench in the proceedings under section 255(4) is applicable. In that view of the matter, it is obligatory on us to consider the provisions of section 80-IA as they stand as on today which also includes Explanation substituted by the Finance Act, 2009 with retrospective effect from 1-4-2000 covering both the years before us. In this regard, the learned AR contended that this Explanation substituted below section 80-IA(13), on the first look gives impression that the deduction is not available t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion was to clarify that the benefit of deduction is not to be allowed to a civil contractor, but it was interpreted by some quarters as applying only to the sub-contractor and not to the contractor. With a view to clarify the position beyond any doubt, the said Explanation was substituted by the Finance Act, 2009 with a new Explanation to clarify that the deduction is not available to business referred to in sub-section (4) which is in the nature of a works contract awarded by any person (including the Central or State Government) and executed by an enterprise referred to in sub-section (1). Now with this substitution of Explanation below section 80-IA(13), the entire controversy, created for no reason to needlessly distinguish between contractor and developer, has subsided. The position which was earlier apparent on a careful look of the provisions of sub-section (4) has now been made available even at the cursory look through the Explanation by clarifying the hitherto intention of the Legislature that no person executing the works contract shall be eligible for deduction under section 80-IA, even if it is an enterprise as referred to in sub-section (1). The language of this Expla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iscovered from the language used which means that attention should be paid to what has been said as also to what has not been said. It was further observed that "the question is not what may be supposed and has been intended but what has been said". The Hon'ble Supreme Court in the case of Padmasundara Rao v. State of Tamil Nadu [2002] 255 ITR 147 has held that while interpreting a statute the legislative intention must be found in the words used by the Legislature itself. Legislative casus omissus cannot be supplied by judicial interpretative process except in case of clear necessity and when reason for it is found in the four-corners of the statute itself. The Hon'ble Supreme Court in the case of Federation of Andhra Pradesh Chambers of Commerce & Industry v. State of Andhra Pradesh [2001] 247 ITR 363 has held that it is a trite law that a taxing statute has to be strictly construed and nothing can be read into it. Similar view has been expressed in several judgments of the Hon'ble Supreme Court including CIT v. Sodra Devi [1957] 32 ITR 615 , Smt. Tarulata Shyam v. CIT [1977] 108 ITR 345 and Goodyear India Ltd. v. State of Haryana [1991] 188 ITR 402. In view of the afore-noted pr ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
