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TMI Blog2013 (9) TMI 556X X X X Extracts X X X X X X X X Extracts X X X X ..... f ‘developer’ given in that case is also relevant for this purpose - Moreover, we are in agreement that in incentive provisions, the construction should be liberally given as held by the Hon'ble Supreme Court rendered in the case of Bajaj Tempo Ltd vs CIT [1992 (4) TMI 4 - SUPREME Court]. When the assessee makes investment and himself executes development work and carried out civil works, he was eligible for tax benefit u/s 80IA of the Act - the assessee was entitled to deduction u/s 80IA(4) of the Act. Entering into a lawful agreement and thereby becoming a contractor should in no way be a bar to the one being a ‘developer’ - The assessee had developed infrastructure facility as per the agreement with Maharashtra Government/APSEB, therefore, merely because in the agreement for development of infrastructure facility the assessee was referred to as a contractor or because some basic specifications are laid down, it does not detract the assessee from the position of being a ‘developer’; nor will it debar the assessee from claiming deduction u/s 80IA(4) - Section 80IA(4)(i)(b) required development of infrastructure facility and transfer thereof as per agreement and it cannot be ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Revenue is aggrieved and following grounds have been raised: 1. The order of the Commissioner of Income Tax (Appeals) is opposed to the facts and circumstances of the case. 2. The Ld. CIT(A) erred in holding that the assessee is eligible for claim of deduction under section 80 IA (4) and in directing the assessing officer to allow the deduction of Rs. 1,58,06,032/-. 3. The Ld. CIT(A) erred in coming to a conclusion that the deduction is available for a person who has obtained the contract for development also. 3.1 The Ld.CIT(A) failed to appreciate that the assessee is only a 'contractor' and not a 'developer'. 3.2 The Ld. CIT(A) ought to have noticed that as per the provisions of section 80 IA (4), the benefit is available only to any enterprise carrying on the business of 'developing', or 'operating and maintaining' or 'developing, operating and maintaining' . It is submitted that the assessee is not an enterprise engaged in the business of infrastructure development and hence the benefit cannot be extended to it. 3.3 The Ld. CIT(A) failed to note that in the Memorandum explaining the Finance Bill 2007 reported in 289 ITR st. 292 at page 312 it is stated that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r after 01.04.1995. From the assessment year 2000-01, deduction is available if the assessee is carrying out the business of any one of the above mentioned three types of activities. When an assessee is only developing an infrastructure facility project and is not maintaining nor operating it, obviously such an assessee will be paid for the cost incurred by it; otherwise, how will the person, who develops the infrastructure facility project, realize its cost? If the infrastructure facility, just after its development, is transferred to the Government, naturally the cost would be paid by the Government. Therefore, merely because the transferee had paid for the development of infrastructure facility carried out by the assessee, it cannot be said that the assessee did not develop the infrastructure facility. If the interpretation done by the Assessing Officer is accepted, no enterprise carrying on the business of only developing he infrastructure facility would be entitled to deduction under section 80IA(4), which is not the intention of the law. An enterprise, who develop the infrastructure facility is not paid by the Government, the entire cost of development would be a loss in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12.01.2006 4. The assessee has also produced all six agreements regarding six projects undertaken before the Assessing Officer, whose copies are available before us also. It is a fact that even after taking a contract from the Government, if the assessee develops infrastructure facilities, it would be regarded as a developer and not as a works contractor . The assessee firm has carried on entire construction/development of the infrastructure facilities and satisfy all the conditions of section 80IA(4)(i)(a). It is undeniable fact that the assessee has taken development of infrastructure facility agreement from the State Government/local authority. A contractor who develops the infrastructure facility becomes a developer to claim exemption under section 80IA(4). The Hon ble Bombay Bench of ITAT while deciding the case of Patel Engineering Ltd. vs. DCIT in ITA No. 1221/Mum/2004 has gone to the extent of holding that the assessee, a civil contractor, having executed a part of contracts of irrigation and water supply on build and transfer basis and handed over them to contractee Governments, was eligible for deduction under section 80IA(4). 5. We have also taken a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ection 80-IA) for executing works contract, will not be eligible for tax benefit under section 80- IA. 10. We have found that the assessee-company is a works contractor, who has entered into agreement with the local bodies to execute certain part of the work awarded to it through contract for infrastructure facility. It is true that where a person who makes infrastructure and himself executes development work and carries out civil work will be eligible for tax benefit u/s 80IA of the Act. In contrast to this, a person who enters into a contract with another person for executing works contract, will not be eligible for tax benefit u/s 80IA. It was clarified by the Circular No.3 of 2008 dated 12.3.2008 that the provisions of section 80IA shall not apply to a person who executes only work contracts and only those who make the development work will be eligible for tax benefit u/s 80IA of the Act. Be that as it may, when we apply this provision in its letters and spirit, we find that this assessee is verily eligible for deduction u/s 80IA, as the assessee-company fulfills all the relevant conditions. The facts of this case go to prove that the assessee is a developer of infrastructu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es for a ten-year tax benefit to an enterprise or an undertaking engaged in development of infrastructure facilities, industrial parks and special economic zones. The tax benefit was introduced for the reason that industrial modernization requires a passive expansion of, and qualitative improvement in, infrastructure (viz., expressways, highways, airports, ports and rapid urban rail transport systems) which was lacking in our country. The purpose of the tax benefit has all along been for encouraging private sector participation by way of investment in development of the infrastructure sector and not for the persons who merely execute the civil construction work or any other works contract. Accordingly, it is proposed to clarify that the provisions of section 80- IA shall not apply to a person who executes a works contract entered into with the undertaking or enterprise referred to in the said section. Thus, in a case where a person makes the investment and himself executes the development work, i.e., carries out the civil construction work, he will be eligible for tax benefit under section 80- lA. In contrast to this, a person who enters into a contract with another person (i.e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the conditions imposed was that the enterprise must start operating and maintaining the infrastructure facility on or after 1st April, 1995. The same requirement is embodied in subclause (1) of sub-clause (4) of the amended provisions. It was urged that since the assessee was not operating and maintaining the facility, he did not fulfill the condition. The submission is fallacious both in fact and in law. " That the assessee was maintaining the facility is not in dispute. The facility was commenced after 1s1 April, 1995. Therefore, the requirement was met in fact. Moreover, as a matter of law, what the condition essentially means is that the infrastructure facility should have been operational after 1s1 April, 1995. After Section 80IA was amended by the Finance Act, 2001, the section applies to an enterprise carrying on the business of (i) developing; or (ii) operating and maintaining; or (iii) developing, operating and maintaining any infrastructure facility' which fulfills certain conditions. Those conditions are (I) ownership of the enterprises by a company registered in India or by a consortiums; (II) an agreement with the central or State Government, local authority or sta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... efore uncalled for. Therefore, we find requirement of harmonious reading of sub-clause (c) vis- -vis of clause (i) of section 80IA (4) of the Act. Thus, the discussion in High Court's decision in paragraph-22 extracted above, is directly applicable to the facts of the case and eventually is entitled for the deduction under section 80IA (4) of the Act. Accordingly, the modified ground, which is common in all the four appeals is allowed in favour of the assessee. 12. Let us remind ourselves that the Hon'ble Supreme Court in the case of Bajaj Tempo Ltd vs CIT, 196 ITR 188, has ordained that taxing statute granting incentives for promoting growth and development should be liberally construed. 13. Now, the question arises as to whether the term contractor is not essentially contradictory to the term developer . In fact, in every development the term developer will definitely be a works contractor but every works contractor may not be a developer . A developer is a specific kind of works contractor to be eligible for deduction u/s 80IA(4) who fulfills all the conditions namely, if the assessee develops the infrastructure facility if it operates the infrastructure facility ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s of the Departmental proposal, like Road level/bottom of deck level, MFL, Sill level, Linear water way, width of the bridge etc. Right from the drawings to the work of construction has been done by this assessee and has borne the cost itself. The company has constructed, delivered and maintained and security is also maintained thereafter. So, this is a case of transfer of property in chattel and not a contract of service. A developer as per the Advanced Law Lexicon means a person engaged in development or operation or maintenance of Special Economic Zone, and also includes any person authorized for such purpose by any such developer . In the case of ACIT vs Bharat Udyog Ltd, F Bench of ITAT Mumbai, has concluded that any assessee who is engaged in developing the infrastructure facility and also operating and maintaining the same, is entitled to the benefit of deduction u/s 80IA(4). A copy of this decision is enclosed at page 139 of the paper book. In the case of Patel Engineering Ltd vs Dy. CIT, 84 TTJ (Mumbai) 646 [copy enclosed at page No.145 of the paper book], it has been held that a person, who enters into a contract with another person will be treated as a contractor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hority to the developer for development of infrastructure facility/Project. The same has been the position in the given case as well. So, deduction u/s 80IA(4) is also available to this assessee which has undertaken work of a mere developer . Rather, the statutory provision as contained in section 80IA which provides for deduction of infrastructure facility no way provides that entire infrastructure facility project has to be developed by one enterprise. Thus, as per section 80IA the assessee should develop the infrastructure facility as per the agreement with the Central/State Government/Local Authority. Entering into a lawful agreement and thereby becoming should, in no way be a bar to the one being a developer . In this regard, as we have already stated, the decision of ACIT vs Bharat Udyog Ltd, 118 ITD 336 and Patel Engineering Ltd vs Dy. CIT, 84 TTJ 646, are relevant. As per Circular No.4/2010[F.No.178/14/2010-ITA-I] dated 18.5.2010, widening of existing roads constitutes creation of new infrastructure facility for the purpose of section 80IA(4)(i) . The assessee is not required to develop the entire road in order to qualify for deduction u/s 80IA as has been held by the Hon ..... X X X X Extracts X X X X X X X X Extracts X X X X
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