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TMI Blog2018 (7) TMI 213X X X X Extracts X X X X X X X X Extracts X X X X ..... sing Officer came to the conclusion that the assessee was eligible for deduction u/s. 80-IA(4) of the Act. Observation of the ld. Commissioner of Income Tax is totally extraneous and unsustainable - Commissioner of Income Tax has obtained the assessee’s response in this regard. He noted that the assessee was shouldering the investment and after the substantial completion of the work, which entailed approximately three months, the assessee was made payment. The ld. Commissioner of Income Tax disregarded this aspect by holding that the payment of bills after three months is normally phenomenon in government contracts. We find this observation strange and not at all sustainable as even if the assessee is putting his investment for three months, it can by no stretch of imagination be said that the assessee is not shouldering investment. Hence, the Assessing Officer’s acceptance of this aspect can by no stretch of imagination be said to be improbable or impossible view. Commissioner of Income Tax has further stated that the Assessing Officer is directed to examine the matter in the light of the above discussion. He further stated that the Assessing Officer may also examine the cas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 80IA(4) of I.T. Act. We have already mentioned the reasons given by learned Commissioner to invoke the provisions of section 263 of I.T. Act in the present case. Without repeating those reasons, in short, the main basis of holding that the assessee was not eligible for the deduction under section 80IA(4), learned Commissioner has placed reliance on a decision of a larger Bench of ITAT, Mumbai in the case of B.T. Patil and Sons, Belgaon P. Ltd. 35 SOT 171 (Mum.) (LB) It is true that when the learned Commissioner has directed not to allow the claim of deduction, the decision of B.T. Patil .and Sons (supra) was in existence. However, the latest position is that after the decision of Hon'ble Bombay High Court pronounced in the case of ABG Heavy Industries 322 ITR 323 the view taken by the larger Bench was reversed. It is very much evident from a subsequent order of ITAT-B Bench, Pune pronounced in that very case of B.T. Patil and Sons Belgaon P. Ltd. (ITA No. 1408 1409/PN/2003) assessment year 2000-01 and 2001-02 order dated 28-02-2013 that while passing the order under section 255(4) of I.T. Act to give effect of the Third Member decision it was held that the issu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... also operating the project. The provisions are applicable in respect of the project which is related to development of infrastructure facility. Therefore, one of the primary requirement is that an assessee is entitled for the claim of deduction if he has developed the project. The Hon'ble Bombay High Court has, therefore, mentioned that the assessee is expected to shoulder out the investment and also subjected to technical risk in respect of the work executed. Such a developer is liable for liquidated damages if failed to fulfill the obligation laid down in the agreement. To keep brevity in mind it is not advisable to discuss all the parameters in this regard but to leave it to the Revenue authorities to examine the issue in its so as to arrive at the correct judicial decision. It is also worth to mention that the guidelines enumerated in the case of ABG Heavy Industries Ltd. (supra) are required to be followed while deciding this issue. 8.2 Before we conclude this issue and give directions, it is worth to mention that in the grounds of appeal as reproduced above the appellant has not challenged the jurisdiction invoked by learned Commissioner under section 263 of I.T. Act. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... work has to be performed as per standard methods and specifications and the final inspection upon the completion of work will be performed by third party. 5. The contractor shall gurantee that the facilities are free from defects in workmanship, materials and manufacturer's defect for the certain period. 6. Damages are to be recovered from the contractor upon failure of achieving the timely completion of the project. From the above points, direction of ITAT Nagpur in this case and guidelines enumerated by Hon'ble Bombay High Court in case of ABG Heavy Industries Ltd, it emerges that the assessee is responsible for utilization of funds, development of project, nature of venture the substance of transaction. The assessee is also responsible for risk cover, damages occurred during completion of project. Hence, as per the directions given by Hon'ble ITAT, Nagpur and judicial pronouncement which are to be followed for deciding the issues, the assessee is found eligible for deduction u/s 80IA(4) of the I. T. Act, 1961. The assessee has not challenged additions made while passing order u/s. 143(3) of the I. T. Act, 1961. Hence income assessed u/s. 143(3) dated 30.12. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... order, the assessee is in appeal before us. 8. We have heard both the counsel and perused the records. The ld. Counsel of the assessee submitted that the Assessing Officer has duly followed the direction of the ITAT in this case and there is no infirmity therein. He submitted that the ld. Commissioner of Income Tax (Appeals) has exercised jurisdiction which is not at all sustainable. He submitted that the directions of the ld. Commissioner of Income Tax, in fact, amount to the ld. Commissioner of Income Tax sitting in judgments over the directions of the ITAT. In this regard, we may gainfully refer to the summarized submissions of the ld. Counsel of the assessee. 1.1 The Hon'ble Income Tax Act, 1961 Tax Appellate Tribunal, Nagpur Bench has passed an order in Assessee's own case for AY 2008-09vide order dated 28 August 2015 in I.T.A No. 115 of 2013 [Refer Page 1 to 13 of Factual Paper Book]. The appeal was filed against the order passed under section 263 of the Act by the then learned CIT withdrawing the claim of deduction under section 80IA(4) of the Income-tax, Act 1961 [Act]. The Hon'ble Tribunal without upholding the order of the then learned CIT, modified the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f three months from the date on which Bills were raised on MSEDCL. Therefore, complete investment was made by the Assessee for execution of the project. The Assessee had invested capital and had also obtained secured unsecured loan for execution of the project. The Assessee had purchased material on its own account and employed labour for execution of the project. The Assessee had the sole responsibility to undertake survey of the site for assessing topography, hydrological climate conditions along with any other risk assessment for carrying out the project. The Assessee had to get the material testing and inspection from MSEDCL The Assessee was responsible for the final design of the work including any site service, subsoil investigations and all the other things necessary for proper planning and design. As per invitation to bid, the contract was full turnkey project including supply, erection, testing, transport, construction and commissioning with 2-5 years bank guarantee for defect liability period for work done by the Assessee. The Assessee had to provide guarantee that the facilities provided to MSEDCL were free from defects in workmanship, materials and manuf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... project is completed, the competent authority examines the work done and issues a completion certificate. That it was only after the issue of completion certificate, MSEDCL takes over the work and the Assessee raises RA bills. The payment was made by MSEDCL nearly after three months from the date of submission of bills for 90% payment and remaining 10% payment is retained towards defect liability. The Assessee had provided details of invoice raised and payments received alongwith copy of invoices. [Refer Page228-238 of Factual paper Book]. The aforesaid fact has been accepted by the learned CIT in his order. However, the learned CIT did not appreciate the submissions of the Assessee and issued directions to the AO to revise the order, without giving an cogent reasoning. 1.7 The Assessee submits that the learned CIT has erred in invoking provisions of section 263 of the Act on following grounds which are independent and without prejudice to each other: I. Complete enquiry was made by the learned AO with respect to subject issue following the directions of Hon'ble Nagpur Tribunal and binding judicial precedents. II. The learned AO had taken a possible view after conside ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hile deciding this issue. After the said direction of the ITAT, the Assessing Officer had elaborately examined the issue. He has specifically mentioned that he is following the guidelines as emanating from the above said decision of the ABG Heavy Industries Ltd. (supra) by numerically noting the facts of the case which compared favourably with the guidelines emanating in the aforesaid case. The Assessing Officer noted that in this case, the assessee is responsible for funds and the development of the project. He is also responsible for the risk, damage, etc and hence, the Assessing Officer came to the conclusion that the assessee was eligible for deduction u/s. 80-IA(4) of the Act. 12. Now after the afore-said order, the ld. Commissioner of Income Tax further found mistake in the order of the Assessing Officer. He noted that the ITAT directed the Assessing Officer to examine the case particularly from the point of view whether the assessee is expected to shoulder out the investment part in execution of the contract. This we find is totally an erroneous observation by the ld. Commissioner of Income Tax. The ITAT had referred to various aspects including that investment part, but ..... X X X X Extracts X X X X X X X X Extracts X X X X
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