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TMI Blog2022 (1) TMI 1050X X X X Extracts X X X X X X X X Extracts X X X X ..... nch u/s 255(3) of the Act and therefore, we ought not to proceed further with the instant appeal till a final decision is taken therein. We note from a perusal of section 255(3) of the Act that there is no such pre-condition of keeping the issue in abeyance so as to await the foregoing representation. We accordingly adopt judicial consistency qua the instant letter as well as in absence of any distinction on the relevant facts involved and restore the impugned section 80IA disallowance in all these three assessment years in Revenue s favour. - ITA Nos.2051 And 2052/Hyd/2018 & ITA No.481/Hyd/2020 - - - Dated:- 24-1-2022 - Shri A.M. Alankamony, Accountant Member And Shri S.S. Godara, Judicial Member For the Revenue : Sri Solgy Kottaram CIT(DR) For the Assessee : Sri B. Shanti Kumar And Shri Mohan KumarDR ORDER PER S. S. GODARA, J.M. These three Revenue s appeals for A.Ys 2014-15, 2016-17 2017-18 arise against the CIT (A)-12, Hyderabad s, separate orders dated 12/7/2018 passed in case Nos.10122 10471/2017-18 for the former two and CIT(A)-2 Hyderabad-2 order dated 29.05.2020 in case No.13302/2019-20/ CIT(A)-2 respectively, involving proceedi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing from 7 lakhs to 9 lakhs on each occasion, with the description of purpose as 'Dummugudem Tail Pond, PK-8 labour advance'. As per the AO, these amounts were not explained during survey proceedings and were not supported by bills/vouchers and no TDS was made on such amounts. During the asst. proceedings, only self-made Vouchers were shown to have been produced and some of the amounts were also used for payment as expenses against public policy such as penalty, gratuitous payments etc. For the said reasons the AO disallowed the entire a mounts of ₹ 15,83,00,000/-, treating it as unexplained expenses. 8.2 The appellant objected. for such addition and it has been submitted that the disallowance of ₹ 15.82 cr. also forms part of total Expenditure On Dumugudem Project, which has been put at ₹ 37.07 cr., against which the AO made separate disallowance of ₹ 32.81 cr., which are agitated separately. On the issue of withdrawal of ₹ 15.82 cr., and treatment of the entire amount as unexplained expenditure by the AO, the submissions of the appellant run as under: (i) the amount of ₹ 15.82 cr. cannot be treated as unexplained expenses, as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... amounts of ₹ 15.82 cr. as income separately, on the ground of disallowance of expenses related to Dummugudem Project. Accordingly, the addition of ₹ 15.82 cr. held to be unsustainable as separate addition, with the said amounts merged with disallowance of ₹ 32.82 cr., related to Dummugudem, which has been disallowed on same issue. Thus, this ground to this extent is treated as Partly Allowed . 2.1. Learned CIT-DR vehemently contended during the course of hearing that the CIT(A) has erred in law and on facts in deleting the impugned cash expenditure additions. Her case is that the assessee had failed to prove its cash expenditure regarding Dummugudem Project during the course of assessment. She fails to dispute that the Assessing Officer's assessment order dt.31-03-2013 had already disallowed the assessee's entire expenditure pertaining to the very project to the tune of ₹ 32,18,13,943/- as bogus under a separate head. The CIT(A) therefore has rightly held it to be an instance of the double addition apart from all other factual and legal aspects. We therefore find no merit in the Revenue's instant former substantive grievance in all these app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted during the year, were examined, and the AD arrived at the conclusion that the Projects executed by the assessee either do not come under the purview of 'Development of Infrastructure Facility' or have not fulfilled the conditions laid down in Section 80-IA(4) of the Act. The common finding for all the seven projects has been as under: As has been stated in the agreement, only contract bid has been given to Joint Venture concern. Hence, this Project has not fulfilled the conditions laid down in Section 80-IA of the Act. The other common observation on each of the project made by the AD runs as under: In the present case, the undertakings or enterprises i.e., Hyderabad Expressways (P) Limited, HKR Road Ways Limited, Indore Dewas Tollways Limited, Gayatri Jhansi Roadways Limited, Gayatri Lalitpur Roadways Limited, Sai Maatarini Tollways Limited and Western UP Tollway Limited are SPV formed for this purpose. However, it is seen that it has no Plant Machinery of its own. The only asset it has is Carriageway, on which it claims Depreciation [now amortization as per (CBDT Circular] and other incidental Office equipment. The entire Plant Machinery is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 7 Sai Maatarin Tollways Ltd Panikoli Rimuli Road work Package-1 1410.00 1,87,92,30,315 Panikoli Rimuli Road work Package-2 1,99,13,82,897 Applying the provisions of the said section it may be seen that the Company has incurred expenditure on its own for purchase of materials and towards labour charges and itself executes the development work, it will be eligible for deduction under section 801A of the Act. The word 'owned' in sub-clause (a) on clause (1) of sub-section (4) of section 801A of the Act referred to the enterprise. In other words, the enterprise carrying on development of the infrastructure facilities should be owned by a company or consortium of companies. The infrastructure facilities need not be owned by a company. It was held that the word 'ownership' is attributable only to the enterprise carrying on the business which would mean that only companies are eligible for deduction under section 80lA (4) and not any other person like new HUF Firm etc., and that for arriv ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nvolves development, operating, maintenance, financial involvement and defect correction and liability period is to be computed by Assessing Officer on pro-rata basis of turnover. In the case of M/s. KMC Construction Ltd., vs. AClT ITA 996/ Hyd / dt. 16/03/2012 ITA T, Hyderabad also the allowed the claim of deduction under section 80lA of the Act as the assessee had clearly demonstrated that it had undertaken huge risk in terms of development of technical personnel, plant and machinery, technical knowhow expertise and financial resources. Thus, the principle that would emerge from the above said decisions of the Coordinate Bench is that Company would be entitled for deduction under section 801A(4) of the Act, if it develops the infrastructure facilities . .......................................................................................................... ......................................... The facts of the case and the decisions of the Jurisdiction Tribunal i.e., ITAT, Hyderabad, all in favour of the Company. Further in the A.V 2011-12 also, the same road works were carried on by GPL and pursuant to the order of Hon'ble Commissione ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 801A(4), being the profits of JVs, as claimed in return of income, while computing the total income. Accordingly this ground of appeal treated as Allowed. Further in the A.V 2006 - 07 also, the same road works were carried on by GPL and pursuant to the order of Hon'ble Commissioner of Income Tax (Appeals), wherein the Hon'ble CIT in para 13.3.6 of the order has directed AO as under: Accordingly the AO is directed to allow the amount of ₹ 6,45,23,517/- claimed as deduction u/s 80IA(4), being the profits of JVs, as claimed in return of income, while computing the total income. Accordingly this ground of appeal treated as Allowed. As per the above direction the AO then called for details of all the works for which deduction was claimed, examined whether the respective works satisfied the conditions prescribed u/s 801A(4) and then proceeded to allow deduction claimed u/s 80IA(4) for the A.V 2011-12,2012-13,2013-14,2004-05,2005-06 and 2006-07. As the same road works have been continued in the current year, it is prayed that the deduction u/s 80IA(4) be allowed in the current year also . 9.2.1 The assessee's submission runs further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s under: 13.3 Perused the submissions of the appellant and the brief observations of the AO in assessment order. As could be seen from the facts/information brought on record, the assessee company shown to be engaged in infrastructural activity of various kind, as enumerated in this order and among the works the company from whom the company derived profits for the year, were awarded to JVs/Consortia but executed by assessee company as constituent of the said JV, as such. The profits related to the projects under reference are claimed for deduction u/s.80IA(4). On these lines the assessee claimed deduction on ₹ 6,45,23,517/- u/s.80IA(4), stating to represent the profits from eligible 6 projects for the year under reference. The AO examined of these projects as regard to their eligibility for deduction 80IA(4), with reference to the conditions as stipulated in provisions of section 80IA(4) and the observations of judicial decision. Though satisfied with the eligibility of profits of 6 of such projects representing of ₹ 6.45 crores for the year under reference, the AO disallowed the benefit of deduction u/s. 80lA (4), related to such projects under reference, on th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... further facts of the case, the AO is satisfied with the claim for deduction u/s.80IA(4), having explained the nature of income that are attributable to the projects awarded to JVs but executed by the assessee, as constituent. Thus, based on facts of the case, and ratio of judicial decisions in this regard, the claims were held to be allowable as deduction in the hands of the constituent, has been based on the clear finding given by Hon'ble ITAT, Vishakapatnam in the case of M/s.Transtroy India Ltd Vs ITO (supra). The assessee, being the constituent of the JVs/Consortia, having executed the contracts, thus held to be justified in claiming the deduction u/s. 80lA (4), for the said amount of ₹ 6,45,23,517/-, based on the decision of ITAT, Visakhapatnam(Supra). 13.3.3 On the issue of binding nature of ITAT decision, the case laws in the following cases support the cause and stand of the assessee. (i) Union of India Vs Kamalakshi Finance Corpn Ltd (AIR 1992 SCC 711): where in the Hon'ble Apex Court held that the mere fact that the order of the appellate authority 'is not acceptable' to the department-in itself is an objectionable phraseand is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrying on the defined business of developing or operating or maintaining any infrastructure finally then assessee would be liable for deduction. It is also provided that the project should be owned by the company or consortium of companies, who got the contract from the State, as mentioned in Articfe-12 of the Constitution. But this facility is available only w.e.f 01-04-1995, as per the amended provision and for the assessment year it is applicable. When it is so, then we find no reason to interfere with the impugned order passed by the Tribunal. The same is hereby sustained along with the reasons mentioned therein. 13.3.6 Thus, based on the ratio of the judicial decisions cited, it is reasonable to hold that the AD is not justified in denying the deduction u/s.80IA(4), on the profits of JVs to the assessee, as a constituent, based on the decision of ITAT, Vishakapatnam, which was not stayed in it's operation and as such binding on the AD. It is not correct on the part of the AD to not to implement the said order, merely on the ground that such decision was not accepted by department. Further, the order of Allahabad High Court upheld the allowance of claim of deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... / works contracts come under the statutory explanation to section 80IA inserted by the Finance Act 2009 w.e.f. 01.04.2000 substituting the earlier one introduced by the Finance Act 2007 w.e.f. 01.04.2007 as under : 8. We have heard the foregoing rival submissions qua the instant issue of section 80IA deduction. The assessee has admittedly claimed the same taking itself as the developer by court that a corresponding commercial project firm of infrastructural facility as per section 80IA(4) Expln.(c) covering a water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management system only. Our attention has been invited to the corresponding project s architectural design (supra). The assessee has thereafter pleaded that it has undertaken the business risk not only in the development of the said lift channel forming part of the irrigation project which has turned barren uneven tracks of land to a canal but also it had deployed all of the corresponding plant and machinery, labour force followed by retention money s project thereby satisfying all the conditions of development of infrastructure facility. All these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 07; respectively. Learned CIT-DR further sought to pin point the fact that the latter explanation inserted vide Finance Act, 2009 w.e.f. ;1.4.2000 has rather covered a work contract as not entitled for the impugned deduction despite the fact that the concerned assessee satisfied all other conditions in sub-section (4) of section 80IA of the Act. We find force in Revenue s instant argument as the Finance Act, 2009 substitutes the earlier explanation that the same would not cover a works contract for the purpose of providing deduction qua industrial undertaking or enterprise engaged in infrastructure development, etc. 12. There is yet another equally important aspect which requires our apt adjudication at this stage i.e. of the clinching legislative expression in the latter explanation 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 by any person (including the central or the state government) . We note that honourable apex court yet another larger bench decision in Kartar Singh Bhadana Vs. Hari Singh Nalwa Ors Civil Appeal No.6931 of 2000 decided on 27.03.2001 had a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... value of the work executed is more than or equal to the fixed lump sum monthly instalment as indicated in the agreement. The said agreement stipulated advance payments to the assessee qua supply of goods at the site. All these facts sufficiently indicate that the assessee, assuming that not accepting that it is the developer u/s. 80IA(4) of the Act, executed a works contract only under Explanation to section 80IA of the Act and therefore, not entitled for the impugned deduction. 14. The assessee next made a very strong endeavour to place reliance on a catena of case law (supra) including CIT Vs. ABG Heavy Industries Limited (2010) 322ITR 323 (Bom). We find that neither of these decisions deals with the interplay between the section 80IA(4) Vs. 80IA Explanation involving execution of works contract as is the factual position before us. The said case law distinguished, therefore. 15. Mr. Afzal s last argument seeks to buttress the point that such a strict interpretation employed in dealing with an instance of development of an infrastructure project would tantamount to closing the deduction chapter altogether and more particularly, when this assessee has borne all risks an ..... 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