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TMI Blog2018 (10) TMI 585X X X X Extracts X X X X X X X X Extracts X X X X ..... We taken all the submissions of the assessee while taking cognizance of the statement of facts extracted (supra) vis-àvis finding recorded by the AO. AO construed the assessee as a contractor or sub-contractor for two companies viz. s.MSK Infrastructure & Toll Bridge Pvt.Ltd. and MSK Highway Ltd. It is also pertinent to observe that the AO failed to take of the facts that these two companies are wholly owned subsidiaries of the assessee. The assessee has applied in response to the tenders invited by M.P. Rajya Setu Nirman Nigam Ltd.. It was fully qualified and well equipped to undertake development and completion of contract work. According to the assessee on account of certain technicalities, it has to float two subsidiaries as special purpose vehicle. Later on these subsidiaries amalgamated with the assessee company during the accounting period relevant to AY 2005-06. The scheme of amalgamation was approved by the Hon’ble Gujarat High Court and given effect from the appointed date i.e. 1.1.2005. These facts have totally been ignored while framing the assessment order. Thus, considering the order of the ITAT in the AY 2010-11 and order of the Commissioner passed under sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... I, am director of Welspun Projects Ltd, (formerly known as MSK Projects (India) Ltd.) which is engaqed in the business of developing infrastructure facilities like road, highway projects, etc. I have been authorized by the Company to make this Affidavit on behalf of the Company. 2. I hereby state that Welspun Projects Ltd. (formerly known as MSK Projects (India) Ltd.) had during the A. Y. 2005-06 (F.Y. 2004-05) had undertaken development of contract for its group concerns being M/s. MSK infrastructure Toll Bridge Pvt. Ltd. (for Hosangabad- Harda-Khandwa Project) and M/s. MSK Highways Ltd. (for Raisen- Rahatgarh Project). The tripartite contracts were 'executed 'between the Company, the Company's group concerns and the Government merely to fulfill the tender requirement of the concerned authorities mainly to meet with the eligibility criteria. 3. Welspun Projects Ltd. (formerly known as MSK Projects (India) Ltd.) filed its return of income for the A. Y. 2005-06 (F.Y. 2004-05) on 31/10/2005 declaring total income at 1,64,27,700/- and its regular assessment was finalized on 12/06/2009 assessing total income at ₹ 1,14,01,876/-. 4. The Compan ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that claim u/s 80IA of the Act is allowable to entities who undertake substantial functions for the eligible project. Hence the understanding given by the assessing officer to the appellant company that it is not eligible to claim deduction u/s 80 IA was incorrect and misplaced in light of the retrospective amendment. The case laws as referred above are enumerated hereunder along with the name of adjudicating authority and the relevant citation: a. The Gujarat High Court decision in the case of Katfra Construction Co. vs. Union of India vide citation 352 ITR 513, pronounced on 04.03.201 3 and reported on 03.05.201 3 in ITR; b. The Bombay High Court decision in the case of B.T.Patil Co. Belgaum Construction Pvt. Ltd. reported on 1 1.04.2013 on ITAT Online website; c. The Hyderabad ITAT decision of KMC Construction Ltd. vs. ACIT vide citation 51 SOT 211 (URO) reported on 1 6.03.201 3 in SOT; d. The Ahmedabad ITAT decision in the case of Sugam Construction vs. ITO vide citation 30 taxmann.com 331 for AY 2001 -02 reported in February 201 3 on Taxmann.com. The adjudicating authorities citied above have allowed the benefit u/s 80- IA.to person who u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... filed is within limitation. Thus, considering the above circumstances, delay in filing the appeal be condoned. On the other hand, the ld.DR contended that there is no plausible explanation at the end of the assessee for filing appeal after expiry of limitation. Therefore, she prayed that delay in filing appeal be not condoned and the appeal be dismissed being time barred. 6. We have considered rival submissions and gone through the record. Sub-section 5 of Section 253 contemplates that the Tribunal may admit an appeal or permit filing of memorandum of cross-objections after expiry of relevant period, if it is satisfied that there was a sufficient cause for not presenting it within that period. This expression sufficient cause employed in the section has also been used identically in sub-section 3 of section 249 of Income Tax Act, which provides powers to the ld.Commissioner to condone the delay in filing the appeal before the Commissioner. Similarly, it has been used in section 5 of Indian Limitation Act, 1963. Whenever interpretation and construction of this expression has fallen for consideration before Hon ble High Court as well as before the Hon ble Supreme Court, then, H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the remedy may lead to unending uncertainty and consequential anarchy. Law of limitation is thus founded on public policy. It is enshrined in the maxim Interest reipublicae up sit finis litium (it is for the general welfare that a period be putt to litigation). Rules of limitation are not meant to destroy the right of the parties. They are meant to see that parties do not resort to dilatory tactics but seek their remedy promptly. The idea is that every legal remedy must be kept alive for a legislatively fixed period of time. A court knows that refusal to condone delay would result foreclosing a suitor from putting forth his cause. There is no presumption that delay in approaching the court is always deliberate. This Court has held that the words sufficient cause under Section 5 of the Limitation Act should receive a liberal construction so as to advance substantial justice vide Shakuntala Devi lain Vs. Kuntal Kumari [AIR 1969 SC 575] and State of West Bengal Vs. The Administrator, Howrah Municipality [AIR 1972 SC 749]. It must be remembered that in every case of delay there can be some lapse on the part of the litigant concerned. That alone is not enough to turn down his pl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he wall, leaving no other way except to file appeal, because that would unnecessary bring it under the burden of penalty as well as could expose it with criminal proceedings. No choice has been left to the assessee. Some negligence may be attributable to the assessee for not filing appeal in time, but it was not adopted as a strategy, because, the assessee would not get anything by making the appeal time barred. Thereafter, after looking into facts and circumstances and the explanation given by the assessee, we allow the application of the assessee and condone the delay in filing he appeal. 9. Now we proceed to decide both the appeals on merit. In ground no.1, the assessee is challenging validity of re-assessment orders passed under section 147 of the Act. The assessee has filed statement facts in the Asstt.year 2005-06, which is running into 35 pages. In the statement it has highlighted its activity and how it is entitled for the deduction under section 80IA(4) of the Act. For appreciating the issue, whether reopening is justified or not, it is imperative upon us to take note of the facts and circumstances submitted in this statement of facts. Relevant part of the statement of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies, independently assessed to Income-tax. He has further stated that these two companies were engaged in construction of Hoshangabad-Harda-Khandwa Road and Raisen-Rahatgarh Road in the state of Madhya Pradesh. He has stated that these two companies got their work done through the appellant-company and the appellantcompany has shown contractual receipt of ₹ 28,90,86,936 from MSK Infrastructure and Toll Bridge Pvt. Ltd. and contractual receipt of ₹ 33,72,99,030 from MSK Highways Ltd. for execution of the aforesaid contract works and on these payments the two companies also deducted TDS. From these facts the Assessing Officer assumed that the appellantcompany was engaged in executing only works contracts during this year and that the Explanation inserted under sub-section (13) of section 80-IA by the Finance (No.2) Act, 2009 with retrospective effect from 1.4.2000 was applicable to the case of the assessee. This Explanation reads as under: Explanation .- For the removal of doubts, it is hereby declared that nothing contained in this section shall apply in relation to a business referred to in sub-section (4) which is in the nature of a works contract awarded ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ompany in respect of the Hoshangabad-Harda-Khandwa Road project. ( 4) After the aforesaid communications from MPRSNN, all remaining formalities were completed by the appellant-company and on account of some technical difficulties, the appellant-company floated two fully owned subsidiary companies as Special Purpose Vehicle (SPV) companies for the purpose of getting the aforesaid works awarded to them by MPRSNN under tripartite agreements of which the appellantcompany is one of the parties. This arrangement for awarding the works was duly approved by MPRSNN who awarded the works under the tripartite agreements. To give effect and practical shape to this arrangement the following tripartite agreements were executed: ( a) Agreement dated 7th May, 2003 between MPRSNN, MSK Projects (India) Ltd. (i.e. appellant-company) and MSK Highways Ltd. in respect of the development works of Raisen- Rahatgarh Road project. ( b) Agreement dated 20th May, 2002 between MPRSNN, MSK Projects (India) Ltd. (i.e. appellant-company) and MSK Infrastructure and Toll Bridge Pvt. Ltd. in respect of Hoshangabad-Harda-Khandwa Road project. ( 5) In Form No.10CCB authenticated by the audi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the bipartite agreements are, mutatis mutandis, on similar lines, for the sake of brevity, a reference is made here only to bipartite agreement entered by the appellant-company with MSK Highways Ltd. as under: ( a) At page-6 of the agreement, Construction Defects Liability Period is defined as a period of 12 months commencing from the date stated in the Taking Over Certificate and ending upon the issuance of Maintenance Certificate. ( b) At page-7, Independent Consultant means the independent engineer appointed in accordance with the Concession Agreement (i.e. tripartite agreement). On the same page the term liability includes all claims damages, expenses, fines and penalties. ( c) At page-8, MSK Projects (India) Ltd. (i.e. the appellantcompany) is defined as Operator for Operation and Maintenance of Works . ( d) At pages 16 17, General Obligations of the appellantcompany are defined, some of which are as under: ( i) To design and engineer the works with all skill, care and diligence, using the best design and engineering principles and practice. ( ii) To carry out the works so that the facility may be fully, efficiently, economi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing year relevant to the assessment year 2005-06 which is the subject matter of this appeal. ( 11) MSK Infrastructure and Toll Bridge Pvt. Ltd. addressed a letter dated 18.11.2004 to MPRSNN seeking approval of amalgamation of MSK Infrastructure and Toll Bridge Pvt. Ltd. and MSK Projects (India) Ltd. Similarly, MSK Highways Ltd. as per letter dated 26.11.2004 sought approval of amalgamation from MPRSNN. ( 12) Further, vide letter dated 10.1.2005 of MSK Infrastructure and Toll Bridge Pvt. Ltd. addressed to MPRSNN, the motive of the amalgamation was explained and certain very important averments were made, some of which merit narration hereunder: ( a) Original bid was made by MSK Projects (India) Ltd. and the work was awarded to them. ( b) Even though separate companies were formed for implementation of the projects, the original bidder is responsible for all liabilities arising out of the development of the works during the execution period as also during the course of operating, maintaining and running the project. ( c) The Execution, Procurement and Construction (EPC) of contract are in favour of the original bidder of both the projects. ( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 body, the provisions of this section shall apply to the transferee enterprise as if it were the enterprise to which this clause applies and the deduction from profits and gains would be available to such transferee enterprise for the unexpired period during which the transferor enterprise would have been entitled to the deduction, if the transfer had not taken place. Explanation .- For the purposes of this clause, infrastructure facility means- ( a) a road including toll road, a bridge o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat it is merely a contractor executing a works contract. The difference between a developer and a contractor has to be properly analyzed and understood. This particular question came up for adjudication before the Hon'ble ITAT, Amritsar Bench and decided vide order dated 19th March, 2013 in the case of M/s. TRG Industries P. Ltd. in ITA Nos. 433 etc./Asr/2009. In the case of M/s. TRG Industries P. Ltd. similar facts were involved and the Hon'ble Tribunal has considered various decided cases as under: (1) CIT vs. ABG Heavy Industries Ltd., 322 ITR 323 (Bom.) (2) Patel Engineering Ltd. vs. DCIT, 84 TTJ 646 (Mum.) (3) DCIT vs. Intercontinental Consultants Technocrats (P) Ltd, 22 SOT 259 (Del.) (4) ACIT vs. Bharat Udyog Ltd., 123 TTJ 689 (Mum.) (5) Koya Co. Construction P. Ltd. vs. ACIT, 51 SOT 203 (Hyd.) (6) Om Metal Infra Projects Ltd. vs. CIT, 26 DTR 359 (Jaipur) (7) Ayush Ajay Construction Ltd. vs. ITO, 79 ITD 213 (Indore) (8) Chetak Enterprises P. Ltd. vs. ACIT, 95 ITD 1 (Jodhpur) (9) Ocean Sparkle Ltd. vs. DCIT, 99 TTJ 582 (Hyd.) 2.8 Various relevant issues have been considered by the Hon'ble Tribuna ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consortium of such companies. Such an arrangement is eligible for the claim of deduction. Few Circulars have been issued by CBDT through which it has also been clarified, as discussed in the foregoing case-laws, that the benefit of the impugned deduction is available to an enterprise which either develops or maintains or operated or executed the combination of these three, inter alia as a Build, Operate and Transfer (BOT), or, Build, Own, Operate and Transfer (BOOT), or, Build, Own, Lease and Transfer (BOLD) basis or similar other basis where ultimately the infrastructure facility so constructed is ultimately transferred to Government or Public Authority, then such an enterprise is within the ambits of qualification of deduction. The explanatory memorandum to the Finance Act, 2007, as quoted before us, states that the purpose of the tax benefit has all along been to encourage investment in development of infrastructure sector and not for the persons who merely execute the civil construction work. 12.6. In the light of the above discussion and the view expressed by the Hon ble Courts, a conclusion can be drawn that there is a distinction between developer and a contractor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ract . (h) That in a development contract responsibility is fully assigned to the developer for execution and completion of work. (i) That although the ownership of the site or the ownership over the land remains with the owner but during the period of development agreement the developer exercise complete domain over the land or the project. (j) That a developer is not expected to raise bills at every step of construction but he is expected to charge the cost of construction plus mark-up of his profit from the assignee of the contract. (k) That a developer is therefore expected to arrange finances and also to undertake risk. (l) That in contrast to the rights of a contactor a developer is authorized to raise funds either by private placement or by financial institutions on the basis of the project. These are few broad qualities of a developer through which the character of a developer can be defined. 10. On the other hand, the stand of the AO while reopening of the assessment is that the assessee failed to fulfill mandatory condition as prescribed under section 80IA of the Act. It has worked as contractor or sub-contractor for M/s.MSK Infrastructure Toll Bridge Pvt.L ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Act. 3. A notice u/s 143(2) was issued on 19.09.2011 and was acknowledged by the assessee on 19.09.2011. The assessee company had filed a letter on 01.08.2011 of which, some relevant excerpts are narrated as under: The assessee had submitted full details explanation on 12th August 2010 which the Ld Officer ignored in its order of re-opening of assessment u/s 147 dtd 08.10.2010. The assessee has complied with all the mandatory conditions as laid down u/s 80IA(4) of the Act in terms of Following: a) It has entered into an agreement with Central Govt or the State Govt as the case may be for carrying out its business as laid down in sec 80IA(4)(i)(b) of the Act. b} The company has started operating or maintaining the infrastructure facility after 1985 in accordance with conditions mentioned in sec 80IA(4)(i)(c} of the Act. c) The company has derived income from eligible business and claimed deduction for the eligible business carried out by it. 4. The reply of the assessee has been perused. In schedule of the consolidated P L a/c for the year ended 31.03.2006, the assessee has showed income from civil contracts of R.38,68,54,411. An Expl ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... We therefore take up both these grounds together for adjudication. 9. We advert to Revenue's grievance first that the assessee's BOT road project cannot be treated as an instance of infrastructure development rendering profits derived therefrom in the form of toll collection as eligible for the impugned Section 80IA deduction. We notice that the very issue pertaining to the said two projects had arisen in assessment year 2008-09 as well. The assessee filed Section 264revision. The CIT-II, Baroda in his order dated 28.12.2011 upheld its case treating the above two projects to be eligible for the impugned deduction. The same has attained finality as on date. The CIT(A)'s order under challenge in para 10.3 page 58 takes due note thereof in accepting assessee's arguments. We therefore adopt consistency to affirm the CIT(A)'s findings under challenge in Revenue's third substantive ground. Its appeal ITA No.2940/Ahd/2013 therefore fails. 14. Apart from the above, we taken all the submissions of the assessee while taking cognizance of the statement of facts extracted (supra) vis- vis finding recorded by the AO. Basically, the AO construed the assessee as ..... X X X X Extracts X X X X X X X X Extracts X X X X
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