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TMI Blog2014 (4) TMI 389X X X X Extracts X X X X X X X X Extracts X X X X ..... eduction u/s. 80IA of the Act - The profit from such is to be computed by assessing officer on pro-rata basis of turnover – thus, the assessee is entitled for deduction u/s 80IA(4) – the order of the CIT(A) upheld – Decided against Revenue. - ITA Nos. 1627, 1628, 1629, 1630, 1631, 1632, 1633 & 1634 /Hyd/2013 - - - Dated:- 2-4-2014 - Shri Chandra Poojari And Shri Saktijit Dey,JJ. For the Appellant : Shri D. Sudhakar Rao For the Respondent : Shri S. Rama Rao ORDER Per Chandra Poojari, A.M. All these pertaining to one assessee preferred by the Revenue are directed against different orders of CIT(A)-III Hyderabad, for the assessment years 2003-04 to 2010-11. Since common issue is involved in these appeals, they were clubbed and heard together, therefore, a common order is passed for the sake of convenience. 2. The revenue has raised common grounds in all the appeals under consideration, which are as follows: 1. The CIT(A) erred on facts and in law in granting relief to the assessee u/s 80IA. 2. The CIT(A) erred on facts and in law in ignoring the fact that all the contracts entered into by the assessee are in the nature of works contracts a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se 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 incurs expenditure on its own for purchase of materials and towards labour charges and itself executes the development work i.e., carries out the civil construction work, it 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. We find that the word owned in subclause (a) of clause (1) of sub section (4) of Section 80IA of the Act refer to the enterprise. By reading of the section, it is clear that the enterprises carrying on development of infrastructure development should be owned by the company and not that the infrastructure facility should be owned by a company. The provisions are made applicable to the person to whom such enterprise belongs to is explained in sub-clause (a). Therefore, the word ownership is attributabl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 agreement or not. The agreement is not for a specific work, it is for development of facility as a whole. The assessee is not entrusted with any specific work to be done by the assessee. The material required is to be brought in by the assessee by sticking to the quality and quantity irrespective of the cost of such material. The Government does not provide any material to the assessee. It provides the works in packages and not as a works contract. The assessee utilizes its funds, its expertise, its employees and takes the responsibility of developing the infrastructure facility. The losses suffered either by the Govt. 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was held that mere development of 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 present business models and intend to grant the incentives to such entities. The CBDT, on several occasions, clarified that pure developer should also be eligible to claim deduction under section 80IA of the Act, which ultimately culminated into Amendment under section 80IA of the Act, in the Finance Act 2001, to give effect to the aforesaid circulars issued by the CBDT. We also find that, to avoid misuse of the aforesaid amendment, an Explanation was inserted in Section 80IA of the Act, in the Finance Act-2007 and 2009, to clarify that mere works contract would not be eligible for deductions under section 80IA of the Act. But, certainly, the Explanation cannot be read to d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pproval by the Bank in accordance with the terms and conditions of the loan agreement. Except as the Bank may specifically otherwise agree, no party other than the borrower shall derive any rights from the loan agreement or have any claim to the loan proceeds. Scope of work The work broadly comprises of a) Construction of additional two lane carriageway by the side of existing two lane road in km 27.80 to 61.00 b) Strengthening of existing pavement by providing bituminous strengthening overlays c) Provision of central median, pavement shoulders and service roads. d) Improvement of junctions/ geometrics, pavement profile correction, lane marking and providing road signages. e) Repair/rehabilitation of existing bridges. f) Construction/reconstruction of bridges. g) Improvement of drainage system, widening/providing culverts, cattle crossings etc. h) Other miscellaneous items pertinent to the project. i) Maintenance of the said infrastructure for a period of 48 months (during the period of development of 36 months and defect liability period of 12 months) 49. For this purpose, the possession of the site is handed over to the assessee by the Governmen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... gnite 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 taken the same view by inter-alia holding as follows: 7. Moreover, the reasons for introducing the Explanation were clarified as providing a tax benefit because modernisation requires a massive expansion and qualitative improvement in infrastructures like expressways, highways, airports, ports and rapid urban rail transport systems. For that purpose, 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 work contract has been encouraged by giving tax benefits. Thus the provisions of section 80IA shall not apply to a person who executes a works contract entered into with the undertaking or enterprise referred to in the section but where a person makes the investment and himself executes the development work, he carries out the civil construction work, he will be eligible for the tax benefit under section 80IA. 53. The above order was followed in subsequen ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the explanation section 80IA(13), those work are not entitled for deduction u/s. 80IA of the Act. 6.2 Following the aforesaid findings of the Tribunal in assessee s case, the CIT(A) held as follows: 4.6 I find that the AO was duty bound to follow those orders of the hon ble ITAT, whereas she had disallowed the said deduction on all the contracts including those contracts where the hon ble ITAT had specifically considered all the issues and had directed that with respect to those contracts deduction u/s 80IA(4) was to be allowed. These contracts are provided at page numbers 11 to 13 of the order of the Hon ble ITAT referred to supra. The AO is directed to allow deduction u/s 80IA(4) with respect to contracts which have been specifically adjudicated upon by the hon ble ITAT in their order referred to supra. With respect to other projects, the AO shall abide by the decision of the Hon ble ITAT in the current year also and for each project she will examine the five features listed supra. Wherever the five features are present, for that contract deduction u/s 80IA(4) shall be allowed. She will pass a speaking order wherein it will be clearly stated whether the five features are ..... X X X X Extracts X X X X X X X X Extracts X X X X
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