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TMI Blog2012 (9) TMI 1034X X X X Extracts X X X X X X X X Extracts X X X X ..... JARI, AM: These two appeals by the assessee are directed against the different order of the CIT(A)-VII, Hyderabad dated 6.12.2010 for assessment years 2005-06 and 2006-07. 2. The issue before is with regard to allowability of deduction u/s. 80IA(4) of Income-tax Act, 1961. Brief facts of the issue are that a search and seizure operation was conducted u/s. 132 of the I.T. Act, 1961 in group cases of M/s. Bhooratnam Construction Co. Pvt. Ltd. on 30.8.2007. Consequent to the search operation, the assessee's case was notified with Central Circle-5, Hyderabad. The Assessing Officer has completed the assessment proceedings. Before the CIT(A), the AR of the assessee company submitted that the company is developing various infrastructural facility projects on contract basis and the agreements of the assessee company with regard to the infrastructural projects are mainly with Central Government, State Government, statutory bodies or local authorities. The assessee has started that development of projects after 1.4.1995. Therefore, it is the submission of the AR that since the assessee had taken up the infrastructure facility projects on contract basis, it had claimed deduction u/s. 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 and he is not eligible for deduction under section 80IA (4) of the Act. Whether the assessee is a developer or works contractor is purely depends on the nature of the work undertaken by the as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s 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 provisions of the section 80IA of the Act, a person being a company has to enter into an agreement with the Government or Government undertakings. Such an agreement is a contract and for the pu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t 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 Manufacturing of pipes: The assessee specially designed and manufactured Pre-stressed concrete pipes and it has been done in accordance with specific requirements. ii) Design and manufacturing ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... herefore, 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 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es 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." 7. On the other hand, the DR submitted that this is squarely covered against the assessee by the order of the Tribunal Mumbai Bench in the case of Indian Hume Pipe Co. Ltd. Vs. DCIT in ITA No. 5172/Mum/08 dated 29.7.2011 for A.Y. 2004-04 wherein it was held that the company was not entitled to deduction u/s. 80IA(4) of the Act as it was only engaged in carrying out works contract and not development of eligible infrastructure project. This decision was pronounced after considering the order of Tribunal Mumbai Bench in the case of B.P. Patil and the judgement of Bombay High Court in the case of CIT vs. ABG Heavy Industries Ltd. (322 ITR 323) and also Pune Bench decision the case of Laxmi Civil Engineering Pvt. Ltd. Vs. Add. CIT,Kolhapur (unreported) in ITA No. 766/Pn/09 dated 8.2.2011 wherein it was held that the assessee of similar nature who has carried on similar nature of works as in the case of the a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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