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TMI Blog2016 (10) TMI 1369X X X X Extracts X X X X X X X X Extracts X X X X ..... on from the profits of developing the infrastructure facility though it may not operate or maintain the same, particularly in view of the in insertion of the word or in sec.80-IA(4) of the act. In view of the facts and circumstances as stated above and legal legal findings as referred in the above judicial pronouncements, we considered that the assessee is entitled to a deduction under section 80IA(4) of the act, therefore, we uphold of the order of the learned CIT (A) - Appeal of the revenue is dismissed. - ITA No. 507/Rjt/2012 - - - Dated:- 28-10-2016 - SHRI S.S. GODARA, JUDICIAL MEMBER AND SHRI AMARJIT SINGH, ACCOUNTANT MEMBER For the Appellant : Shri Arvind N. Sontakke, D.R. For the Respondent : Shri D.M. Rindani, A.R. ORDER PER : AMARJIT SINGH, ACCOUNTANT MEMBER:- This Revenue s appeal for A.Y. 2009-10, arises from order of the CIT(A)-I, Rajkot dated 29-06-2012 in appeal no. CIT(A)- I/Rjt/172/11-12, in proceedings under section 143(3) of the Income Tax Act, 1961; in short the Act . 2. The assessee has raised following ground of appeal:- 1. The learned CIT(A)-I, Rajkot erred in law and on facts in deleting addition of Rs. 49,46,122/- made o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... verted and more so when same kind of nature of business was carried on by the assessee in earlier yeas wherein similar deduction has been allowed after due consideration and/or in appellate proceedings. (ii) The Explanation does not in any way create an artificial fiction about the nature of business of the undertaking but it only stated that no deduction shall be admissible in the case where an applicant carried on business in the nature of a works contract. This clearly means that if the nature of business is not just a works contract but something more, the applicant cannot be hit by the rigours of the Explanation. As far as the applicant and its facts on record of Revenue are concerned, the nature of business carried on by it', albeit under a contract with the State Government, is not just of a work contract but it also has many shades, colours, hues and trappings of developing of new infrastructure facility and for this reason itself, the deduction cannot be denied to the applicant this year notwithstanding the insertion of the Explanation. (iii) That the applicant also carried on activities by way of developing of infrastructure facility is also patent from its fina ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pment means the realization of potentiality of land or territory by building or mining. Your honour kind attention is also invited to the decision of the Ahmedabad Tribunal in the case of Radhe Developers and Others vs. ITO 113 TTJ 300 wherein it is observed that the term contractor is not contradictory to the term developer and when the applicant is working for itself to exploit the potential of its business in its own interest, it is a developer. Even after the insertion of the said Explanation, the importance of activity as a developer is not lost because the Explanation applies only if the nature of business is that of works contract and nothing more or less. Further, the meaning of the term development with reference to various dictionaries as also the Law Lexicon and the central meaning coming out of these definitions is that developing should be understood reasonably as bringing about producing a new facility wherein certain risks are assumed and at the same time the know how or funds or resources as well as art of creation are supplied by the developer and not someone else. In the case of the assessee, the role as developer gets further accentuated by the fact that it is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... otherwise it will lead to absurdity and irrationality, more so when all infrastructure basically belongs to Government and without contracts being awarded by the Government, no infrastructure facility can be created under the private participation policy adopted by the Governments in current times in India. (viii) The words development and developer have been defined in dictionaries and in law lexicon as follows From Webster: Development a. To realize the potential of b. To aid in the growth of: STRENGTHEN develop the biceps. To bring into being: make active (develop a business) To convert (a tract of land) for specific purpose, as by building extensively From Law Lexicon: Development: 1. The Act, process of result of developing or growing or causing to grow; the state of being developed; 2. happening Development of land: The expression Development means the realization of potentialities of land or territory by building or mining. Sadruddein Suleman vs. J.H. Patwadlen, AIR 1965 Bom 244, 242 (Constitution of Indian, Article 31). The Webster's Encyclopedia defines the term develop as to bring out the capabilities or possibilities of; bring to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d 27.09.2010 Special Civil Application preferred before the Hon'ble Gujarat High Court on the above matter by the assessee's engaged in infrastructure develpers. The Hon'ble Gujarat High court has issued notice and granted interim relief whereby further proceeding of reasstt. u/s. 148 are stayed on this issue. Considering the totality of the facts on record as also the development of law concerning the granting of deductions from gross total income, the applicant is entitled to deduction u/s. 80IA(4) of the Act as it has fulfilled all conditions of eligibility. 4. The Assessing Officer has not accepted the explanation of the assessee and stated that deduction u/s. 80-IA sub-section 4 is available to a developer of the infrastructural facilities as provided within the meaning of the said section and not to the contractor who simply executes the work as per work contract received from either central government or state government or any other agency. He also stated that the explanation below sub-section 13 of section 80-IA inserted by the Finance Act, 2009 with retrospective effect from 01- 04-2000 has only clarified that the deduction is not available to busine ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eveloping, operating and maintaining were only eligible for such deduction upto A.Y. 1999-2000 by virtue of the provisions of section 80IA(4A), and with the introduction of the new section 80IA(4) amending the sub section (4) of section 80IA and deleting the sub section (4A) the Legislature provided deduction for any enterprise carrying on the business either developing or operating and maintaining or development, operating and maintaining instead allowing deduction only to the enterprises engaged in activity covering all the three activities together. Thus, the Legislature specifically added the conjunction OR between the words - developing; operating and maintaining; developing, operating and maintaining). The Hon'ble ITAT, Hyderabad also drew support from the CBDT Circular No.3 of 2008 dated 12/3/2008 wherein the clarification issued by the Board makes it clear that an assessee who executes the development work and carried out the civil construction work is a developer. The Board is also of the view that those persons working for others are the works contractors and not the developers. Moreover, the Board's Circular No.793 dated 23/6/2000 clarified that part of the pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) any enterprise carrying on the business [of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining] any infrastructure facility which fulfils all the following conditions, namely :- (a) it is owned by a company registered in India or by a consortium of such companies [or by an authority or a board or a corpora-tion or any other body established or constituted under any Central or State Act;] [(b) it has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility;] (c) it has started or starts operating and maintaining the infrastructure facility on or after the 1st day of April, 1995: 7. We noticed that the assessee entered into a contract with the government and the nature of work carried out shows that the assessee carried the work directly and it has employed various resources as stated above. The assessee has made huge investments in all kinds of resources for its business, namely plant and machineries, structures at sites, work ..... X X X X Extracts X X X X X X X X Extracts X X X X
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