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TMI Blog2017 (11) TMI 1198X X X X Extracts X X X X X X X X Extracts X X X X ..... accordance with law. Since the order passed by the learned Commissioner of Income-tax (Appeals) for the assessment year 2006-07 was followed by him to give relief to the assessee on the issue of deduction under section 80-IA for the assessment years 2004-05, 2005-06, 2007-08 and 2008-09, the orders of the learned Commissioner of Income- tax (Appeals) for the said years were also set aside by the Tribunal with a direction to the learned Commissioner of Income-tax (Appeals) to decide the matter afresh after deciding the appeal of the assessee for the assessment year 2006-07. When the opportunity given to him by the learned Commissioner of Income-tax (Appeals) in the second round as per the direction of the Tribunal was availed of by the Assessing Officer by submitting a remand report putting forth the case of the Revenue on the issue and the rejoinder was also filed by the assessee in response to the said remand report, we are of the view that the action of the learned Commissioner of Income-tax (Appeals) in allowing the claim of the assessee for deduction under section 80-IA by simply relying on the order of the learned Commissioner of Income-tax (Appeals) dated October 30, 2009 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... come-tax (Appeals) of the disallowance made by the Assessing Officer on account of the assessee's claim for deduction under section 80-IA of the Income-tax Act, 1961. 3. The assessee in the present case is a company, which is engaged in the business of high technology construction work for different organisations as per the contracts awarded to it on the basis of tenders. The return of income for the assessment year 2004-05 was originally filed by it on October 28, 2004 declaring a total income of ₹ 1,15,25,709. The said return was selected by the Assessing Officer for scrutiny and a notice under section 143(2) was issued by him to the assessee on April 13, 2005. During the course of assessment proceedings, the assessee-company filed a revised return on March 31, 2006 declaring a total income at 'nil' after claiming deduction under section 80-IA in respect of its entire business income of ₹ 1,15,25,709. The said claim of the assessee for deduction under section 80-IA was examined by the Assessing Officer and on such examination, he found that the conditions for claiming deduction under section 80-IA were not satisfied by the assessee as under : (i) The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned Commissioner of Income-tax (Appeals) first vide an order dated October 30, 2009 whereby he allowed the claim of the assessee for deduction under section 80-IA after discussing all the relevant aspects in the light of submission made by the assessee as under : I have carefully considered the detailed submissions/supplementary submissions of the appellant and also various details filed by way of paper book containing details of projects executed and other related documents. I have also considered the observations of the Assessing Officer while arriving at the decision denying exemption under section 80-IA of the Act. My observations and decision are as under : 'The appellant claimed deduction under section 80-IA since according to the appellant the business carried on was towards development of infrastructural facilities viz. flyover (bridge project) and metro railway (railway system project). On the other hand, the Assessing Officer is of the view that the condition required for claiming deduction under section 80-IA has not been fulfilled by the appellant. According to the Assessing Officer the three basic conditions viz. (1) enterprise is required to carry on the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ous supporting documents evidencing the nature of works carried out by the appellant in developing infrastructural facilities in a paper book form has been furnished by the appellant to the Assessing Officer for recognising the appellant as a developer entitling to a deduction under section 80-IA. 4.3.4. The learned authorised representative brought to my notice about the hon'ble Mumbai Income-tax Appellate Tribunal decision in the case of Asst. CIT v. Bharat Udyog Ltd. [2009] 313 ITR (AT) 168 (Mumabi) (I. T. A. No. 6137 of 2005 dated June 30, 2008) wherein it was held that if there exist any contract that does not necessarily mean that the relevant contract could not be a developer. The Tribunal dealt the issue of (a) 'developer' being eligible for deduction and the concept of developer vis-a-vis 'contractor' with reference to development of a infrastructural facilities. Brief facts of this case are that the assessee was engaged in the development of roads. The Assessing Officer relying on sub-clause (C) of clause (i) of section 80- IA(4), opined that deduction under section 80-IA was available to a person who was not only developing the infrastructural fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... after April 1, 1995. Since the assessee was only a developer of the infrastructure project and it was not maintaining and operating the infrastructure facility, sub-clause (c) of sub-section (4) of section 80-IA was not applicable. Further, from the assessment year 2000-01, deduction under section 80-IA(4) 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 would be paid for the cost incurred by it, otherwise, how would the person who develops the infrastructure facility project, realise its cost ? If the infrastructure facility, just after its development, is transferred to the Government, naturally the cost would be paid by the Government. If a person who only develops the infrastructure facility is not paid by the Government, the entire cost of development would be a loss in the hands of the developer as he is not operating the infrastructure facility, When the Legislature has provided that the income of the developer of the infrastructure project would be eligible for deduct i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use (c) of clause (i) of section 80-IA(4) were inapplicable to the instant case. Hence, the order of the Commissioner (Appeals) was correct.' 4.3.5 The reason cited by the Assessing Officer for denying the appellant's claim for deduction under section 80-IA have been countered in entirety by the authorised representative of the appellant wherefrom it appeared that the appellant had duly complied with all the requirements as prescribed under section 80-IA for an assessee to be entitled to deduction under section 80-IA (paragraph 4.2.4) The relevant documents in support of authorised representative's submissions have been produced. 4.3.6. The point to be decided here is as to whether the business activities carried out by the appellant could be termed to be only execution of works contract awarded by any person for being covered by the Explanation to section 80-IA. Usually by a works contract it is understood that the relevant contractee asks the contractor to execute certain work as for the specifications on planning of the contractee and a contractor does not have any role to play as regards the designing and for making plans for implementation of the desired ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n In view of the above facts and observation, I am of the opinion that the appellant, in relation to its infrastructural facility's projects of flyover at Kolkata and metro railway project at Delhi, should be considered as a developer and accordingly, it is entitled to a deduction under section 80-IA in respect of the profits and from the said activities. The Assessing Officer is directed to allow the appellant's claim for deduction under section 80-IA . Thereafter the assessee's appeals for the assessment years 2004-05, 2005-06, 2007-08 and 2008-09 were also disposed of by the learned Commissioner of Income-tax (Appeals) vide appellate orders dated September 26, 2011, September 19, 2011, June 30, 2010 and September 26, 2011 respectively, whereby he allowed the claim of the assessee for deduction under section 80-IA by following the view taken in the assessment year 2006-07. 6. Against the orders of the learned Commissioner of Income-tax (Appeals) for the assessment years 2004-05 to 2008-09 allowing the claim of the assessee for deduction under section 80-IA, appeals were preferred by the Revenue before the Tribunal and while disposing of the same vide ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ationship between the appellant and the Government agent had been defined as contractor and employer ; (vii) If deduction would be allowed to the appellant under section 80-IA there would not be any difference between the appellant executing the contract works and those enterprise/undertaking really participating in developing and operating the infrastructure facilities deploying their own funds. 8. When the remand report submitted by the Assessing Officer was confronted by the learned Commissioner of Income-tax (Appeals) to the assessee, the assessee filed rejoinder offering its explanation in respect of various points raised by the Assessing Officer as under : (a) The appellant had been in the business of carrying out high technology construction activities. In pursuance of agreements entered into with the Government of India and/or certain State Governments including local authorities, the appellant had developed a number of infrastructure projects such as the metro railway in Kolkata as well as in Delhi, several flyovers in Kolkata, etc. The metro railway projects were taken up and completed by the appellant as per the agreements entered into with Delhi Metro Rai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t entitled to deduction under section 80-1A. (c) The Assessing Officer did not appreciate that for any contract there had to be a deduction of tax at source as per the relevant provisions of the Income-tax law. The TDS itself cannot lead to the conclusion that there could not be any developmental work. Hence, the Assessing Officer's observation that in view of there being TDS at 2.3 per cent. the appellant could allegedly not be treated as a developer, has been unjustified. (d) The execution of a contract for development of infrastructure facilities is also a 'contract' and the contract is also a part of business. The Assessing Officer should have appreciated that what the appellant was carrying on was not a mere execution of a works contract but the appellant's works comprised of several parts such as designing, 'conceptualising, development, constructing, commissioning and thereafter releasing the infrastructure facilities for the public use. (e) The agreements entered into between the appellant and the prescribed Government authorities, viz., HRBC and DMRC, had been for development of infrastructure facilities such as flyover and metro railway. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... been produced before the Assessing Officer for examination thereof. It will be clear from the aforesaid documents that the appellant had been entrusted with the developmental works as per the written agreements which in some cases had been in the form of tender documents. DMRC used to issue letter of acceptance (LoA) in duplicate and on signing thereof by the appellant such LoA became an agreement. A comprehensive note specifying the nature of works carried out by the appellant for the development of flyovers and metro rail way, had earlier been given to the Assessing Officer during the assessment proceedings. From the said notes it will be clear as to why the relevant documents are to be considered as 'contract for developments' and not mere 'works contracts'. The appellant submits that as regards the development works of metro railway (DMRC) some particular works relating to electrification of the concerned stations had been assigned to certain contractors as per DMRC's choice. However, the designing of the entire project as well as the tunnelling and construction of the stations had been carried out by the appellant. In the cases of flyovers at Kolkata the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 80- I(A) as had been effective for and up to the assessment year 1999-2000, had required the transfer of the 'Infrastructure facility' to the Government or the local authority/statutory body, as the case may be, within a specified period. So there had been the requirements firstly of 'ownership' and thereafter 'transfer' of the Infrastructure facility. However, with effect from the assessment year 2000-01 such conditions of 'ownership' and 'transfer' of the infrastructure facility were withdrawn. Hence, in the appellant's case there had not been any requirement of ownership of the 'infrastructure facility' by the appellant and consequently question of 'transfer' of the infrastructure facility could not arise. Hence, the Assessing Officer's remark that the transfer of the projects had not been as per the scheme of BOT/BOOT does not have any relevance for the purpose of deduction under section 80-IA. (k) The appellant's case was not a case where only a part of a development project had been entrusted to a person for execution thereof. In respect of the Infrastructure facilities, viz., metro railway (Delhi) as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owards the development of the infrastructure facilities but it had been entrusted with the entire work of the development of the infrastructure facilities towards metro railway in Delhi. (o) In relation to HRBC flyover projects it had been required of the appellant to incur the necessary expenses towards the development out of its own fund at the first instance and only after completing substantial portion of the projects, the appellant could raise progressive bills on HRBC. From these facts it would be clear that the entire risk for these projects towards development of infrastructure facilities had to be borne by the appellant on its own. It was only after the progress of the development to a particular extent the appellant could raise bills on HRBC. The relevant details of incurring expenses and raising of the bills had earlier been produced before the Assessing Officer, but those were not considered by the Assessing Officer while examining the eligibility of the appellant to deduction under section 80-IA. (p) As regards the infrastructure development projects relating to Park Street flyover and Gariahat flyover, the authorities of HRBC issued certificates certifying t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red as mere work contract. In any case in the latter case also the person to whom the abovementioned works including the designing and planning are allotted will be known as a 'contractor'. On submission of the design as well as the plans of implementation, the necessary approval or sanction is given by the contractee to the said contractor to proceed with the implementation by way of construction. It must be appreciated that for such a case the relevant work cannot be stated to be a mere execution of a work contract. In the appellant's case the entire work relating to designing and planning had been entrusted to the appellant and, therefore, such works should be treated as work for development of infrastructure facilities. Further, the fact of the appellant's investments of its own fund for proceeding with the work and after completion of the project has to give guarantee for a period of 120 years in respect of its developed infrastructure facilities, should be considered as evidences for treating the entire work as being for the purpose of development of infrastructure facilities. (s) it is to be noted that the predecessor Commissioner of Income- tax (Appeals ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m for deduction under section 80- IA, the Revenue has preferred these appeals before the Tribunal being I. T. A. Nos. 991 to 995/Kol/2016. 10. Meanwhile the appeal filed by the assessee against the order passed by the Assessing Officer under section 143(3) dated December 5, 2011 disallowing the similar claim of the assessee for deduction under section 80-IA was disposed of by the learned Commissioner of Income-tax (Appeals) vide an order dated February 7, 2013 whereby he deleted the disallowance made by the Assessing Officer under section 80-IA by following the order of his predecessor passed in the assessee's own case for the assessment year 2006-07 in the first round. Against the said order of the learned Commissioner of Income-tax (Appeals) dated February 7, 2013, the Revenue has also filed an appeal being I. T. A. No. 1159/Kol/2013. 11. We have heard the arguments of both the sides on the main issue involved in these six appeals filed by the Revenue and also perused the relevant material available on record. It is observed that while disposing of the appeals filed by the assessee for the assessment years 2004-05 to 2008- 09 vide his orders passed in the first round, t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the notice has also been mentioned in each of the appellate order. For the assessment year 2006-07, we noted that the Commissioner of Income-tax (Appeals) has not mentioned about the service of ITNS 51 along with the notice under section 250 of the Act to the Assessing Officer. We have looked into the file of the Commissioner of Income-tax (Appeals) as well as the order sheet. We noted that in the order-sheet the Commissioner of Income-tax (Appeals) nowhere has mentioned about the issue of notice to the Assessing Officer even there is no noting in respect of the issuance of ITNS 51 what to talk of the service of the notice on the Assessing Officer, we found that there are three notices. There are notices of date on them. Notices are addressed to the assessee and none of the notices is addressed to the Assessing Officer. We have also examined and verified the copy of the notices as available on which the learned senior advocate has relied on. These notices, we found that none of the notice is addressed to the Assessing Officer but addressed to the assessee. The acknowledgment slip does not indicate that notice had been received by the Assessing Officer even though the acknowledgment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the learned Commissioner of Income- tax (Appeals) is in violation of the principles of natural justice and we therefore set aside the matter to the file of the learned Commissioner of Income-tax (Appeals) with the direction to the learned Commissioner of Income-tax (Appeals) to give the Assessing Officer proper and sufficient opportunity of being heard and to decide the issue afresh in accordance with law. 10. Since we have set aside the order of the learned Commissioner of Income-tax (Appeals) for the assessment year 2006-07 in which the Commissioner of Income-tax (Appeals) for the first time allowed the claim of the assessee under section 80-IA of the Act and in subsequent year the Commissioner of Income-tax (Appeals) allowed the claim of the assessee under section 80-IA of the Act by following the order for the assessment year 2006-07. We, therefore, set aside the order of the learned Commissioner of Income-tax (Appeals) for the assessment years 2004-05, 2005-06, 2007-08 and 2008-09 also and restore the issue involved to the file of the learned Commissioner of Income-tax (Appeals) with the direction that the learned Commissioner of Income-tax (Appeals) sha11 re-decide the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessing Officer in the remand report as well as the explanation offered by the assessee in the rejoinder are duly extracted by the learned Commissioner of Income-tax (Appeals) in his impugned order passed for the assessment year 2006-07, a perusal of the operative portion of the said order shows that he has neither discussed nor considered the same, inasmuch as, no comment whatsoever has been made by him either on the remand report submitted by the Assessing Officer or even on the rejoinder filed by the assessee. He has simply held that the issue relating to the assessee's claim for deduction under section 80-IA was already considered and decided in favour of the assessee by his learned predecessor vide his order dated October 30, 2009 passed in the first round and after extracting the relevant portion of the said order, he allowed the claim of the assessee for deduction under section 80-IA by simply following the same. As already noted by us, the said order of the learned Commissioner of Income-tax (Appeals) dated October 30, 2009 passed in the first round was set aside by the Tribunal on the ground of violation of the principles of natural justice after having found that no ..... X X X X Extracts X X X X X X X X Extracts X X X X
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