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TMI Blog2014 (1) TMI 292X X X X Extracts X X X X X X X X Extracts X X X X ..... with effect from 1.4.2002 by Finance Act, 2001 - If the contracts involve design, development, operating and maintenance, financial involvement, and defect correction and liability period, then such contracts cannot be called as simple works contract to deny the deduction under section 80IA - The contracts which contain above features to be segregated, this deduction under section 80IA have to be granted and the other agreements which are pure works contracts hit by the Explanation to section 80IA(13 ), those work are not entitled for deduction under section 80IA - The order of CIT was quashed - Decided in favour of assessee. - I.T.A. No. 250/Kol./ 2012 - - - Dated:- 19-12-2013 - Shri Mahavir Singh And Shri Abraham P. George,JJ. For the Appellant : Shri Ravi Tulsiyan, A.R For the Respondent : Shri Ravi Jain, CIT, D.R. ORDER Per Abraham P. George : 1. Through this appeal, assessee assails an order dated 2 nd March, 2011 passed by the ld. Commissioner of Income Tax-IV, Kolkata under section 263 of the Income Tax Act, 1961 (in short "The Act") for the assessment year 2006-07. 2. The appeal has been filed with a delay of 288 days. Assessee has filed an applica ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rking as Manager (Finance Accounts). He also submitted that the default was on account of a mistaken impression he held regarding requirement of filing an appeal under section 263 of the Act. In our opinion, the reply given by Shri Deepak Acharya does show that he was a responsible Officer of the assesee company attending to matters relating to its tax work. For a mistake committed by an employee, an assessee cannot be put on peril, especially when the concerned employee has filed an affidavit stating that the mistake had happened only due to his default. It is not the question of ignorance of law but it is the question of penalising an assessee for a mistake committed by one of its staff. When assessee had delegated certain duties to its employees, it could hold a bonafide belief that such employees would discharge their duties as were required of them. In our opinion, the reasons cited by the assessee appear to be genuine. We do not find anything to doubt either the affidavit filed by Shri Deepak Acharya or the replies given by him on the questions raised. We are of the opinion that in order to meet ends of justice, delay has to be condoned. Delay is therefore condoned and the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bstituted Explanation. Hence, for the work of the nature done by the assessee was eligible for deduction under section 80IA(4) of the Act.. Therefore, according to him, even if the Explanation was considered, the view taken by the Assessing Officer was legitimate. The ld. CIT was only substituting his own view and for doing this taking refuge of substituted Explanation under section 80IA. 7. Per contra ld. DR strongly supporting the order of ld. CIT submitted that the assessee was only a contractor. According to him, Explanation to Section 80IA as substituted by Finance (No.2) Act, 2009 with retrospective effect from 1.4.2000. Such explanation clearly stated that deduction under sub-section (4) thereof was not available for a works contract executed by a party on a contract with the Central or State Government. Works awarded to the assessee were either by Central Government or State Government or its Agencies. Assessing Officer did not have the benefit of the substituted Explanation when he was passing the order. When the substituted Explanation was having retrospective effect, ld. CIT was well within his powers for invoking the revisionary jurisdiction under section 263 of the A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r section 80IA of the Act and thereafter reached a conclusion that for two of the projects, it was not eligible for such a deduction. Such decision was arrived at by the Assessing Officer after considering the Explanation to section 80IA as originally introduced by Finance (No.2) Act, 2007 with retrospective effect from 01.04.2000. No doubt at the time when the Assessing Officer completed the assessment, the substituted Explanation to Section 80IA was not available. The substitution of the Explanation was brought in by Finance (No. 2) Act, 2009 with retrospective effect, that too, from 01.04.2000. The projects undertaken by the assessee were all with Central Government or State Government and this has not been disputed by the ld. CIT. Ld. CIT's only qualm is that the substituted Explanation would disentitle it from enjoying the deduction under section 80IA (4) of the Act, since the works contract awarded to it were by Central Government or State Government. The effect of substitution of the Explanation by Finance (No. 2) Act, 2009 with retrospective effect from 1 st April, 2000 was one of the issues considered by the Hon'ble Hyderabad Bench of this Tribunal in the case of GVPR Eng ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e utilizes its funds, its expertise, its employees and takes the responsibility of developing the infrastructure facility. The losses suffered either by the Government or the people in the process of such development would be that of the assessee. The assessee hands over the developed infrastructure facility to the Government on completion of the development. Thereafter the assessee has to undertake maintenance of the said infrastructure for a period of 12 to 24 months. During this period, if any damages are occurred, it shall be the responsibility of the assessee. Further, during this period, the entire infrastructure shall have to be maintained by the assessee alone without hindrance to the regular traffic. Therefore, it is clear that from an underdeveloped area, infrastructure is developed and handed over to the Government and as explained by the CBDT vide its circular dated 18.05.2010, such activity is eligible for deduction under section 80IA(4). This cannot be considered as a mere works contract but has to be considered as a development infrastructure facility. Therefore, the assessee is a developer and not a works contractor as presumed by the revenue. The Circular issued by ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... structure sector and not for the persons who merely execute the civil construction work. It categorically states that the deduction under section 80IA is available to developers who undertakes entrepreneurial and investment risk and not to the contractors, who undertake only business risk. Without any doubt, the assessee clearly demonstrated that it has undertaken huge risk s in terms of development of technical personnel, plant and machinery, technical know-ho w, expertise and financial resources. After the amendment section 80IA(4) is read as (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility. While prior to amendment the 'or' between the activities was not there, after the amendment 'or' has been inserted with effect from 1.4.2002 by Finance Act, 2001. Therefore, if the contracts involve design, development, operating and maintenance, financial involvement, and defect correction and liability period, then such contracts cannot be called as simple works contract to deny the deduction under section 80IA. The contracts which contain above features to be segregated, this deduction under section 80IA have to be ..... X X X X Extracts X X X X X X X X Extracts X X X X
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