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TMI Blog2010 (4) TMI 1160X X X X Extracts X X X X X X X X Extracts X X X X ..... ich is engaged in construction activity since 1996-97. The company has been allotted during the FY 2001-02 the work of housing project worth ₹ 12,53,65,692/- for the construction of housing units measuring 450 sq.ft. each on area more than one acre of land at Sector-62, Noida by Indian Railway Welfare Organization (in short IRWO). Another work had also been allotted of housing project worth ₹ 22,82,96,800/- for the construction of housing unit measuring 38 to 42 sq. metre each on area more than one acre of land at Sector 14, Dwarka, Phase-II, New Delhi by Delhi Development Authority (in short DDA). Both the above works remained continued in the year under consideration. From the above two works, the contract receipt during the year under consideration has been shown at ₹ 54,78,5,200/-. The profit out of this contract receipt is being shown at ₹ 48,40,725/-. Out of this, ₹ 47,03,714/- has been claimed exempt from tax in view of the deduction u/s 80IB(10) of the I.T.Act. 3. The AO further observed that Section 80IB(10) states as under: The amount of deduction in the case of an undertaking, developing and building housing projects approved before the 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... works has also been filed. From the letter dated 10.1.2002 of DDA and the copy of agreement attached with it and the letter dated 30.7.2001 of IRWO and copy of agreement attached with it, the AO observed that the assessee was merely a contractor and has executed the work according to the plan, terms and conditions of the contractee. 6. The Indian Railway Welfare Organization vide letter dated September 16, 2005 addressed to the AO, Ward 17(1) stated that M/s V.R.M. (India) Ltd., the contractor was awarded a contract work for construction of 260 dwelling units including all civil, electrical, plumbing, sewerage, road, pavements, drains, underground water tank etc. at the rates provided in the schedule. As per letter dated 17.9.05 of DDA addressed to the ITO, W. 17(1), it has been explained that the rate contract on which the work is awarded is ₹ 22,82,96,800/- and the work is completed as per specifications given. 7. The AO outrightly declined the claim of the assessee u/s 80IB(10) by observing that assessee is only a contractor and not a developer. The AO also observed that in its support, the assessee company has relied upon the decision of ITAT Delhi Bench D order i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s into a contract with another person for executing works contract would not be eligible for tax benefit u/s 80IA of the Act. He also placed on record the decision of the Special Bench in the case of B.T.Patil Sons Belgaum Construction Pvt.Ltd. - 126 TTJ 577 (Mumbai), wherein it was held that deduction under Section 80IA(4) is not available to a contractor even prior to the amendment, insofar as the assessee is not developing any infrastructure facility at its own but only executing the civil construction work. Shri Chand further stated that in the report furnished u/s 44AB of the IT Act alongwith the return of income, the assessee itself has shown the nature of business as a contractor. In view of all these contentions, learned DR Shri Chand vehemently argued that the assessee having only executed works contract, is merely a contractor and not developer, no deduction under Section 80IB(10) is available to it. 11. On the other hand, learned AR contended that assessee is engaged in the construction of building and developing housing projects and during the year under consideration, it was allotted work of construction and development of housing units by Indian Railway Welfare O ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... up the work, the layout plans as well as building plans, structural designs etc. are to be got approved from DDA/competent authority as mentioned in NIT by adhering to the time schedule laid down in the NIT. (vi) The agency will also be responsible for getting the fire fighting arrangements, approved from the Delhi Fire Services before execution of the water supply scheme. 12. Learned AR also placed on record detail of scope of work allotted by the DDA and contended that the work so allotted was not merely civil construction but included planning, designing and execution in accordance with the layout plan and architectural/structural drawings to be approved by the DDA alongwith development of infrastructure. She further highlighted the scope of the work which as per the letter of the DDA was to be carried out which inter-alia included survey of the site, preparation of layout plan within the development controls, soil investigation, complete structural design, drawing for foundations, super structure, other structures, construction of all planned buildings, structures like UGR, pump house, boundary wall etc., all was to be completed as per the approved design, drawings and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Gujarat Industrial Development Corporation Others 227 ITR 414, wherein while answering the question, whether industrial development could be enveloped within the expression planning, development or improvement of cities, towns and villages or for both in section 10(20A) of the Act, held that development involved planning and developing roads, buildings, sanitation, parks, educational institutions and other amenities in industrial area. The word development in section 10(20A) of the Act should be understood in its wide sense. There is no warrant to exclude all development programmes relating to any industry from the purview of the word development in the said clause. There is no indication in the Act that the development of a place can be accelerated through varieties of schemes and establishment of industries is one of the modes of developing an area. 15. Reliance was also placed on the decision of ITAT Coordinate Bench Jaipur in the case of Om Metals Infraprojects Ltd. wherein amendment by the Finance Act 2007 was elaborately discussed and it was held that it applies to a person who enters into a contract with an undertaking or enterprise and not to a work contrac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... u/s 80IB(10) of I.T.Act. 17. Learned AR further contended that the provisions of Section 80IB(10) are incentive provisions, therefore same must be construed liberally and in favour of the assessee so as to give full effect to the intention of the legislature. For this purpose, reliance was placed on the decision of the Hon'ble Supreme Court in the case of Bajaj Tempo Ltd. 196 ITR 188 wherein at page 189, following was observed by the Apex Court:- A provision in a taxing statute granting incentives for promoting growth and development should be constructed liberally; and since a provision for promoting economic growth has to be interpreted liberally, the restriction on it too has to be construed so as to advance the objective of the provisions and not to frustrate it. 18. In the light to the aforesaid judgement of the Apex Court and the provisions of Section 80IB(10) of the Act, as per learned AR the assessee company is entitled to deduction under Section 80IB(10) of the Act. 19. We have considered the rival contentions, carefully gone through the orders of the authorities below and deliberated upon the judicial pronouncements relied on by the learned AR and lear ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al authority on or after the 1st day of April, 2004, within four years from the end of the financial year in which the housing project is approved by the local authority. Explanation.-For the purposes of this clause,- (i)in a case where the approval in respect of the housing project is obtained more than once, such housing project shall be deemed to have been approved on the date on which the building plan of such housing project is first approved by the local authority; (ii)the date of completion of construction of the housing project shall be taken to be the date on which the completion certificate in respect of such housing project is issued by the local authority; (b) the project is on the size of a plot of land which has a minimum area of one acre: Provided that nothing contained in clause (a) or clause (b) shall apply to a housing project carried out in accordance with a scheme framed by the Central Government or a State Government for reconstruction or redevelopment of existing buildings in areas declared to be slum areas under any law for the time being in force and such scheme is notified by the Board in this behalf; (c) the residential unit has a maximum ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o no dispute to the fact that assessee has commenced construction of housing project after 1.10.1998. The copies of approval of the projects from the local authorities were also duly submitted to the AO and the same are appended in the assessee s paper book at pages 1 to 5. However, in view of the explanation introduced with retrospective effect, the benefit of exemption under Section 80IB(10) is available only to an undertaking developing housing projects as a developer and not merely as a work contractor. For finding out whether on the facts and circumstances of the case the assessee has undertaken the work of housing project as a developer and builder or as a work contractor simplicitor , we have to examine the nature of work undertaken and executed by the assessee. As the words developer and contractor have not been defined in Section 80IB nor in the General Clauses Act, we can take the dictionary meaning. As per Chambers 21st Century Dictionary (Revised Edition), contractor means a person or firm that undertakes work on contract, specially connected with building, installation of equipment or the transportation of goods . The word developer has been defined as som ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tc., as stated in the NIT also. (iv) Before taking up the work, the layout plans as well as building plans, structural designs etc. are to be got approved from DDA/competent authority as mentioned in NIT by adhering to the time schedule laid down in the NIT. (v) The agency will also be responsible for getting the fire fighting arrangements, approved from the Delhi Fire Services before execution of the water supply scheme. 22. It is crystal clear from the scope of work as enumerated above and which has been undertaken by the assessee, that the assessee has worked as a builder and developer of housing project as a whole and for this purpose he has undertaken work of planning, designing of layout plan and architectural/structural drawing of complete housing project as approved by the DDA. It has also carried out survey of the site, also prepared layout plan within the development controls, and has also undertaken detailed soil investigation, prepared complete structural, design and drawing for foundations and drawing for super structure. The assessee company has also undertaken the work of planning, designing and execution of internal sanitary system, water supply system, dr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... his rights, nor can the existence or absence of entries in his books of account or observation in the tax audit report will be of much relevance. Particulars in the tax audit report are not restricting the status of the assessee as to the contractors only. Even admission of the assessee is held to be not conclusive as held by the Hon'ble Delhi High Court in the case of Easter Industries Ltd. 316 ITR 260. Hon'ble Supreme Court in the case of Satluj Cotton Mills 116 ITR 1 observed that the way in which entries are made by an assessee in his books of account is not determinative of the question whether the assessee has earned any profit or suffered any loss. The assessee may, by making entries which are not in conformity with the proper principles of accountancy, concealed profit or showed loss and the entries made by him cannot be regarded as conclusive one way or the other. What is necessary to be considered is the true nature of the transaction and whether in fact it has resulted in profits or loss to the assessee. Similar view has been taken by the Hon'ble Supreme Court in the case of Kedarnath Jute Manufacturing Co.Ltd. 82 ITR 363, where it was observed that wh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment with the Central/State Government or local/statutory authority. Second category comprises of those who develop the infrastructure facility and also themselves operate and maintain the same. The use of punctuation sign coma between clauses (i) and (ii) cannot be substituted with the word or as used between (ii) and (iii) of sub-section (4)(i). Each and every word or sign of punctuation used by the legislature in the language of section carries its own meaning and depicts the intention of the legislature. It is not as if coma has been accidentally inserted between (i) and (ii) as against the intention of using the word or , as suggested by the learned AR. Wherever the legislature intends to provide for choosing one of the alternatives it uses the word or between such options but where the intention is to make operative all the given propositions punctuation sign coma or/and the conjunction and is used between or amongst the relevant propositions. Here it is important to mention that the legislature inserted the word or between (i) and (ii) w.e.f. 1.4.2002, which is applicable to AY 2002-03. So, w.e.f the AY 2002-03, not only the enterprise (i) developing, (ii) operating ..... X X X X Extracts X X X X X X X X Extracts X X X X
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