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TMI Blog2012 (10) TMI 1089X X X X Extracts X X X X X X X X Extracts X X X X ..... circumstances of the case, the order of the learned Commissioner of Income Tax (Appeals) is erroneous in law and facts of the case. (2) On the facts and in the circumstances of the case the learned Commissioner of Income Tax (Appeals) erred in law and facts of the case in confirming the disallowance of deduction under Section 80IA of the profits and gains derived by the appellant from the eligible business of developing a new infrastructure facility being a irrigation project. The learned Commissioner of Income Tax (Appeals) ought to have appreciated that the Larger Bench decision in B T Patil Belgaum Construction P. Ltd., Vs. ACIT is no longer a good law after the Honourable Bombay High Court Judgment in ABG Heavy Engineering (2010) 322 ITR 323. (3) The learned Commissioner of Income Tax (Appeals) erred in law and facts of the case in not allowing credit for Tax Deducted at Source on Mobilization Advance. On the facts and in the circumstances of the learned Commissioner of Income Tax (Appeals) ought to have appreciated the fact that the Mobilization Advance represents repayable obligation and there is no income comprised in the said payment, therefore, tax ought not to have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n to whom such enterprise belongs to is explained in sub-clause (a). Therefore, the word ownership is attributable only to the enterprise carrying on the business which would mean that only companies are eligible for deduction under section 80IA (4) and not any other person like individual, HUF, Firm etc. 25. We also find 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. 26. The next question is to be answered is whether the assessee is a developer or mere works contractor. The Revenue relied on the amendments brought in by the Finance Act 2007 and 2009 to mention that the activity undertaken by the assessee is akin to works contract a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... overnment 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 un-developed 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) of the Act. This cannot be considered as a mere works contract but has to be considered as a development of infrastructure facility. Therefore, the assessee is a developer and not a works contractor as presumed by the Revenue. The circular issued by the Board, relied on by learned counsel for the assessee, clearly indicate that the assessee is eligible for deduction under section 80IA (4) of the Act. The department is not correct in holding that the assessee is a mere contractor of the work and not a developer. 27. We also find that as per the p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rsed the Amendment made in the Finance Act, 2001. Thus, the aforesaid Explanation was inserted, certainly, to deny the tax holiday to the entities who does only mere works contact or sub-contract as distinct from the developer. This is clear from the express intension of the parliament while introducing the Explanation. The explanatory memorandum to Finance Act 2007 states that the purpose of the tax benefit has all along been to encourage investment in development of infrastructure sector and not for the persons who merely execute the civil construction work. It categorically states that the deduction under section 80IA of the Act is available to developers who undertakes entrepreneurial and investment risk and not for the contractors, who undertakes only business risk. Without any doubt, the learned counsel for the assessee clearly demonstrated before us that the assessee at present has undertaken huge risks in terms of deployment of technical personnel, plant and machinery, technical know-how, expertise and financial resources. 29. As per submission of the assessee s counsel broadly the technical nature of the work undertaken by the assessee is as follows: i) Designing and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndment or has been inserted w.e.f. 1-4-2002 by Finance Act 2001. 31. Accordingly, the assessee is entitled for deduction under section 80IA of the Act on the projects which involve above activities. Therefore, in our considered view, the assessee should not be denied the deduction under section 80IA of the Act if the contracts involves development, 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 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 th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nation section 80IA(13), those work are not entitle for deduction u/s 80IA of the Act. The profit from such contracts which involves 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 and grant deduction on eligible turnover as directed above. 26. In view of the above orders of the Tribunal on similar issue relating to deduction u/s. section 80-IA(4), we are inclined to remit the issue back to the file of the Assessing Officer to decide the issue in the light of the above order. 6. Further the same issue came for consideration in the case of Bhooratnam Construction Co. Pvt. Ltd. in ITA Nos. 270 271/Hyd/ 2011. The Tribunal vide order dated 7.9.2012 held as follows: 8. We have heard both the parties and perused the material on record. In our opinion, as seen from the facts of the case, the assessee has not produced copies of tender/contract executed by it before the lower authorities. Before us the assessee filed certain copies of tenders suggesting nature of activity carried on by the assessee and argued ..... X X X X Extracts X X X X X X X X Extracts X X X X
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