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TMI Blog2012 (4) TMI 149X X X X Extracts X X X X X X X X Extracts X X X X ..... ther specified conditions become relevant. - where an assessee incurred expenditure for purchase of materials himself and executes the development work i.e., carries out the civil construction work, he will be eligible for tax benefit under section 80 IA of the Act. In contrast to this, a assessee, who enters into a contract with another person including Government or an undertaking or enterprise referred to in Section 80 IA of the Act, for executing works contract, will not be eligible for the tax benefit under section 80 IA of the Act. Ownership of project - held that:- according to sub-clause (a), clause (i) of sub section (4) of Section 80-IA the word “it” denotes the enterprise carrying on the business. The word “it” cannot be related to the infrastructure facility, particularly in view of the fact that infrastructure facility includes Rail system, Highway project, Water treatment system, Irrigation project, a Port, an Airport or an Inland port which cannot be owned by any one. Even otherwise, the word “it” is used to denote an enterprise. Therefore, there is no requirement that the assessee should have been the owner of the infrastructure facility. The assessee should ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... take up appeals relating to M/s. GVPR Engineers Ltd. Hyderabad in ITA Nos. 1481, 1482, 1483, 1484, 1485, 1486, 1487 of 2011, 347/Hyd/08, 1323/Hyd/08, 1471, 1472 and 1473 of 2011. 3. The first common ground in assessee s appeals namely ITA Nos. 1481/Hyd/2011 to 1487/Hyd/2011 is with regard to the framing the assessment under section 153A of the Act, in spite of absence of valid search and any incriminating material found at the premises of the assessee. According to the assessee, the assessing officer should not have issued notice under section 153 of the Act. We have heard both the parties on this issue. There was a search operation conducted in the case of Sri Venkata Kutumbarao and others on 28-7-2008 and also search was conducted at the business premises of GVPR Engineers Limited and there was seizure of some incriminating documents and the cases were notified with the DCIT, Central Circle-5, Hyderabad. Thereafter, notice under section 153A has been issued consequent to the search action. Being so, we find no merit in the ground. Accordingly, this ground of the assessee is dismissed. 4. This being the sole ground in ITA No.1481/Hyd/2011, this appeal is accordingly dismissed ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e capital fund or an infrastructure capital company by way of interest, dividend (other than dividends referred to in section 115-0) and long term capital gains from investment made by way of equity or long-term finance in an approved enterprise wholly engaged in the business of (i) developing, (ii) maintaining and operating, or (iii) developing, maintaining and operating an infrastructure facility shall not be included in computing the total income. 17.2 Fiscal incentives for development of infrastructure have been provided in the Income-tax Act as a package, so that tax holiday is allowed under section 80-IA to the infrastructure enterprise and income from long-term investment made by the Infrastructure Capital Company or Infrastructure Capital Fund in the approved enterprise is exempt under section 10(23G). Thus, whenever a decision is taken to revise the scope of fiscal incentives to infrastructure by amending section 80-1A, necessary amendments are required to be made in sections 10(23G) as well. 17.3 Thus, as a measure of rationalisation, Finance Act, 2001, has amended section 10(23G) so as to provide that income by way of interest, dividend or long term capital gains ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... toll road), bridge, rail system, highway project, water supply project, sanitation, sewerage and solid waste management system shall be allowed a ten year tax holiday in place of a two-tier tax holiday. Such an enterprise may avail of the tax holiday consecutively for any ten years out of twenty years beginning from the year in which the undertaking begins operating the infrastructure facility. 47.3 In the case of other infrastructure, namely, for airport, port, inland port and inland waterways, section Bo-IA has been further amended to relax the existing two tier fiscal incentive. Instead, an identical ten year tax holiday may be availed of in a block of initial fifteen years. 47.4 The condition that such infrastructure facility shall be transferred to the Central Government, State Government or local authority has also been removed. However, the agreement with such authorities for creation of such infrastructure will have to be entered into. 47.5 Under sub-section (B) of section Bo-IA, where any goods are transferred for a consideration to any other business of the assessee, the consideration should correspond to the market value of such goods. As in certain cases, th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80-IA(4) became available to any enterprise carrying on the business of (i) developing or (ii) maintaining and operating, or (iii) developing, maintaining and operating any infrastructure facility. [Para 7] Sub-clause (c) of section 80-IA(4) is applicable to an enterprise which is engaged in operating and maintaining the infrastructure facility on or after 1-4- 1995. It is not applicable to the case of an enterprise, which is engaged in mere development of infrastructure facility and not its operation and maintenance . Therefore, the question of operating and maintaining of infrastructure facility by such an enterprise before or after any cut off date cannot arise. When the Act provides for deduction under section 80- IA(4), undisputedly for an enterprise, which is only developing the infrastructure facility, unaccompanied by operating and maintaining thereof by such entity, there cannot be any question of providing a condition for such an enterprise to start operating and maintaining the infrastructure facility on or after 1-4- 1995. Since the assessee was only a developer of the infrastructure project and it was not maintaining and operating the infrastructure f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lly contradictory to the term developer . On the other hand, rather section 80-IA(4) itself provides that the assessee should develop the infrastructure facility as per the agreement with the Central Government, State Government or a local authority. So, entering into a lawful agreement and thereby becoming a contractor should, in no way, be a bar to the one being a developer. Therefore, merely because, in the agreement for development of infrastructure facility, assessee was referred to as contractor or because some basic specifications were laid down, it did not detract the assessee from the position of being a developer; nor would it debar the assessee from claiming deduction under section 80- IA(4).[Para9] Therefore, the assessee, who was only engaged in developing the infrastructural facility, i.e., road, and not engaged in the operating and maintaining the said facility, was entitled to the benefits of the deduction under section 80-IA(4). The provisions of sub-clause (c) of clause (i) of section 80-IA (4) were inapplicable to the instant case. Hence, the order of the Commissioner (Appeals) was correct. [Para 13] 10. Further, he drew our attention to the decision o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fter the judgment of the Supreme Court, the expansive definition of the expression 'work' co-existed with the revenue's understanding that a contract for sale would not be within the purview of section 194C. The revenue always understood section 194C to mean that, though a product or thing is manufactured to the specifications of a customer, the agreement would constitute a contract for sale, if (i) the property in the article or thing passes to the customer upon the delivery; and (ii) the material that was required was not sourced from the customer/ purchaser, but was independently obtained by the manufacturer from a person other than the customer. The rationale for this was that where a customer provides the material, what the manufacturer does is to convert the material into a product desired by the customer and ownership of the material being that of the customer, the contract essentially involves work of labour and not of a sale. The Parliament recognized the distinction which held the field, both administratively in the form of circulars of the CBDT and judicially in the judgments of the several High Courts. Consequently, the principles underlying the applicability of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y, a clause relating to exclusivity is not inconsistent with a transaction of sale. Here again much depends upon the nature of the product. Restrictive covenants of this kind are intended to protect the intellectual and other property rights of a party which markets its goods by requiring a manufacturer to observe norms of specifications and exclusivity. The law is, therefore, consistent with the transaction being regarded as a transaction of sale, provided that the requirements of a contract of sale are met. They were net in the instant case. The contract entered into by the assessee was not a contract for carrying on any work within the meaning of section 194C. [Para 32] 11. Further, he submitted that in the case of the assessee irrigation agreements entered with the State Government and not part of the work. The site has been handed over to the assessee for carrying on the work as per the requirements of the Government and also operating system for a certain period mentioned therein and completed the project at the end of the above said period and as such the assessee is a developer and also operating the system for a certain period. Accordingly, the assessee is entitled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ive of the assessee, the assessee has undertaken the construction of the entire infrastructure facility as envisaged by the respective Central or State Government in the agreements. The assessee has entered into agreement with Central or State Government thereby satisfying the conditions envisaged in section 80IA of the Act. He also submitted that the following observation at paras 7, 7.1 is incorrect which reads as follows:- 7. The assessee's AR has filed a chart giving the details of all the contracts undertaken during the year in respect of which deduction u/s 8OlA was claimed. It is evident from the chart that some of the agreements have been entered into by the assessee with Government of India undertakings besides state Govt. Departments. 11 cannot therefore be said that the assessee entered into an agreement with a statutory body for development of an infrastructure facility which is a mandatory condition laid down in section 8OlA (4)(i)(b) of the Act. None of the contracts undertaken by the assessee are on BOT/BOOT model. On the perusal of the nature of work done in these contracts, it is evident that none of the projects were conceived, designed and planned by the asse ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PRADESH STATE Sl. No. Name of the Project Name of the work Nature of Facility Agreement entered in connection with work with 1 Electrical Warangal Distribution System Improvement work under APL-1 Supplementary in Warangal (WC-35) Power Distribution Andrew Yule I Co Ltd (A Govt India Undertaking ) 2 NTPC Parwad Construction of Raw Water Reservoir other than live storage area at Simhadri Thermal Power Project for NTPC near Vizag A.P. Simhadri Thermal Power Bharat Heavy Electricals Ltd ( A Govt. of India Undertaking ) 3 SRSPHuzurabad Earthwork excavation forming embankment construction of structures and CC lining from Km. 9.00 to 26-25 (tail-end) of 4F-21IR OF dem. 48 and its minors Irrigation Project Superintending Engineer Construction Circle, Huzurabad. A.P. 4 SRSP-FFC 21- 22 Earth work excavation and forming embankment from Km. 21.00 to Km 22.00 of FFC from Sri Ram Sagar Project Irrigation Project The Executive Engineer, SRSP - FFC Division, No. 2, Mettpally, Karimnagar Dist. 5 KC Canal LCB ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r villages in U.K. District in Karnataka Construction of Sewerage Systems The Executive Engineer, ZPE Division Karwar, Karnataka. GVPR ENGINEERS LIMITED STATEMENT SHOWING THE DETAILS FOR CLAIMING DEDUCTION UNDER SECTION 80-IA F.Y. 2004-05 A.Y. 2005-06 ANDHRA PRADESH STATE Sl. No. Name of the Project Name of the work Nature of Facility Agreement entered in connection with work with 1 SRSP Huzurabad Earthwork excavation forming embankment construction of structures and CC lining from Km. 9.00 to 26-25 (tail-end) of 4F-21IR OF dem. 48 and its minors Irrigation Project Superintending Engineer Construction Circle, Huzurabad. A.P. 2 SRSP-FFC 21-22 Earthwork excavation and forming embankment from Km. 21.00 to Km 22.00 of FFC from Sri Ram Sagar Project Irrigation Project The Executive Engineer, SRSP - FFC Division, No. 2, Mettpally, Karimnagar Dist. 3 SRBC-38 Earthwork excavation and Construction of Structures for Micro network distribution system for Block 13 14 of Packages No. 38 Irrigation Project The Superintend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... heme in Gulbarga City Construction of Sewerage Systems The Commissioner, Karnataka Slum Clearance Board, Bangalore 15 Karwar Comprehensive water Supply to Gokarna and 7 Development The Executive Engineer, ZPE Division 16 ROB Yelhanka Construction of ROB in lieu of at Yelhanka Chickballapur ?Railway station, work for NHAI Road Work The Executive Engineer, Yallahanka Karnataka 17 KPCL Bellary The work of survey design supply testing fabrication Galvanising erection of commissioning of 33 KV electrical work Electrical work Chief General manager, Karnataka Power Corp., Bellary Total MADHYA PRADESH STATE 18 MP Road Work Construction/upgradation of rural roads under PMGSY Package NO. MP 2913 District Raison Road Work The Project General Manager, M.P.R.D.A., Bhopal GVPR ENGINEERS LIMITED STATEMENT SHOWING THE DETAILS FOR CLAIMING DEDUCTION UNDER SECTION 80-IA F.Y. 2005-06 A.Y. 2006-07 ANDHRA PRADESH STATE Sl. No. Name of the Project Name of the work Nature o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hi Scheme in Gulbarga City Construction of Sewerage System The Commissioner, Karnataka Slum Clearance Board Bangalore 10 Construction of under drainage work at Bangalore city Remodelling of Primary Secondary Storm water Drains and Bridges and culverts across storm water drains in Chalgatta Valley Irrigation Project The Commissioner, Bangalore Mahanagara Palike, Bangalore 11 Electrical work in Bijapur Gadag Districts Electrical Work The Superintending Engineer, EI, (T P), Corporate Office, HESCOM, Hubli 12 Electrical work in Bijapur Gadag Districts 2X5 MC33/11 kv Substation at Chamnal in Shahapur taluk Gulbarga Dist on total turnkey basis supply Erection Commissioning Electrical Work The Chief Engineer, Elecy., Corporate Office, GESCOM, Gulbarg GVPR ENGINEERS LIMITED STATEMENT SHOWING THE DETAILS FOR CLAIMING DEDUCTION UNDER SECTION 80-IA F.Y. 2006-07 A.Y. 2007-08 ANDHRA PRADESH STATE Sl. No. Name of the Project Name of the work Nature of Facility Agreement entered in connection with work with 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m water Drains and Bridges and culverts across storm water drains in Challgatta Valley Irrigation Project The Commissioner, Bangalore Mahanagara Palike, Bangalore 12 HESCOM Bijapur Gadag 2X5 MVA 33/11 KV Substation at Chamnal in Shahapur taluk Hubli Dist on total turnkey basis supply Erection Commissioning Electrical Work The Superintending Engineer, EI, (T P) Corporate Office, HESCOM, Hubli 13 GESCOMBijapur Gadag 2X5 MVA 33/11 KV Substation at Chamnal in Shahapur taluk Hubli Dist on total turnkey basis supply Erection Commissioning Electrical Work The Chief Engineer, Elecy., Corporate Office, GESCOM, Gulbarga 14. He submitted that out of the above agreements the following mentioned contracts are entitled for deduction u/s 80IA:- AY 2004-05 Sl. No. of Eligible Products Assessment year 2004-05 Clause under which exemption is claimed Paper Book Page No. 2 NTPC Parwad-BHEL 22.1.period of maintenance 12 months 12 3 4 SRSP FFC 21-22KM Handing over of site and defect liability period of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nance of the system 82-86 6 BMP Works 1.1. Maintenance period shall be 24 months, Article 8- Defects liability period and maintenance period 34 35 7 HESCOM Bijapur Gadag 2.1.1 Design, engineering, testing, supply, erection and commissioning. 2.2 complete the work and successful testing commissioning of the transmission lines. 42 8 GESCOM Bijapur Gadag 2.1.1. Design, engineering, testing, supply, erection and commissioning. 2.2. Complete the work and successful testing commissioning of the Transmission lines. 42 15. According to the authorised representative, all the contracts of the site which was handed over by the Government to the assessee for development of the infrastructure facility and on completion, in few cases after operation for certain period, the entire site with the infrastructure facility developed to the owner. He submitted that the lower authorities wrongly relied on the order of the Tribunal in the case of Patel Engineering Limited (94 ITD 411) wherein the Tribunal has not considered the retrospective amendment by Finance Act, 2007. According to the auth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tisfy 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 80IA(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 8o-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 mayor 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 contractor as well as developer. As ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of no assistance in this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n 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 and gains derived from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act so as to clarify that in order to avail of a deduction, the assessee (i) develop,(ii) operate and maintain or (ii) develop, operate and maintain the facility. The condition as regards development, operation and maintenance of an infrastructure facility was contemporaneously construed by the authorities at all material times, to cover within its purview the development of an infrastructure facility under a scheme by which an enterprise would build, own, lease and eventually transfer the facility. This was perhaps a practical realisation of the fact that a developer may not possess the wherewithal, expertise or resources to operate a facility, once constructed. Parliament eventually stepped in to clarify that it was not invariably necessary for a developer to operate and maintain the facility. In Bajaj Tempo v. CIT [1992] 196 ITR 188, the Supreme Court emphasized that a provision in a taxing statute granting incentives for promoting growth and development should be construed liberally. In the present case, the administrative circulars issued Central Board of Direct Taxes proceeded on that basis by adopting a liberal view of the scope and ambit of the provisions of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ease charges in a total sum of Rs. 215.50 crores over a period of ten years. The contract envisaged two options. Under the first option, operation and maintenance was to be carried out by the assessee. Under the second option only maintenance was to be carried out by the assessee. Under the contracts, JNPT reserved the right to exercise the option to request the assessee to carry out both operation and maintenance during the lease period or to carry out only maintenance while operation was done by JNPT. The contracts stipulated, inter alia, the submission of a performance guarantee bond representing 10 per cent of the average annual contract value computed with reference both to maintenance and operation. The assessee assumed the responsibility of making the equipment available for operation for a minimum number of days as stipulated in the contract and became liable to pay liquidated damages for nonavailability of the equipment after commissioning. After the expiry of the lease period of ten years, the assessee was liable to hand over the equipment to JNPT free of cost. Under the contract the assessee furnished an indemnity to JNPT towards damages that may be sustained to the equi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e of ten years, there was a vesting in the JNPT free of cost. The finding that the assessee had developed the infrastructure facility and that it was engaged in operating the cranes was, therefore, based on the material on record. The fact that the assessee was also maintaining the cranes was not disputed. The facility was commenced after April 1, 1995. The assessee was entitled to the special deduction under section 80-IA . 16.1 The learned counsel for the assessee placed reliance on two decisions- Mumbai High Court in the case of CIT vs. ABG Heavy industries Limited 322 ITR 323 and ITAT Pune Bench in the case of Laxmi Civil Engineering Pvt. Ltd., vs. Addl. CIT Kolhapur (unreported/ITA No.766/Pn/09 dated 8-6-2011) . It was urged by the learned authorised representative that these decisions supported the proposition that (i) the ITAT s decision in the case of B.T. Patil Sons, Larger Bench (Mumbai) reported in 126 TTJ 577 is no longer good law, and (ii) the distinction between developer and contractor is no longer relevant in the context of changed law explained by the Mumbai High Court in the case of ABG Heavy Industries (supra) and followed within its jurisdictio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... certain number of kilometres of a highway or irrigation canal has no existence by itself, and is incapable of becoming operational without reference to the rest of the project, of which it is only a part. It is evident from the enclosures that the assessee undertook to execute the work as per agreed specifications, at rates agreed upon, subject to maintenance, within a period of 24 months of commencement. 18. The subsequent parts of the paper book details in the rate analysis, Bill of quantities etc., make it clear that the assessee had no autonomy in matters of design and specification which completely vested with the employer. The only lawful entitlement of the assessee was to be paid for the measurement of work completed at rates agreed upon. The partial and sectional nature of the proposed work is immediately clear from this notice and it is also apparent from this that the section of the road proposed for improvement has no independent existence capable of satisfying the requirement of section 80 IA (2). Therefore, this project is incapable of commencement of operations by itself, or to qualify the larger infrastructure facility of which it is a part. 19. The DR submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... because the Explanation takes over. If not, the other nuances such a development/operation etc., and other specified conditions become relevant. Reliance was placed in this regard on the decision of the Mumbai High Court in the case of Glenmark Pharma (324 ITR 199, 207) which digests the case law for ascertainment of whether facts of the agreement would amount to a contract for work or for sale. 21. The ld. DR placed reliance on the decision of jurisdictional High Court in the case of Dr. Mrs. Renuka Datla vs. CIT (240 ITR 463) (AP) , that provisions granting exemptions have to be strictly construed. It was held by the Supreme Court in the case of IPCA Laboratory Limited vs. DCIT (SC) 266 ITR 521 ) that when there is no ambiguity, provisions cannot be interpreted to confer a benefit upon the assessee. The provision is incapable of application to the facts of the assessee s case because the assessee is only an executor of a contract, which is in turn, part of a larger project undertaken by the Government, or its agency. It has been argued in rejoinder by the departmental representative that such reliance is neither correct nor relevant in deciding the issues on hand. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ne of whom were absent in the case of ABG Heavy Industries. 23. According to the DR, the decision of the Mumbai High Court, though later in time was different in facts that there was no occasion even to refer to the ITAT s decision in the case of B.T. Patil. Therefore, it can be said that the decision of the Mumbai High Court in the case of ABG Heavy Industries will be binding in its jurisdiction for infrastructure contract cases, only in so far as the facts of the case are compatible. For the same reason, there can be no adverse implication for the precedent value of the B T Patil case. As submitted hereinabove, on immediate and necessary consequence of the retrospective amendment introduced by the Finance Act, 2009 inserting Explanation below section 80 IA(13), is that any business transacted in terms of a works contract stands disqualified from seeking deduction under section 80I(A(4). The decision of the Mumbai High Court in the case of ABG would have no application from this point of view also. Since the agreement in ABG was a BOLT agreement and not a works contract their Lordships had no occasion to consider the Explanation introduced in Finance Act, 2009 with effect from 1 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ities. The container handling cranes assembly was certified to be an integral part of the Port Complex by the Port Authority. This is contextually very different from parts of the running length of a highway or irrigation canal being executed on a rate contract. The Department s argument that the assessee did not actually operate or maintain the facility in question was not upheld because the benefits of the section were held to be available to BOT/BOLT contracts by CBDT Circulars, which were any way binding on the IT authorities. In the case of the present case, it is not even claimed by the assessee that the work was carried out under a BOT/BOLT contract, or that it was not a works contract. It is further submitted that the distinction between business of development operation/maintenance and development/operation/maintenance was removed with the change in law effective from 1-4-2002, and that this was explained by the decision of the Mumbai High Court in the case of ABG Heavy Industries is fallacious for the following reasons: The Mumbai High Court decision was rendered in the context of a BOLT contract, which was in any case clarified by the Board Circular to qualify for th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dictional High Court decision in the case of ABG and goes on to hold that the assessee is not entitled to the deduction under section 80IA (4) in view of the Explanation introduced with retrospective effect. 26. We have considered the elaborate submissions made by both the parties and also perused the materials available on record. We have also gone through all the case laws cited by both the parties. We find that the provisions of Section 80IA (4) of the Act when introduced afresh by the Finance Act, 1999, the provisions under section 80IA (4A) of the Act were deleted from the Act. The deduction available for any enterprise earlier under section 80IA (4A) are also made available under Section 80IA (4) itself. Further, the very fact that the legislature mentioned the words (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining clearly indicates that any enterprise which carried on any of these three activities would become eligible for deduction. Therefore, there is no ambiguity in the Income-Tax Act. We find that where an assessee incurred expenditure for purchase of materials himself and executes the development work i.e., carries ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ontract or for development of infrastructure. It is to be seen from the agreements entered into by the assessee with the Government. We find that the Government handed over the possession of the premises of projects to the assessee for the development of infrastructure facility. It is the assessee s responsibility to do all acts till the possession of property is handed over to the Government. The first phase is to take over the existing premises of the projects and thereafter developing the same into infrastructure facility. Secondly, the assessee shall facilitate the people to use the available existing facility even while the process of development is in progress. Any loss to the public caused in the process would be the responsibility of the assessee. The assessee has to develop the infrastructure facility. In the process, all the works are to be executed by the assessee. It may be laying of a drainage system; may be construction of a project; provision of way for the cattle and bullock carts in the village; provision for traffic without any hindrance, the assessee s duty is to develop infrastructure whether it involves construction of a particular item as agreed to in the agre ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ry agreement entered into is a contract. The word contractor is used to denote the person who enters into such contract. Even a person who enters into a contract for development of infrastructure facility is a contractor. Therefore, the contractor and the developer cannot be viewed differently. Every contractor may not be a developer but every developer developing infrastructure facility on behalf of the Government is a contractor. 30. We find that the decision relied on by the learned counsel for the assessee in the case of CIT vs. Laxmi civil Engineering works [supra] squarely applicable to the issue under dispute which is in favour of the assessee wherein it was held that mere development of a infrastructure facility is an eligible activity for claiming deduction under section 80IA of the Act after considering the Judgement of the Mumbai High Court in the case of ABG Heavy Engineering [supra]. The case of ABG is not the pure developer whereas, in the present case, the assessee is the pure developer. We also find that Section 80IA of the Act, intended to cover the entities carrying out developing, operating and maintaining the infrastructure facility keeping in mind the prese ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, operating maintenance, financial involvement, and defect correction and liability period, then such contracts cannot be called as simple works contract to deny the deduction u/s 80IA of Act. In our opinion the contracts which contain above features to be segregated on this deduction u/s. 80-IA has to be granted and the other agreements which are pure works contracts hit by the explanation section 80IA(13), those work are not entitle for deduction u/s 80IA of the Act. The profit from the contracts which involves design, development, operating maintenance, financial involvement, and defect correction and liability period is to be computed by assessing officer on pro-rata basis of turnover. The assessing officer is directed to examine the records accordingly and grant deduction on eligible turnover as directed above. It is needless to say that similar view has been taken by the Chennai Bench of the Tribunal and deduction u/s. 80IA was granted in the case of M/s. Chettinad Lignite Transport Services (P) Ltd., in ITA No. 2287/Mds/06 order dated 27th July, 2007 for the assessment year 2004-05. Later in ITA No. 1179/Mds/08 vide order dated 26th February, 2010 the Tribunal has ta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... work done. On appeal, the CIT (A) sustained 10% of the disallowance. Against this, both are in appeal before us. 35. For assessment year 2009-10 (ITA No.1487/Hyd/11), the assessing officer disallowed 15% of the work expenses which worked out to Rs.1,39,75,073/-. The CIT (A) confirmed the disallowance at 7%. Against this, both are in appeal before us. 36. We have heard both the parties and perused the material available on record. We find that the issue involved for consideration in this appeal has already been dealt with by us in the case of M/s GSP Infratech Development Ltd., Hyderabad in ITA Nos. 1396/Hyd/2011 and others vide order dated 27th December, 2011 wherein we have confirmed the disallowance at 5% of such expenses by holding as follows in para-9 :- We have heard the parties and perused the material on record. The assessee is a subcontractor. Assessee is engaging labour at site at far flung places. In such circumstances, it is difficult to have documents for such expenditure, to the satisfaction of the assessing officer. It is also difficult to verify the identity of the labour, after lapse of many years. The accounts of the assessee have been audited and auditor s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessing officer towards repair expenses. Brief facts of the issue are that the assessee incurred expenditure of Rs.39,18,702/- towards repairs of machinery. The assessing officer disallowed Rs. 25 lakhs as the assessee has not produced authentic vouchers and bills during the assessment proceedings. On appeal, the CIT (A) disallowed Rs.15 lakhs out of the amount of Rs.25 lakhs disallowed by the assessing officer. Against this, both the assessee as well as the revenue is in appeal before us. 42. We have heard both the parties and perused the material available on record. In our opinion, disallowance of Rs.15 lakhs out of Rs.39,18,708/- is at higher side. There is no allegation that the expenditure is not incurred for the purpose of business. In our opinion, the assessing officer doubted only the volume of expenditure. He has not doubted the capacity of the payee also. Being so, this expenditure of the disallowance is not warranted. Accordingly, we delete the disallowance. This ground raised in the assessee s appeal is allowed and in the revenue s appeal is dismissed. 43. The next ground raised in ITA No.1486/Hyd/ 2011assessment year 2008-2009 is with regard to an addition of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for determining the undisclosed income. However, as per disposition an amount of Rs.80 lakhs was agreed to be admitted as income, the same be considered as income on this count and no set off could be given towards workin- progress in any subsequent assessment year. This ground of assessee partly allowed. 45. The next ground in ITA No. 1487/Hyd/2011 is with regard to addition of Rs.2.01 crores being cash seized from Sri K. Venkata Kutumba Rao, even though the assessee had offered satisfactory explanation for the sources and the circumstances under which the cash was handed over to Shri K.V. Kutumba Rao where there was no incriminating material found in the premises of the assessee and search operation was only consequential and seized operations conducted in the premises of Sri K.V Kutumba Rao and material found there. Similar issue was also for consideration in ITA No.1489/Hyd/2010 in the case of GSP Veera Reddy where the addition was on protective basis. Brief facts of this issue are that the assessing officer added the above said amount in the assessee s hands as unexplained cash and also made similar addition in the hands of Sri G. Shiva Shanker Reddy one of the Directors of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is belonged to the assessee. Either the assessee s explanation is to be accepted as a whole or rejected as a whole. They cannot pick and chose according to their convenience and make addition. In our o opinion, the addition made towards cash found at the premises of Sri K. Venkata Kutumba Rao, cannot be made either in the hands of the assessee s company i.e. M/s GVPR Engineers Limited or in the hands of Sri Siva Shanker Reddy. Accordingly, this ground of assessee is allowed. 47. Now, we will take up ITA No.1401/Hyd/11 and ITA No.1359/Hyd/2011. These cross appeals are directed against the order of the CIT (A) dated 10-5-2011. 48. The first ground in assessee s appeal is with regard to confirmation of the assessment order passed under section 153A of the Act. The ld. Counsel for assessee submitted that there was no valid search and no incriminating material found at the premises of the assessee, the issue of notice under section 153A of the Act is bad in law. 49. We have heard both the parties on this issue. There was a search operation conducted in the case of Sri Venkata Kutumbarao and others on 28-7-2008 and also search was conducted at the business premises of GVPR Engi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted at the premises of S.K. Builders, Abids, Hyderabad certain papers/documents were found and seized vide Annexure No.A/MKN/1 and A/SKB/01 were found and impounded. In these material vide page Nos.48 to 51 of annexure A/SKB/01, there is an agreement of sale executed on 22-11-2007, jointly by Aziz Mohd. Khan, Zameel Mohd. Khan, Matin Sarif and Usman Salmad in favour of GSP Infratch Development Limited i.e., the assessee company. Similarly, a copy of receipt forming part of this agreement was found and impounded as part of the same agreement vide page No.47. This was in connection with purchase of land for Rs.3,37,77,500 and paid an amount of Rs.14,00,000 by way of cheques and an amount of Rs.53,98,750/- by way of cash to the vendors. The balance amount of Rs.2,69,78,750/- was to be paid to the vendors by 22.12008. The assessing officer asked to verify whether it has paid the balance consideration to the vendors and got registered if so, explain the source for the same. However, on enquiry, it was stated by Sri Zameel Ahmed Khan, partner of M/s S K Builders vide letter dated 8-11-2010 that his firm had entered into sale agreement with M/s GSP Infotech Limited on 22- 11-2007 for a co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mount accounted for in the books of accounts of the assessee is with regard to the development charges not relating to the purchase consideration and has relied on the order of the CIT (A). In our opinion, these facts requires re-examination of the books of accounts of the assessee and the assessee is required to substantiate whether the entries found in the books of accounts relate to the development charges or towards the payment of purchase consideration. Accordingly, we set aside this issue to the file of the assessing officer for fresh consideration. 55. Next we will take up ITA Nos. 1491 and 1488/Hyd/2011. The common ground in these two appeals is with regard to the issue of notice under section153A of the Act claiming that it is bad in law though there were no incriminating material found. This ground is dismissed as decided in para 3 of this order. 56. The next common ground is with regard to the disclosing of income by the assessee lesser than the admitted in the deposition made u/s 132(4) of the Act. In the case of Sri GSP Veera Reddy, the assessee admitted under section 132(4) of the Act declaring income at Rs. 60 lakhs. However, it filed the return of income at Rs.4 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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