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TMI Blog2016 (7) TMI 396X X X X Extracts X X X X X X X X Extracts X X X X ..... ested to press ground of appeal No.5 against the addition of Rs. 17,70,000. The said ground of appeal is accordingly rejected as not pressed. 3. As regards the grounds of appeal Nos. 2 to 4 against the disallowance of the claim of deduction U/S 80IA(4) of the Act, the brief facts of the case are as follows:The assessee company is engaged in the business of executing contracts like dams, roads, bridges, tunnels, reservoirs and canals etc., It filed its original return of income for the A.Y. 2009-2010 on 30.09.2009 declaring income of Rs. 50,83,53,564 without making any claim under Chapter-VIA of the I.T. Act. Subsequently, the assessee filed its revised return of income on 09.03.2010 declaring income of Rs. 23,34,33,257 after claiming deduction of Rs. 34,24,73,802 under section 80IA of the I.T. Act. 4. During the assessment proceedings under section 143(3) of the I.T. Act, the A.O. called for various details which were filed by the assessee. On perusal of the same, the A.O. observed that the assessee company had carried out execution of certain contract works and had claimed deduction under section 80IA(4) of the Act to the tune of Rs. 34,24,73,802 being 100% of the profits from t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... any PCL Intertech Lenhydro Consortium J.V.by THDC India Limited, a Joint Venture formed by Government of India and Government of U.P. under an agreement, which in turn, has sub-contracted the work to the assessee on back to back basis. It was also submitted that the assessee-company is having the required expertise and infrastructure facility to execute the said work and that the only contract executed by the assessee is the contract in question for the A.Y. 2009-2010 and therefore, the assessee is eligible to claim deduction under section 80IA as even the principal contractor has not claimed any deduction with regard to the said contract. 4.4 The A.O. however, did not accept the assessee's contentions and held that the assessee has not made any investment in the form of infrastructure. He therefore, held that the assessee is only a works contractor. Further he also held that the assessee has failed to prove that it has received a works order directly from THDC Ltd., and that the works executed by the assessee are purely as per the contract agreement entered into with PCL5 ILHC J.V. which according to him is a works contract. He, therefore, disallowed the claim of deduction under ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or a State Government or any local authority or statutory body and further that the entire work was not executed by the assessee as the initial agreement for execution of the contract was entered into by PCL-ILHC with the joint venture of Rithwik Swathi Joint Venture and the assessee was a constituent of the said JV. Further, according to him, the project executed by the assessee is not an infrastructure facility as defined u/s 80IA(4) of the I.T. Act. 8. In rebuttal, the learned Counsel for the assessee has drawn our attention to page 264 of the paper book filed by the assessee wherein the THDC India Ltd had certified that the work for construction of spillway work at Koteshwar Hydro Electro Projects was awarded to M/s. PCL-ILHC J.V. and against contract No. THDC/RSH/CV/187/80 dated 14.11.2002 M/s. Rithwik Projects (P) Ltd was the back to back sub contractor for the said work and further that Koteshwar Hydro Electric Projects is a multi purpose project where Hydro power generation, water supply and irrigation for D/S areas are involved and that this project is regulating water, release from Tehri Reservoir for irigation purpose. The certificate is dated 13.10.2015 i.e after the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... derstanding (MOU) dated 6.9.2012 and the JV was known as Rithwik Swathi JV. As per the MOU, Rithwik Projects Private Ltd's share in joint venture was 60% and share of Swathi Constructions was at 40%. 8.2. Consequent to the agreement between THDC and M/s PCL Intertech Lenhydro Consortium JV dated 14.11.2002, an agreement between M/s PCL Intertech Lenhydro Consortium JV and M/s Rithwik Swathi JV was executed on 16.11.2002 by virtue of which, Rithwik Swathi JV was to execute and complete the work as mentioned in the original agreement on back to back basis. This sub contract agreement was permissible as per clause 56 of the original agreement. The work was executed by the joint venture partly, while on 31.03.2008, there was a dissolution of the joint venture by virtue of which the joint venture "Rithwik Swathi JV" was dissolved by mutual consent w.e.f. 1.4.2008. As per the said dissolution deed, Rithwik Projects Private Limited was entitled to carry on and continue the business of Koteshwar Dam work and shall take over all the assets and liabilities of RSJV with respect to assets of Koteshwar Dam Work. Further, as per the agreement, M/s Swathi Constructions was not entitled to any cl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... agreement, it shall be deemed to have been entered into an agreement with the Govt. and thus eligible for deduction u/s 80IA(4) of the Act. Further, he has also relied upon the decision of the Hon'ble Madras High Court in the case of A.L. Logistics P Ltd (Supra) for the proposition that an assessee is eligible to claim deduction u/s 80IA of the Act, even in the absence of specific agreement with Central/State Govt. provided the sequences of events clearly show that the assessee is providing the facility in accordance with the conditions laid down by the Government.. Let us therefore, first examine the applicability of these decisions to the case before us. 9. The first case is of Ayush Ajay Constructions Ltd., vs., ITO reported in (2001) 79 ITD 213 (IND.). In this case, the Coordinate Bench of this Tribunal at Indore has considered similar set of facts and has at paras 18 and 19 of its order held as under : "18. If we examine the relevant provisions of s. 80-IA(4A) of the Act and the object of its insertion to the tax statute in the light of the budget speech of the Hon'ble Finance Minister and the above said judicial pronouncements, we would find that the legislature has giv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee was recognised by the State Government and a tripartite agreement was executed between the assessee, M/s Ajay Constructions and the State Government through which the State Government have recognised that the assessee has stepped into the shoes of M/s Ajay Constructions and notified authorising the assessee to collect the toll tax for a particular period. A copy of the letter dt. 22nd May, 2000, to this effect is also placed before us. The assessee has also placed various correspondence entered into between the assessee and the State Government and the letter dt. 26th Aug., 1995, through which the assessee was informed about the notification in his favour to collect the toll tax. A copy of the letter placed at p. 140 of the compilation of the assessee. Copies of the notification and various receipts of toll tax are also placed on record for our perusal. It is also revealed from various correspondence of the assessee with the State Government that the assignment of contract was duly recognised by the State Government and it was admitted by them that the actual construction work was undertaken by the assessee only. 19. From a careful perusal of the text and tenor of the ten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of sub-s. (4A) of s. 80-IA of the Act. The action of Ajay Agrawal, proprietor of Ajay Constructions and the assessee can only be termed as a valid tax planning which is permissible under the law as held by the apex Court in the case of McDowell & Co. Ltd. (supra), that tax planning may be legitimate provided it is within the framework of law. We, therefore, have no hesitation in holding that the assessee-company has fulfilled the requirements provided in cl. (ii) of sub-s. (4A) of s. 80-IA of the Act for claiming deduction under this section because had it not been recognised as a valid assignment of the tenderer by the State Government or had it not stepped into the shoes of the main tenderer, the State Government would not have notified authorising the assessee to collect the toll tax for a particular period as stipulated in the tender/agreement dt. 14th Feb., 1995. We, therefore, set aside the order of the CIT(A) on this count and direct the AO to allow the deductions claimed by the assessee under s. 80-IA(4A) of the Act." 9.1. Following the above decision, the Coordinate Bench of the Tribunal at Amritsar in the case of TRG Industries (P.) Ltd., vs. DCIT, Circle-1, Jammu (201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... The working of the CFS will be to review by the Inter Ministerial Committee. (f) Formalities in respect of acquisition/possession of the land shall be completed within 60 days and intimated to the M/o Commerce, failing which the approval granted would be automatically cancelled. 2. The facility to be set up shall be full computerized, with EDI compatibility and a minimum complement of equipment and accessories as necessary shall be made available at the facility. The indicative list of equipment/accessories considered necessary is annexed. The status regarding confirmation of the installation/availability of the items shall be furnished to the appropriate authorities to facilitate issue of requisite notification. 3. Please acknowledge receipt of this letter. Yours faithfully, Sd/ (N.G.Biswas) DIRECTOR A perusal of clause 'b' of the above letter shows that the assessee was required to execute necessary bond and guarantees with the concerned Commissioner of Customs and Central Excise. It was only on the compliance of all the terms and conditions mentioned in the aforesaid letter that the assessee was allowed to carryon the services of CFS. The assessee on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ement with the Government, the assessee is eligible to claim deduction under section 80IA of the I.T. Act for such facility. Applying the said ratio to the facts of the case before us, we find that the initial agreement has been entered into by the Government Agency i.e., THDC with PCL-ILHC which has further sub-contracted the entire execution of the work to Rithwik Swati J.V. Though the Rithwik Swati J.V. has executed part of the agreement, it was dissolved thereafter and the entire project has been sub-contracted to the assessee herein with all its assets and liabilities and risks involved, as per the original contract. It is seen that at page 110 of the paper book filed by the assessee, vide letter dated 28.02.2011, the Chief General Manager of THDC India Ltd., has certified that the official sub-contractor for the construction of civil works of dam, spillway, power-house and switchyard of Koteshwar Dam HEP is M/s. Rithwik Projects P. Ltd., Hyderabad (assessee herein). Thus, it can be seen that the THDC i.e., the Joint Venture between the Government of India and State of Uttar Pradesh has officially recognised M/s. Rithwik Projects P. Ltd., Hyderabad as the official subcontracto ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own under section 80IA(4) of the I.T. Act. Since the CIT(A) has not given any finding on this issue and particularly because the assessee has filed additional evidence before us in the form of performance guarantees given on behalf of PCL-ILHC to THDL, we deem it fit and proper to admit the additional evidence and remand the issue to the file of the CIT(A) to give a finding as to the nature of the work carried out by the assessee herein and also whether the assessee is eligible for deduction under section 80IA(4) on such grounds. 9.5. Further, one of the arguments taken-up by the Ld. D.R. was that the project was not an infrastructure facility as defined under section 80IA(4). The assessee had filed additional evidence in the form of a letter dated 13.10.2015.As discussed in the earlier paragraphs that the Koteshwar Dam is a multipurpose project where Hydro-power generation, water supply and irrigation for D/S are involved and that it is an irrigation project,this additional evidence also needs to be considered by the authorities below. In view of the same, we admit the said additional evidence also and remand the issue to the file of the CIT(A) for reconsideration in accordance w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the expenditure. Since the assessee has failed to establish both the above criteria, according to the learned DR, the disallowance has been rightly upheld. 11. Having regard to the rival contentions and the material on record, we are satisfied that the assessee has not proven that the expenditure has been incurred for the business purpose of the assessee and since the recipient has denied having executed any work, it cannot be considered as genuine expenditure and cannot be allowed. Hence Ground No.6 is rejected. 12. As regards Ground No.7 against the disallowance u/s 40A(3) of the I.T. Act, the brief facts are that during the assessment proceedings, AO verified the books of accounts and found that the assessee has made payments totalling to Rs. 21,35,295 in cash in excess of Rs. 20,000. He therefore, disallowed the entire amount of Rs. 21,35,295 u/s 40A(3) and brought it to tax. Aggrieved, the assessee preferred an appeal before the CIT (A) stating that the AO had taken into a/c the payments from Head office to various sites towards site expenditure on an emergency basis from time to time for disallowance u/s 40A(3) of the Act. It was submitted that the amount has been paid to a ..... X X X X Extracts X X X X X X X X Extracts X X X X
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