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TMI Blog2017 (1) TMI 1200X X X X Extracts X X X X X X X X Extracts X X X X ..... spect of the issues raised in the show cause notice u/s.263 of the Act. The liability that was assumed by the assessee under terms of the contract would be obligations involving the development of an infrastructure facility. The assessee has also in its employment technically and administratively qualified team of persons. If the above conditions are satisfied then it would not be correct to say that assessee is merely a contractor and not a developer. Without giving adverse finding on the above tests, the CIT could not conclude that the order of the AO was erroneous and prejudicial to the interest of the revenue. Further the CIT in the impugned order has also observed that the roads construed by the Assessee were not coming under expressway or highway category as mentioned in the Explanation to Sec.80IA(4)(i) of the Act, which defines Infrastructure facility for the purpose of claiming deduction under the aforesaid section. We are of the view that the definition covers any road including toll road. It need not be coming under expressway or highway category. - Decided n favour of assessee X X X X Extracts X X X X X X X X Extracts X X X X ..... g the claim of the assessee for deduction u/s 80IA(4)(i) of the Act was erroneous and prejudicial to the interest of the revenue. In this regard, the CIT issued show cause notice u/s 263 of the Act not only for A.Y.2011-12 but also for A.Y.2010-11. Both the show cause notices were dated 23.02.2016. The allegations in the show cause notice for both the AY's were identical. In so far as AY 2011-12, the allegation of the CIT in the show cause notice u/s.263 of the Act was that the Assessee was engaged in road construction and claimed and availed deduction u/s.80IA during A.Y. 2011-12 as detailed below: AY Work executed for which deduction claimed Total Deduction claimed Total deduction allowed 2011-12 Executed works for Executive Engineer StateRuralDevelopment Agency in Bankura, Purulia (Sonamukhi Block)And Paschim MediniporeGarbeta-II,Panchayat Samiti Area). 1,49,16,548 1,46,38,163 5. Under Section-80IA(4)(i) of the Act, a deduction of prescribed percentage of profits derived from the eligible business for certain number of years is allowed to - (i)any enterprise carrying on the business of (i)developing or(ii)operating and maintaining or (iii) developing, operating and main ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctions under the section. The CIT was therefore of the view that the order of the AO allowing deduction u/s.80IA(4)(i) of the Act to the Assessee was erroneous and prejudicial to the interest of the revenue and therefore the Show cause notice was being issued to pass appropriate orders u/s.263 of the Act. 9. According to the Assessee it filed a reply to the show cause notice in the office of the CIT on 30.03.2016. The CIT however had already passed the impugned order u/s 263 of the Act as earlier as 23.02.2016. In other words, there was no occasion for the assessee to explain before the CIT as to why the proceedings u/s 263 of the Act cannot be initiated in the case of the assessee for the relevant AY. 10. The CIT in the impugned order came to the conclusion that the order of the AO was erroneous and prejudicial to the interest of the revenue. According to the CIT the AO has failed to apply his mind to the assessee's claim of deduction u/s 80-IA(4) in the light of the decision of the Hon'ble Pune Bench in the case of M/s. B.T.Patil & Sons and the statutory amendment to Act referred to earlier whereby an explanation was inserted by the Finance Act 2009 with retrospective effect fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rity. The Miscellaneous application was allowed and order of dismissal of the appeal for non appearance was recalled. In view of the aforesaid development the assessee sought to withdraw the appeal filed before the Hon'ble Bombay High Court against the order giving effect to the opinion of the majority. The Hon'ble Bombay High Court allowed the Assessee to withdraw it's appeal and in doing so also gave some directions to the Division Bench to be followed while giving effect to the opinion of the majority. The relevant portion of the said order of Hon'ble jurisdictional High Court in ITA No.1307 of 2011 for A.Y. 2000-01 and 1640 of 2011 for A.Y. 2001-02 is as under: "1. Since the Tribunal has recalled the impugned order dated 23.03.2011, the appellant is withdrawing its appeal. 2. Further, while considering the matter afresh, the Tribunal will take into consideration all decisions including the decision of this court in the matter of CIT v. ABG Heavy Industries Ltd. reported in 322 ITR page 323. All contentions are kept open. 3. The appeal is dismissed of in above terms." The Division Bench of the Tribunal while giving effect to the order of the Tribunal, held that the view of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uent decisions rendered on the issue what is to be seen is as to whether the assessee has shouldered out Investment & technical risk in respect of the work executed and it is liable for liquidated damages if it failed to fulfill the obligation laid down in the agreement. The liability that was assumed by the assessee under terms of the contract would be obligations involving the development of an infrastructure facility. The assessee has also in its employment technically and administratively qualified team of persons. If the above conditions are satisfied then it would not be correct to say that assessee is merely a contractor & not a developer. According to him the CIT in the show cause notice as well as in the order passed u/s 263 of the Act has not taken cognizance of the later development of the law, which development had taken place prior to the date of show cause notice issued u/s.263 of the Act, the entire approach of the CIT was not sustainable in law. It was his submission that in the light of the law as explained in the subsequent decisions, the ratio laid down by the larger bench in the case of M/s. B.T.Patil & sons(supra) by ITAT Pune was no longer good law. It was his ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... structure facility which fulfils all the following conditions, namely :- (a) it is owned by a company registered in India or by a consortium of such companies or by an authority or a board or a corpora-tion or any other body established or constituted under any Central or State Act; (b) it has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility; (c) it has started or starts operating and maintaining the infrastructure facility on or after the 1st day of April, 1995: Provided that where an infrastructure facility is transferred on or after the 1st day of April, 1999 by an enterprise which developed such infrastructure facility (hereafter referred to in this section as the transferor enterprise) to another enterprise (hereafter in this section referred to as the transferee enterprise) for the purpose of operating and maintaining the infrastructure facility on its behalf in accordance with the agreement with the Central Government, State Government, local authority or statutory ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... It is not in dispute in this case that similar receipts from similar contracts executed by the Assessee in the past were considered as eligible for deduction u/s.80IA(4)(i) of the Act. The details of the past Assessment (i.e. from AY 2003-04 to 2009-10) are given at page-14 of the Assessee's paper book. The same is as follows: Details of Deductions allowed u/s 80IA(4) Sl.No. Assessment Years Deduction Allowed u/s 80IA(4) as per Assessment Order u/s 143(3) 1. 2009-10 2,27,85,300 2. 2008-09 2,54,43,092 3. 2007-08 4,03,90,515 4. 2006-07 2,11,00,534 5. 2005-06 1,96,56,553 6. 2004-05 4,74,21,529 7. 2003-04 4,57,26,314 Keeping in mind the aforesaid background of facts, we have to examine the question as to whether the CIT was justified in coming to the conclusion that the order of the AO allowing the claim of the Assessee for deduction u/s.80-IA(4)(i) of the Act could be termed as erroneous. 18. From a perusal of the impugned order it is clear that the Assessee has furnished the copies of contracts the receipts from which were claimed as profits derived from the business of carrying out infrastructure development eligible for deduction u/s.80IA(4)(i) of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... udes 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. 21. The CIT has also observed that the Assessee was only a contractor and not a developer because he was carrying out work as per the contracts awarded by the Executive Engineer. As rightly pointed out by the learned counsel for the Assessee, the question as to whether the Assessee as per the question as to whether the Assessee is 'developer' or 'contractor' has to be tested in the light of the subsequent decisions rendered on the issue by the Hon'ble Bombay High Court in the case of ABG Heavy Industries (supra) and the order of the Division Bench of ITAT giving effect to the larger bench (third member) decision in the case of B.T.Patil & Sons (supra). According to these decisions what is to be seen is as to whether the assessee has shouldered out Investment & technical risk in respect of the work executed and it is liable for liquidated damages if it ..... X X X X Extracts X X X X X X X X Extracts X X X X
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