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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 ..... claim under section 80IA(4) of the I.T. Act as the assessee is considered to be the official sub-contractor of the said project and also in view of the fact that the employer or the original contractor or the Rithwik Swati JV have not claimed the deduction under section 80IA of the Act. This issue is therefore decided in favour of the assessee. Unexplained expenditure - Held that:- 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. Disallowance u/s 40A(3) - Held that:- CIT (A) correctly confirmed the order of the AO by holding that the AR has furnished any explanation, leave alone but the evidence to show that it was covered by any of the expenses given under Rule 6DD. - ITA.No.1781/Hyd/2013, ITA.No.1552/Hyd/2014 - - - Dated:- 4-7-2016 - SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER For The Assessee : Mr. P. Muralimohan Rao For The Revenue : Mr. P. Somasekhar Reddy ORDER SMT. P. MADHAVI DEVI, J.M. Both the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4 of 2001 which states that the applicable schemes are either BOT ( Built, Own and Transfer ) or BOOT ( Built, Own, Operate and Transfer ). He observed that in both the claims, the assessee shall not only build but also own the infrastructure facility before it is transferred. After considering the budget speech for 1995-1996 which was delivered by the then Minister of Finance on 15th March, 1995, setting out the intention behind introducing the deduction, the A.O. held that the legislature intended that the benefit of deduction was meant to be extended only to those private enterprises which develop infrastructure facility in the collective role of a funds investor builder operator, but not merely as a works contractor. 4.1. Thereafter, the AO proceeded to examine the nature of works undertaken by the assessee and the various clauses of sub-contract agreement and observed that the sub-contract was only for execution of the work contract received by the PCL Intertech Lenhydro Consortium JV and that whatever contract work was received by the principal, has been given to the assessee. Thus, he came to the conclusion that the contract to the assessee was a works contrat and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n in its own right or as a principal of a J.V. She observed that the contracts entered into by the assessee, whether as a member of J.V. on 16.11.2002 or in its own right by agreement dated 01.04.2008 with PCL-Intertech Lenhydro Consortium J.V. can not be considered as an agreement with the Central Government or a State Government or a Local Authority or any other statutory body as required under section 80IA (4)(i)(b) of the Act. Thus, she held that the assessee is not eligible to claim deduction under section 80IA of the Act. She thereafter, considered it irrelevant to go into the fact as to whether the assessee can be termed as a developer or a contractor and did not adjudicate the issue. The CIT(A) thus, upheld the disallowance made by the A.O. and the assessee is in second appeal before us. 6. The learned Counsel for the assessee reiterated the submissions made by the authorities below and have also filed detailed written submissions before us which are at pages 1 to 6 of the paper book filed by the assessee on 4.9.2015. He has also placed reliance upon the following decisions in support of his above contentions: i) ITAT Indore in the case of Ayush Ajay Constructions Ltd ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d and considered. Finding favour with the assessee s contention on the additional evidence, we deem it and fit and proper to admit the same and consider it for adjudication of the issue. 8. Having regard to the rival contentions and the material on record, we find that the undisputed facts are that the Govt. of India and Gov. of U.P formed a joint venture by the name of Tehri Hydro Development Corporation (THDC in short) with equity in the ratio of 75:25 between the Govt. of India and the Govt. of UP for the power component. The said company was incorporated in July 1988 to develop, operate and maintain the 2400 MW Tehri Hydro Power Complex and other hydro projects. Koteshwar Hydro Electric Project (400 MW) located 22 kms downstream of Tehri, is an integral part of Tehri Power Complex comprising of Tehri Dam HPP (1000 MW), Tehri PSP (1000 MW) and Koteshwar HEP (400 MW) to develop hydro-electric potential of river Bhagirathi, to facilitate the functioning of Tehri Power Complex as a major peaking station in Northern Grid as reservoir created by Koteshwar Dam having a live storage capacity of 35.0 MCM will function as lower (balancing) reservoir for Tehri PSP. This project is al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... te on a back to back basis all the work to be carried out by the Principal and as more particularly detailed and described in the original contract. Assessee also undertook to take over all responsibilities, all the rights including all claims and all sums thereof, all obligations, all liabilities, all guarantees, all promises of the Principal to the employer or to any other related to the execution of the original contract. It was also agreed that the Principal shall not have any objection to issue the TDS certificate in favour of the assessee for the amount deducted by THDC on account of the Principal. Thereafter, the assessee executed the entire work of Koteshwar Dam on its own by employing its investments and, deploying its labour and technology, assuming all the risks and carrying out the entire development activity. Thus the assessee has claimed the deduction u/s 80IA of the Act as no other party including PCLITLH or any of its constituents has either booked the revenue or claimed deduction u/s 80IA for the Koteshwar Dam Project for the years under consideration. 8.4 One of the objection of the AO which has been confirmed by the CIT (A) is that the assessee has not entered ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... provisions of promoting economic growth should be interpreted liberally and the restriction on it too has to be construed so as to advance the objective of the provisions and not to frustrate it. If we put the facts of the case with the parameter laid down by the apex Court and the various High Courts, we would find that the assessee though not entered into an agreement with the State Government at the initial stage but has obtained the tender/contract by virtue of a valid assignment, which was duly recognised by the State Government, should be deemed to have entered into an agreement with the State Government for construction of the impugned bridge on BOT basis. It is not the case of the Revenue that the entire expenditure incurred in the construction of the aforesaid bridge was not borne by the assessee but by M/s Ajay Constructions, the main tenderer. The Revenue has rejected the claim of the assessee for the simple reason that the assessee had never entered into any contract with the State Government and the assessee-company is nothing but a colourable device to evade tax. It is a settled position of law that the company is a juristic entity and it should be considered independ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f its promoter through an agreement of assignment dt. 21st July, 1995, executed between the assessee and M/s Ajay Constructions after obtaining approval from the State Government, the assessee shall be deemed to have undertaken the construction work since 1st April, 1995. We have also carefully perused the statements of accounts in the light of various judgments referred to by the parties and find that though the financial assistance and the machineries were provided by M/s Ajay Constructions to the assessee-company in which the proprietor of M/s Ajay Constructions and his wife are the sole directors but this fact cannot be ignored that ultimately the contract was executed by the assessee-company and the act of assignment was duly recognised by the State Government. No doubt, it is true that in view of the judgment of the apex Court in the case of Juggilal Kamlapat vs. CIT and McDowell Co. vs. CTO (supra), the judicial authorities are competent enough to pierce the corporate veil and to ascertain the real state of affairs. If we look, into the real state of affairs, we would find that Ajay Agrawal has obtained the tender through its proprietorship concern, M/s Ajay Constructions ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Central/State Government, local authority or Statutory Body, the assessee is entitled to claim the benefit of section 80IA( 4) (i). The assessee had made an application for setting up of CFS at Haldia. In response to the application of the assessee, the Department of Commerce, Infrastructure Division, Ministry of Commerce and Industry approved the proposal of the assessee for setting up of CFS at Haldia for handling import/export of cargo subject to execution of certain documents and compliance of other terms and conditions as stated in the letter; The ld. Counsel for the assessee has placed on record letter dt. 27-05-2003 from the Ministry of Commerce and Industry permitting the assessee to set up CFS at Haldia. The contents of the letter are reproduced herein below : No.16/6/2003-lnfra-I Government of India Ministry of Commerce Industry Deptt. of Commerce Infrastructure Division Udyog Bhawan, New Delhi, Dated the 27th May, 2003 To The Director, M/s.AL Logistics Pvt. Ltd., Chennai. Subject: Setting up of an CFS at Haldia. Sir, I am directed to refer to your application dated 8.2.2003 on the above subject a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... issued by the office of the Commissioner of Customs (Port) Kolkatta. 8. Thus, it is evident that the proposal of the assessee was accepted by the Government on certain conditions which were duly complied with by the assessee. There may not be any specific agreement, but the sequences of events clearly show that the assessee is providing CFS facility in accordance with the conditions laid down by the Government. In such circumstances there is no need to insist for the specific execution of agreements. The co-ordinate bench of the Tribunal in the case of United Liner Agencies of India (Private) Ltd; v. Joint CIT (OSD) in ITA Nos.273 275/Mum/2013 (supra), has taken a similar view. Where no specific agreement with the State Government was entered into but from the approvals granted to the assessee it was inferred that assessee should be deemed to have entered into an agreement with the State Government. Thus, we are of the considered view that the assessee has complied with all the provisions of section 801A(4) (i) and is eligible to claim deduction under the said section. The impugned order is set aside. The appeal of the assessee is allowed. 13. In paragraph 7 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shed a certificate from PCL-ILHC to state that there was no claim of deduction made under section 80IA of the Act for the said project. The assessee has also filed copies of performance guarantees given by the assessee on behalf of PCL-ILHC as an additional evidence to prove that the assessee had undertaken the financial obligations as well. On going through these documents, we find that the Government Agency i.e., THDC has accepted the assessee to be the official sub-contractor executing the entire project and even the original contractor and the Rithwik Swati J.V. have accepted the assessee to be the subcontractor who has taken on all the assets, risks and liabilities of the contract. Though in the case of Ayush Ajay Constructions Ltd., (cited supra) there was a tripartite agreement between the assessee therein, the original contractor and the Government, in the case of the A.L. Logistics P. Ltd., the Hon ble Madras High Court has held that where the Government has given an approval to the assessee to execute the work, even in the absence of any specific agreement, the assessee is eligible for deduction under section 80IA of the Act. Taking all the above into consideration, we ar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of ₹ 9.00 lakhs made by the AO towards unexpalined expenditure, the brief facts are that the assessee had shown sub contract payment of ₹ 9.00 lakhs to have been made to one Shri B. Prabhakar Naidu. During the course of the assessment proceedings, the assessee furnished the address and PAN of the said person. Summon u/s 131 was issued to the said person for examining him on oath. When Mr. Prabhakar Naidu was questioned as to the details of the work taken up by him in Rithwik Projects Ltd, consideration received through cheque and as to how the contract receipts were utilised, the said person replied that he did not do any sub contract work with M/s Rithwik Projects (P) Ltd and that the total sum of ₹ 9.00 lakhs has been received by him through RTGS on various dates at the request of one Mr. Ratakonda Sagar Reddy, S/o Ranga Reddy and that it was withdrawn by the assessee and handed over to him again. He also submitted that he has shown the amount received from Rithwik Projects Ltd for which he has received form No.16A by post. He submitted that he does not know the person who has posted form 16 and that he has not entered into any agreement for any work nor is an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... planation, leave alone but the evidence to show that it was covered by any of the expenses given under Rule 6DD. Aggrieved, the assessee is in appeal before us. The learned Counsel for the assessee reiterated the submissions made before the CIT (A) and submitted that if at all the disallowance is to be made, it should be restricted to the percentage of the disallowance made by the AO. 13. Having regard to the rival contentions, the assessee has not filed any evidence in support of his contentions either before the CIT (A) or before us. In view of the same, we do not find any reason to interfere with the order of the learned CIT (A) and this ground of appeal is also rejected. 14. In the result, assessee s appeal for A.Y 2009-10 is partly allowed. 15. As regards assessee s appeal for A.Y 2010-11, Ground No.2 to 6 are against the disallowance of the claim made u/s 80IA of the Act. The facts and circumstances and the reasons for the disallowance of the claim are the same as in the earlier year. For the detailed reasons given by us in the assessee s appeal for A.Y 2009-10 above, these grounds are also set aside to the file of the learned CIT (A) for fresh consideration in the l ..... X X X X Extracts X X X X X X X X Extracts X X X X
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