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TMI Blog2017 (4) TMI 399X X X X Extracts X X X X X X X X Extracts X X X X ..... rguments of the Assessing Officer and the written submissions of the Authorised Representative of the appellant. As discussed in earlier para of this appeal order, after the Introduction of Explanation to sub-section (13) of section 80-lA, with retrospective effect from 01.04.2000, the only person barred from claiming deduction under this section is a work-contractor. It is an undisputed fact that the appellant is not a sub-contractor and appellant has used his own resources to execute the work. Therefore, as per the section itself, the appellant, solely engaged in the work of development and transfer of infrastructure facilities, is entitled to claim deduction u/s. 80-lA on the income thus arising. I have gone through various decisions, as relied by the Ld. AR, that are being dealt with as under: - It has been held in the decision of M/s Patel Engineering (supra) as under:- "We find that Finance Act, 1995 inserted clause (4A) for providing deduction to any enterprise carrying on the business of developing, maintaining and operating any infrastructure facility Sub-clause (iii) of sub-section (4A) provides the condition that the Infrastructure facility is operated on or after t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot fulfilled, does not hold good after the Introduction of Explanation to subsection (13) of Sec.80-lA and after the decision in the case of M/s. Patel Engg. Ltd. (supra) as discussed above. Therefore, even though the clause of operating of Infrastructure facility is not fulfilled by the appellant since it is not applicable to it, it is entitled to claim deduction u/s.80-IA. 4.5 It has been further observed by the Hon Mumbai ITAT in matter of the ACIT v Bharat Udyog Limited 24 SOT 412 that- "9. The interpretation of revenue is absurd also in view of the rational of the provisions of section BO-IA (4) (I). From the assessment year 2000-01, deduction is available if the assessee carries on the business of anyone of the abovementioned three types of activities. When an assessee is only developing an infrastructure facility/project and is not maintaining nor operating it, obviously such an assessee will be paid for the cost incurred by it; otherwise, how will the person, who develops the infrastructure facility project, realise its cost? If the infra- structure facility, just after its development, is transferred to the Government, naturally the cost would be paid by the Governme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he Central Government, State Government or a local authority. So, entering into a lawful agreement and thereby becoming a contractor should, in no way, be a bar to the one being a developer. Therefore, merely because, in the agreement for development of infrastructure facility, assessee is referred to as contractor or because some basic specifications are laid down, it does not detract the assessee from the position of being a developer; nor will it debar the assessee from claiming deduction under section 80lA (4)" 4.6 Ld. AR further has further relied upon the decision dated 08/06/2011 of Pune Bench of Hon. ITAT in matter of M/s Laxmi Civil Engineering Pvt. Ltd v Addl. CIT ITA 766/PN/2009 in which it has been held as under: The judgment of the Hon'ble High Court is delivered in the case of CIT v ABG Heavy Engg Ltd ITA No 1687 of 2009, who is a contractor for the JNP Trust and that contactor, assessee is found to be an eligible developer for making claim of deduction u/s section 80lA (4) of the Act. From the above, it is evident that the person who only develops the infrastructure does not have the occasion to operate and maintain the infrastructure. It is further evident ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... operates that infrastructure facility. " In the light of the ratio of the above decision of Hon. Bombay High Court being the jurisdictional high court, observation of the AO that in absence of the operation and maintenance, assessee is not eligible for the deduction u/s 80lA is without any merit and cannot be upheld clause (i) of section 80lA (4) should refer to the conditions as applicable to the developer. In other words, the developer who is only developing the infrastructure facilities since he does not operate and maintain Infrastructural facilities, cannot be expected to fulfil the condition at sub clause (c) which is an impossibility and the requirements to fulfil the said condition shall amount to absurdity and therefore uncalled for. Therefore, we find requirement of harmonious reading of sub-clause (c) vis-a-vis of clause (i) of section 80lA (4) of the Act. Thus, the discussion in High Court's decision in paragraph-22 extracted above, is directly applicable to the facts of the case and eventually is entitled for the deduction under section 80lA (4) of the Act. 4.7 Ld. A.R further has further relied upon the decision elated 15/02/2010 of Hon. Bombay High Court in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... qualify for the deduction under section 80lA. Above Interpretation canvassed by the Assessing Officer, is devoid of any merits The explanation has been misconstrued by him. Correct interpretation of the impugned explanation is that what has been debarred from the claiming the deduction is the business which is in the nature of contract from any person and the business of the development of infrastructure facility under the contract which is not the works contract is eligible for the deduction. In the light of the above principle, it would be imperative to examine whether the business of the assessee is in nature of the works contract or something more than that Followings are the undisputed facts arising from the audited financial statements: a. Assessee has arranged various equipment, plants and machineries that are required for the execution of the work either on his own or on hire. b. Assessee has arranged for all the materials and resources for the projects. c. As a matter of fact, assessee has incurred Rs. 2.92 Crores as purchases of various materials and Rs. 83.40 Lacs for equipment hire and has purchased machineries worth Rs. 22.59 Lacs on his own and spent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ufacture is carried out by the contractor, the agreement would, it was clarified, constitute a contract for work. On the other hand, where a manufacturer produces goods to the specifications of the purchaser and the property passes to the purchaser only upon delivery, the contract would be regarded as a contract of sale if the raw material is sourced by manufacturer and is not supplied to him by the purchaser. Secondly, the consistent view which held the field in several High Courts was that contracts where (i) property passes to the purchaser upon the delivery of the goods and (ii) the raw material was sourced by the manufacturer and was not supplied by the purchaser do not fall within the scope and ambit of Section 194C. The judgment of the Division Bench of this Court in matter of BDA Ltd., therefore, clearly reflected the position of law that providing a specification to the manufacturer who produces the article or thing would not detract from the nature of the transaction as a sale so long as the purchaser had not supplied raw material to the seller; and there was nothing to indicate that the seller was captive unit of the purchaser. Such a contract would be a contract of sa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ch was transferred to the Govt or Statutory authority, but in BT, as there was no such right or interest in the infrastructure facility there could not be any transfer. It is pertinent again to refer to the decision of the Mumbai ITAT in the case of M/s, Patel Engg. (supra) where similar question arose of whether there could be any transfer of Infrastructure facility in the absence of any 'rights' or 'interest' as in the case of a BT i.e., a mere developer: It was observed that in a case of a BT, the only way of recoupment of cost was by way periodical or lumpsum payment by the Govt. / the Statutory authority, whether during the progress or after completion of the development work. It was further held as under :- "in that view of the matter, the question of comparing the right, title, or interest of an assessee (a developer) in infrastructure in the case of 'BT with those of a developer in the case of 'BOT or 'BOOT' is in our considered opinion, of no relevant bearing on the issue, in as much as a developer seems to have almost same rights, title or interest (except regarding mode of payment or collection of tolls) in infrastructure facility wheth ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IA (4) was decided in favour of assessee after having the following observation:- 10. We have considered rival contentions and carefully gone through the orders of authorities below and found from the record that assessee has entered into an agreement with the Local Authority as stipulated in terms of provisions of section 80- IA(4)(i)(b) of the Act and developing the infrastructural facilities. The financial, technical and all the other resources required for the development of the infrastructure facility were of the appellant and it was not correct that the MCGM financed the infrastructure facility developed by the assessee. The appellant carried out the entire development of its own by giving specifications and necessary Designs/plans as per the location of the site, which was done by the technical experts employed by the assessee. Thus, the assessee did the entire development of the infrastructure facility. We also found that the cost of development of the infrastructure facility was paid to the assessee and the same was received by the assessee as per the bills raised. The MCGM while making the payments, deducted tax at source under the provisions of section 194-C of the Act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Court. The fact that the TDS was deducted did not in any way bar the appellant from claiming the benefit of deduction u/s.80-IA, as the fact remained that the appellant was a developer of Infrastructural facilities. 12. With regard to the AO's objection that assessee is neither BOT nor BOOT, we found that the wordings of the section prior to the amendment made w.e.f. 01.04.2000 did not have any alternative by usage of the word 'OR' in sub-section (4) of section 80lA of the Act and hence, the provision of section 80lA of the Act was available only to an assessee who not only developed but after developing also operated and maintained the Infrastructure facility. Thus, while introducing the provisions of section 80lA of the Act, the concept of BOT /BOOT prevailed and it was in this context that the Department issued circular nO.717 dated 14/8/1995, which clearly explained the new provisions of section 80-lA of the Act in terms of Infrastructural development. While doing so, the Legislature itself realized that such concept was not feasible in all cases and therefore the provisions of section 80-IA of the Act were substantially relaxed and the benefits of section 80-IA of t ..... 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