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TMI Blog2023 (2) TMI 206X X X X Extracts X X X X X X X X Extracts X X X X ..... l issues that too in respect of the same assessee, the entire bunch of appeals are heard analogously and are being disposed of by this common order for the sake of convenience. 3. A perusal of the grounds of appeals, it would indicate that there are certain common grounds, which are as follows: i. Disallowance of claim under Section 80IA(4) of the Act by treating the assessee is a work contractor and not a developer by Revenue. ii. Disallowance on interest on FD iii. Disallowance under Section 40(a)(ia) of the Act. iv. Disallowance under Section 36(1)(va) of the Act. 4. Ground Nos. 1 & 2 relate to the issue as to whether the assessee is a developer or works contractor as the assessee merely executed the contract for the various sites awarded by the various entities as of the ultimate view of the Revenue and the claim made by the assessee under Section 80IA(4) of the Act has, therefore, been rejected. 5. Since the issues raised in all these appeals revolve around similar set of facts, for the convenience of adjudication, we would like to deal with ITA No.1601/Ahd/2015 for the Asstt.Year 2005-06 and cull out facts, figures therefrom and the relevant orders under challenge. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nstant appeal. 9. The assessee company in support of its claim for deduction under Section 80IA(4) of the Act submitted that the assessee is an industrial enterprise carrying on the business of developing infrastructure facility i.e. irrigation project within the meaning of clause (c) of explanation to section 80IA(4). The business enterprise, which is developing the infrastructure facility i.e. construction of irrigation project is owned by a company registered in India in developing the infrastructure facility i.e. construction of irrigation canal which is one of its objects as per the Memorandum of Association of the company. The assessee has entered into an agreement with State Government/Statutory Body for developing a new infrastructure facility i.e. irrigation project. Namely: (a) Sardar Sarovar Nigam Limited (b) Government of Rajasthan Irrigation Department (c) Govt. of Madhya Pradesh. Water resources department. It has started maintaining the infrastructure facility on or after 01.04.1995. The assessee claims to have satisfied all the requirements in terms of the provision of section 80IA(4) of the Act and is therefore entitled to the benefits of the deduction envisaged u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 95 wef 1/4/1996 i.e. from Assessment Year 1996-97 whereby profit and gains derived from some other business which are referred to us "eligible business" were also allowed deduction..................... .........Section 80IA was further amended by Finance Act 1999 wef. 1st April 2000 i.e. from assessment year 2000-01. After the above modification subsection 4 of section 80IA explains eligible bushes and prescribes the codices can deduction u/s.80IA. This sub-section(4) which is applicable to the assessment year under consideration reads as under: The provision of section 80IA(4) were further simplified by Finance Act 2001 we.f. A.Y. 2002-03, so that the condition for transferring the infrastructure facilities to Government Authority was done away Hence, infrastructure projects for which agreement for development and/or maintenance/ operation have been entered with Government Authorities were eligible. Therefore, the concept of BOT/ BOOT was done away. Hence, the assessee was eligible for deduction u/s 80IA of the Act for developing various projects w.e.f. A.Y. 2002-03. Copy of relevant pages of budget speech, explanatory statement and memorandum regarding delegated legislation o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the project, then the case of the assessee falls within the meaning of expression "developer". A perusal of the tender documents clearly shows that the assessee has to arrange own finances, purchase own plant & machinery and purchase all materials at own cost, deploy qualified personnel for construction and development of infra projects. The authorities gave only general specifications for the project. However, for the specific drawings & designs recommended by the assessee, the same has to be approved by the competent authority and becomes part of the tender. Further that once the tender is awarded, the assessee has to pay earnest money, security deposits, performance guarantee by placing fixed deposits with banks. The assessee is also liable for liquidated damages/penalty, free maintenance and repair during defect liability period. During the construction of project, the assessee has to make all the arrangements and is liable for procurement of water, electricity, all materials, skilled, semi-skilled staff, labourers, plant & machinery, equipments & tools, and also wellbeing of the staff/labourers. A perusal of the books of accounts reveals that the assessee has arranged own f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... course of the Assessment proceedings. The AO had referred to only one submission filed dated 19/02/2013 dealing with different contention which is not part of said submission which referred by AO whereas the appellant had filed four submissions on 19/09/2012, 04/10/2012, 28/01/2013 and 19/02/2013 which had not been considered by the AO while passing the impugned order. The Assessing Officer has denied the appellant's valid claim for deduction w/s 80IA(4) without considering the submissions filed by the appellant in the course of the Assessment proceedings. The AO had referred to only one submission filed dated 19/02/2013 dealing with different contention which is not part of said submission which referred by AO whereas the appellant had filed four submissions on 19/09/2012, 04/10/2012, 28/01/2013 and 19/02/2013 which had not been considered by the AO while passing the impugned order. The AO has taken no notice of the numerous submissions made by the Assessse. The assessee had diligently tried to explain the contention by providing supportive evidences and factual details through submissions. The said submissions have been totally ignored and disregarded by the AO while p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ops the infrastructure facility, the entire cost of development would be a loss in the hands of the developers, 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 deduction, it presupposes that there can be income to developer, i.e. to the person who is carrying on the activity of only developing infrastructure facility. A developer would have income only if he is paid for development of infrastructure facility, for the simple reason that he is not having the right/authorization to operate the infrastructure facility and to collect there from has no other source of recoupment of his cost of development. 3.5 It is further submitted that the word "it" used in clauses (a), (b) and (c) of sub clause (i) of sub section (4) of section 80IA of the Income Tax Act referred to the enterprise and has been used to denote enterprise. A plain reading of the said clause (i) makes it clear without any ambiguity that it is 'any enterprise that should fulfill the condition of carrying of the particular type of businesses narrated /specified in the main part of clause (1) of s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d misdirected and is devoid of any merit in law and facts of the cases. It is true that in the normal sense of the term, the assessee is contractor. The IT Act has not defined the word 'Contractor'. As per the Contract Act, any person entered in to an agreement with another, either to do or refrain from doing something in consideration of something becomes a contract. A person who entered in to contract with another person will be a contractor no doubt and assess having entered into an agreement with Government Statutory Body for development of infrastructure project is obviously a contractor, but does not derogate the assessee from being a developer as well. The term "Contractor is not essentially contradictory to the term developer, On the other hand, rather section 80IA(4) itself provides that assessee should develop the infrastructure facility as per agreement with the Central Government, State Government, local authority So entering into a lawful agreement and thereby becoming a contractor should, in nowhere, be a bar to one being a developer. The Assessee has developed an Infrastructure facility as per agreement with the State Government/ Statutory Body. Therefore nearly ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. 7.2 The Supreme Court in the case of Gujarat Industrial Development Corporation and others, 227 ITR 414 SC., considering the meaning of developer, held that the word development appearing in the provisions should be understood in its wider sense and therefore granted exemption, even though Gujarat Industrial Development Corporation was engaged in the Industrial development. 7.3. The Supreme Court in the case of CIT vs VadilalLallubhai, 86 ITR 02 (SC) hat wed that nothing more than what is stated in the statute can be read and added to find out the meaning of the provision. 7.4. ITAT Hydrabad Bench "A" in the case of Ocean Sparkle Ltd, v/s Deputy CIT 99 TTJ 582 (Hyd) held that section 801A(4) does not provide that the infrastructure facility should be owned either by the enterprise developing the infrastructure facility or by the enterprise operating and maintaining the said facility. Proviso aims at granting deduction to enterprise engaged in the operation and maintenance of the infrastructure facility. 7.5. The Supreme Court in the case of CIT v/s South Arcot District Co-Operative Marketing Society Ltd. 176 ITR 117 (SC) dealt with the concept of liberal construction for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... astructure facility includes a water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management system clause (c) of explanation below section 801A(4). The appellant therefore prays that the disallowance of claim u/s 80IA(4) made by the AO which is unjustified in law and unwarranted by facts may please be deleted. It is submitted that in the return of income the appellant has claimed deduction of Rs 11,88,204/- u/s 80IA(4) However in the course of assessment proceedings the claim was revised for a sum of Rs.17,21,232 In the assessment order the AO has not dealt with enhanced claim of Rs.17,21,232 It is therefore prayed that the appellants claim for deduction u/s 801A(4) may be allowed for the sum of Rs. 17,21,232/-." 15. After considering the above submissions made by the assessee and upon perusal of the materials made available before the First Appellate Authority, the following observation was made: 3.3. Decision: I have carefully considered the facts of the case, the assessment order and the written submission of the appellant. The appellant has claimed deduction u/s. 80IA(4) of the Act, claiming that he is a devel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s during the year, which it claims to be in the nature of development of infrastructure facilities. Before analysing all the construction works it is to be seen, whether it is development of infrastructure facility or not? We will first discuss the reason for which the section 801A was introduced in the Act and other related issues such as the meaning of 'develop' or 'developer' and 'contractor'. The heading of Section 80IA mentions that it is for deductions in respect of profits and gains from industrial undertakings or enterprises engaged in Infrastructure Development etc. Section 80IA contains the provisions for those undertaking which are involved in development of Infrastructural facilities such as telecommunication development of industrial park, development of special economic zone, power generation and distribution of power etc. In addition to this, the deduction is also available for certain infrastructure facilities such as toll road, bridge, rail system, highway project, water supply project, port, airport, Inland waterway etc. It is apparent from the scheme of the section that the deduction u/s. 801A has been brought in the statute as an incent ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he conditions, namely:- the enterprise is owned by a company registered in India or by a i) consortium of such companies: the enterprise has entered into an agreement with the Central ii) Government or a State Government or a local authority or any other statutory body for developing, maintaining and operating a new infrastructure facility subject to the conditions that such infrastructure facility shall be transferred to the Central Government, State Government, local authority or such other statutory body, as the case may be, within the period stipulated in the agreement; the enterprise starts operating and maintaining the iii) infrastructure facility on or after the 1st day of April, 1995." Notes on clauses for introduction of such amendment stated as under: Clear 19 seeks to amend section 80IA of the Income-tax Act relating to Induction in respect of profit and gains from industrial underestings, etc. in certain cases. The proposed amendment seeks to enlarge the scope of deduction under section 80IA. It is proposed to provide hundred per cent deduction from the profits and gains of enterprise carrying on the business of development maintenance and operation of infra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther basis (where there is an ultimate transfer of the facility to a Government or public authority) The enterprise mat have entered into an agreement with the Central or State Government or a local authority or any other statutory authority for this purpose. The period within which the infrastructure facility has to be transferred needs to be stipulated in the agreement between the undertaking and the Government concerned. The tax holiday will be in respect of income derived from the use of the infrastructure facilities developed by them. The five year period will be counted from the year in which the infrastructure facility become operational. It will apply in respect of infrastructure facilities becoming operational on or after 1.4.1995." With effect from 1.4.2000, the Legislature split the existing section 80IA into two separate sections, section 80IA and 80IB. For our limited purpose, we may record that sub-section (4A) which formed part of erstwhile section 80IA was renumbered as subsection (4) of newly recast section 801A. 10. The next significant legislative change came with effect from 1.4.2002, wherein the language used in sub-section (4) of section 80IA was mater ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o those enterprises carrying on business of either developing or opening of maintaining or developing, operating and maintaining any infrastructure facility. Explanation to sub-section (4) of section 80IA which defines "infrastructure facility" was also slightly changed to refer to road including toll road. Further, the requirement of the enterprise fulfilling the condition that such infrastructure facility shall be transferred to the Central Government, State Government, local authority or such other authority, as the case may be, within the period stipulated in the agreement was done away with. 11. Explaining such proposed amendment, explanatory memorandum for the Finance Bill 2001 recorded as under. "Under the existing provisions of section 80IA, roads, highways, bridges, airports, ports and rail systems are regarded as infrastructure facilities and the enterprises engaged in developing or operating and maintaining or developing operating and maintaining such infrastructure are entitled to a tax holiday for five years and a deduction of 30% of profits for the next five years. The benefit may be availed by an enterprise is ten consecutive years out of fifteen years beginning ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ith the undertaking or enterprise, as the case may be." Explanatory memorandum for introduction of such amendment reads as under: "Section 80IA, inter alia, provides for a ten-year tax benefit to an enterprise or an undertaking engaged in development of infrastructure facilities, Industrial Parks and Special Economic Zones. The tax benefit was introduced for the reason that industrial modernization requires a massive expansion of and qualitative Improvement in infrastructure (viz. expressways, highways, airports, ports and rapid urban rail transport systems) which was lacking in our country. The purpose of the tax benefit has all along been for encouraging private sector participation by way of investment in development of the infrastructure sector and not for the persons who merely execute the civil construction works or any other works contract. Accordingly, it is proposed to clarify that the provisions of section 80IA shall not apply to a person who executes a works contract entered into with the undertaking or enterprise referred to in the said section. Thus, in a case where an person makes the investment and himself executes the development work, ie, carries out the ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ise referred to in sub-section (1) thereof." This amendment will take effect retrospectively from 1st April 2000 and will, accordingly apply in relation to assessment year 2000-2001 and subsequent years." 13. These, in the nutshell, are the relevant legislative changes brought about by the Parliament from time to time. The central question is, whether in the present case, the explanation below sub-section (13) to section 801A introduced by the Finance Act No.2 of 2009 with effect from 1.4.2000 transgresses the legislative competence of the Parliament. --- --- --- 18. The case of the petitioners is that the impugned explanation below subsection (13) to section 80IA provides for a levy of tax which was hitherto unknown. It is, therefore, urged that the Court should examine the reasonableness of such provision particularly when the same is brought into operation with retrospective effect. Section 80IA(4) provides for deduction under certain circumstances. If such deductions are withdrawn with retrospective effect, surely there would be a case of providing for a levy which was till then not known. In that context, if the impugned explanation provides for withdrawal of the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ating and maintaining or developing, operating and maintaining any infrastructure facility. Thus, the Legislature by way of the impugned amendment distinguished between the cases of developing/operating and maintaining/developing. operating and maintaining any infrastructure facility from the works contract awarded by any person, be it the Central or the State Government, executed by the undertaking or enterprise seeking such an exemption. That there is an intrinsic difference between developing an infrastructure facility and executing a works contract, in our opinion, can hardly be disputed. 28. In the case of CIT v. Radhe Developers [2012] 341 ITR 403/204 Taxman 543/17 taxmann.com 156 (Guj.), a Division Bench of this Court had an occasion to examine these aspects in the context of a deduction provided under section 80IB(10) of the Act for development of housing projects. The Revenue had contended that since the assessees did not own the lands in question and only developed the same for and on behalf of someone else would not be eligible for the deduction in question. This Court examined the question what can be the meaning of the term 'develop' and who consequently can ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee could engage professional help for designing and architectural work Assessee would enroll members and collect charges. Profit or loss which may result from execution of the project belonged entirely to the assessee. It can thus be seen that the assessee had developed the housing project. The fact that the assessee may not have owned the land would be of no consequence. 36. We have noted at some length, the relevant terms and conditions of the development agreement between the assessees and the land owners in care of Radhe Developers. We also noted the terms of the agreement of sale entered into between the parties. Such conditions would Immediately reveal that the owner of the land had received part of sale consideration. In lieu thereof he had granted development permission to the assessee. He had also parted with the possession of the land. The development of the land was to be done entirely by the assessee by constructing residential units thereon as per the plans approved by the local authority. It was specified that the assessee would bring in technical knowledge and skill required for execution of such project. The assessee had to pay the fees to the Architects an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the land owner first before appropriating any part of the sale consideration of the housing units for his benefit. In short, assessee took the full risk of executing the housing project and thereby making profit or loss o the case may be. The assessee invested its own funds in the cost of construction and engagement of several agencies. Land owner would receive & fix predetermined amount towards the price of land and was thus innlated against any risk. 37. By no stretch of imagination can it be said that the assessee acted only as a works contractor...." 29. In our, opinion, what the explanation aims to achieve is to clarify that deduction under section 801A(4) of the Act would not be available in case of execution of works contract. The fact that such interpretation of the existing provisions of subsection (4) of section 80IA of the Act, even without the aid of the explanation was possible, in our opinion, is not disputable. As noted, sub-section (4) of section 80IA even after the amendment in the year 2002 envisaged deduction in case of developing or operating and maintaining or developing, operating and maintaining any infrastructure facility. Even without the aid of the e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt concerned. The tax holiday will be in respect of income derived from the use of the infrastructure facilities developed by them. The five year period will be counted from the year in which the tracture facility become operational. It will apply in respect of infrastructure facilities becoming operational on or after 1.4.1995." Thus at the very first stage, deduction was made available to draw additional resources for fulfilling the requirements of the country of rapid improvement in the such as expressway, highways, airports, port, etc in which areas development was found to be deficient Adopting the module of BOT or BOOT utilized by several other countries in developing infrastructure facilities, deduction was introduced. The principal idea behind granting deduction was to achieve rapid growth in infrastructure development with private participation. Specific period was also stipulated which must form part of the agreement between undertaking and the Government within which the infrastructure facilities so developed would be transferred. It was explained that the tar holiday was in respect of the income derived in use of the infrastructure facilities developed by them. 31 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the investment in other sectors and mat therefore be attractive. There is, therefore, in particular a need to encourage investment in the area of surface transport, water supply, water treatment system Irrigation project, sanitation and sewerage system or solid waste management system. The bill therefore, proposed to relax the existing system to provide for a ten year tax holiday Significantly, it was stated that keeping in view the capital Intensive nature, the higher allowances of depreciation in the initial years in such enterprise and the need for improved cash flows, it is further proposed that for an infrastructure facility in the nature of a road including a toll road, bridge, roll system, highway project, water supply project, sanitation, sewerage and solid waste management system in place of two-tier tax holiday, a ten year tax holiday may be availed consecutively out of twenty years beginning from the year in which the undertaking begins operating the infrastructure facility. In the case of other Infrastructure, namely, for airport, port, inland part and inland waterways, it also proposed to relax the existing two tier fiscal Incentive. The till proposed an identical ten ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... prepared were given by the Government Authorities. Further the drawing of said designs given by the appellant were to be approved by the Government Authorities. The appellant was paid for the work done by it from time to time during the execution of the project. In none of the projects, the appellant invested the whole amount initially in the project and, thereafter, it shared the revenue or income derived from that project with the government. The liability or risk of the appellant was also limited by contract clause in the tender document. It is clearly mentioned that the security deposit would be 5% of the amount of the contract. The claim of the appellant that it used technical experience and machinery for execution of the project and, therefore, it should be treated as developer, is also not acceptable as in the contracts which are of a technical nature, such use of machinery and technical experience is normally required, but merely use of these things will not make the person a 'developer. The fact remains that the appellant has merely executed a contract as per the specifications and according to the terms and conditions between the developer, i.e. the government agency ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that of the developer. He bears the profit or the loss arising out from that project. In the case of the appellant, it has only executed the limited part of the project and that foo on a contractual basis. The liability of the appellant was only limited to the defects of the project constructed by it or as provided in the contract but nowhere the appellant can be said to be taking the risk of whole of the project value. The appellant has also placed strong reliance on the judgment of CIT (A) in the preceding year, namely, A. Ys. 2008-07 and 2009-10. In those years, the claim of the appellant regarding deduction under section 80 1-A was disallowed by the AO, but the CIT(A) allowed the claim following the judgment of honourable ITAT, Ahmedabad in the case of Sugam Constructions (supra). The appellant has pointed out that the judgment has been delivered after the decision of Gujarat High Court in the case of Katira Constructions(supra). have carefully perused both the judgments and it is noted that no reference to that judgment has been made while deciding the case. The judgments are per incuriam of the judgment of honourable Gujarat High Court, which is the jurisdictional High Cou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... distinguished. Further, it is not binding or there is a contrary judgement of the jurisdictional High Court in the present case. From perusal of all the judgements on the issue, it is noted that the issue is basically factual in nature and each case may have different facts For deciding whether the person is a developer or contractor, facts will have to be examined keeping in view the guidelines given by the honourable Gujarat High Court and thereafter the issue can be decided. The judgements which are given by other courts other than Gujarat High Court would not be applicable to the present case as the factual analysis of the contractual detalls as well as the guidelines given by the honourable Gujarat High Court clearly holds that the appellant is developer. In view of the above discussion, it is clear that the amendment made by the Finance Act, 2009 with retrospective effect from 01/04/2000 by modifying the explanation below sub section (13) of section 80 1-A is applicable in the case of the appellant. The claim of deduction made by the appellant u/s. 801A(4) of the Act cannot be allowed, as it is a contractor, and the related grounds of appeal are, therefore, dismissed for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... shall be approved by the Competent Authority and shall form part of the accepted Tender. 21. Clause 2.22.1 to 3 & Clause 2.34.1 of Tender appearing at Page 54 of the Paper Book specifies that no materials will be issued by the Government Department. The assessee has to arrange all the necessary materials, labour, power and other required qualitative materials & tools, plants, equipments and its transportation at its own cost. 22. We have ascertained from the P&L account of the assessee company that total materials consumed during the year is of Rs. 42,26,046/- as per schedule P. The same is appearing at Page 13 of the Paper Book. 23. Clause 3.6 of Tender at Page 64 of the Paper Book specifies that the various materials and workmanship are also got to be tested by the assessee at its own cost from time to time, provide all facilities for testing, and replace the defective work, if found. 24. Page 5A of Paper Book being part of the tender document specifies that the assessee has to arrange own finance by raising adequate capital, reserves & surplus, secured & unsecured loans Balance Sheet. The total amount raised is of Rs. 2,99,40,748/-. 25. Schedule E of fixed assets on Page 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etion of work. 33. Clause 3.23.2 & 3.24 of Tender of Page 68 of Paper Book specifies that advance on P & M ( 90% for new and 50% for used P & M), subject to maximum of 10 % of contract value can be availed, and such advance will bear interest @ 14 % p.a. which shall be deducted from running bills in equal instalments. 34. Clause 4.3.7 of Tender specifies that the Contractor shall submit monthly statements of estimated value of work completed, and it will be subject to final Certification, determination and approval by the Engineer and that too after deductions like retention, other recoveries, taxes etc. which is appearing at page 88 of Paper Book. 35. Clause 2.18 to 2.20 & Annexures A & B of Tender of Page 52 & 69 of the Paper Book specifies that the assessee has to arrange for labour and is also responsible for safety of all concerned. The assessee is liable under Workmen compensation insurance & is liable to pay Compensation, provide Medical Aid , provide safety equipments, build sufficient huts, provide drinking water, proper sanitation, drainage , rest rooms, canteen facilities, etc. 36. Clause 3.14 & Annexure H of Tender ... being part of Paper Book, particularly, Page 63 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he case of Radhe Developers, 341 ITR 403 (Guj). It is imperative upon us to take note of the relevant portion of the above judgments for better understanding of the issue on hand. "34. We have reproduced relevant terms of development agreements in both the sets of cases. It can be seen from the terms and conditions that the assessee had taken full responsibilities for execution of the development projects. Under the agreements, the assessee had full authority to develop the land as per his discretion. The assessee could engage professional help for designing and architectural work. Assessee would enroll members and collect charges. Profit or loss which may result from execution of the project belonged entirely to the assessee. It can thus be seen that the assessee had developed the housing project. The fact that the assessee may not have owned the land would be of no consequence. 35. With respect to the question whether the assessee had acquired the ownership of the land for the purposes of the Income Tax Act and, in particular, Section 80IB(10) of the Act and to examine the effect of Explanation to Section 80IB(10) introduced with retrospective effect from 1.4.2001, since seve ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and owner and the erstwhile proposed purchasers, the surplus amount would remain with the assessee. Such terms and conditions under which the assessee undertook the development project and took over the possession of the land from the original owner, leaves little doubt in our mind that the assessee had total and complete control over the land in question. The assessee could put the land to use as agreed between the parties. The assessee had full authority and also responsibility to develop the housing project by not only putting up the construction but by carrying out various other activities including enrolling members, accepting members, carrying out modifications engaging professional agencies and so on. Most significantly, the risk element was entirely that of the assessee. The land owner agreed to accept only a fixed price for the land in question. The assessee agreed to pay off the land owner first before appropriating any part of the sale consideration of the housing units for his benefit. In short, assessee took the full risk of executing the housing project and thereby making profit or loss as the case may be. The assessee invested its own funds in the cost of constructio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferred to as a contractor in the agreement, it would not debar it from claiming deduction. (iv) Direct agreement between the transferee-assessee and the specified authority is not a mandatory requirement u/s.80-IA(4) of the I.T. Act. Needless to mention that the assessee qualified all the criterion fixed by the Amritsar Bench. 43. We have already dealt with relevant clauses of the tender documents stipulating various conditions viz. financial involvements, risks, obligations and responsibilities of the assessee in developing, operating and maintaining of infrastructure facilities, which clearly make the case of the assessee within the scope and ambit of section 80IA(4) of the Act so as to claim the impugned deduction. 44. The terms and conditions of tender documents / agreements / work order and comprehensive view of the activities undertaken by the assessee as discussed above clearly demonstrates that the assessee-company has undertaken substantial activities in respect of various projects awarded by various statutory bodies, which makes the assessee to qualify as a developer of Infra facility and to make claim necessary benefits under section 80IA(4) of the Act. 45. So far ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nother submission which was urged on behalf of the revenue is that under clause (iii) of sub-section (4A) of section 80-IA, one of the conditions imposed was that the enterprise must start operating and maintaining the infrastructure facility on or after 1-4-1995. The same requirement is embodied in sub-clause (c) of clause (i) of subsection (4) of the amended provisions of section 80-IA. On this basis, it was urged that since the assessee was not operating and maintaining the facility, he did not fulfil the condition. This submission is fallacious both in fact and in law. As a matter of fact, the Tribunal has entered a finding that the assessee was operating the facility and this finding has been confirmed earlier in this judgment. That the assessee was maintaining the facility is not in dispute. The facility was commenced after 1-4-1995. Therefore, the requirement was met in fact. Moreover, as a matter of law, what the condition essentially means is that the infrastructure facility should have been operational after 1-4-1995. After section 80-IA was amended by the Finance Act of 2001, the section applies to an enterprise carrying on the business of (i) developing; or (ii) operati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o financial risk involved as the assessee was getting the payment for the construction done by him from time to time as one of the major remarks and/or observations made by the CIT(A) in negating the claim made by assessee. We have carefully considered this particular aspect of the matter. If the contention of the Revenue is encouraged then possibly none of the developers will be entitled to the claim made under Section 80IA(4) of the Act. Our this view has been strengthened by the observation and the ratio laid down by the Hon'ble Delhi High Court in the case of CIT vs. VRM India Ltd., reported in [2015] 57 taxmann.com 325 (Delhi). While dealing with this particular aspect of the matter the Hon'ble Court has been pleased to observe as follows: "15. Since the assessee developed an infrastructure facility/project and was not required to maintain or operate, it was entitled to cost, plus the margin of income or profit; not to expect this treatment would render one who develops an infrastructure facility project, unable to realise its cost. If the infrastructure facility is, after its development, transferred to the Government, naturally the cost would be paid by the Government. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... such as, development infrastructure facilities such as development of roads, bridges, water treatment plants, canals, siphon work (irrigation projects), sewage treatment plant etc. by entering into contract with various Government authorities. In fact, we find that the clauses stipulated in the Tender document is almost akin to the clauses mentioned in the Tender document in respect of the assessee before us. Relevant to mention that though the assessee has taken different projects, the clauses mentioned mostly in all tendered documents are in respect of different projects entrusted upon assessee by the statute authorities in different years are identical. We find that on the identical facts and circumstances of the case, the assessee was found to be eligible for claiming deduction under Section 80IB(4) of the Act taking into consideration the overall aspect of works undertaken by the assessee therein. We are inspired by the ratio laid down by the Co-ordinate Bench in the said judgment Rajkamal Builders Infrastructure Pvt. Ltd. (supra) in holding the assesse eligible under the identical facts and circumstances of the case. 50. We have further considered the judgment passed by the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted before us that the issue is squarely covered in favour of the assessee by and under judgment passed in ITA No.2938/Ahd/2011 & Ors. dated 23.12.2022 in the case of Vijay M. Mistry Cons. P. Ltd. vs. ACIT & Ors. The contention of the Ld. AR has not been able to be controverted by the Ld. DR. In fact, the Ld. AR relied upon paragraph 36 of the said judgment in case of Vijay M. Mistry (supra), the copy whereof has been also filed before us. 55. We have carefully considered the judgment passed by the Co-ordinate Bench. We find that while granting relief on the identical issue of bank interest on bank guarantee in favour of the assessee holding said interest income eligible for deduction under Section 80IA(4) of the Act, the Coordinate Bench has been pleased to observe as follows: "36. So far as the bank interest on bank guarantee is concerned, the same is found to be covered in favour of the assessee by the judgment passed in case of Rajkamal Builders Infrastructure P. Ltd. vs. DCIT in ITA Nos. 118/Ahd/2019 & Ors. While granting relief to the assessee, the Co-ordinate bench has been pleased to observe as follows: "46. Before us, the counsel for the assessee reiterated submission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... m other sources and is, therefore, eligible for deduction under section 80IA of the Act. Further, various higher judicial authorities have held that profits of the business of the undertaking include other incidental incomes derived from the business of the undertaking. This being the position of law, we have no hesitation in accepting the claim of the assessee that the income earned from the deposits is business income is eligible for deduction under section 80IA of the Act. Accordingly, this common ground raised in the appeals under consideration is allowed in favour of the assessee and against the Revenue." We do not find any reason to deviate from the stand taken by the Co-ordinate Bench in identical facts and circumstances of the case. We, therefore, respectfully relying on the same, allow this bank interest on bank guarantee to the tune of Rs.11,46,733/- for the deduction made under Section 80IA of the Act. This ground of appeal will apply mutatis mutandis in the appeal preferred by the assessee for A.Ys. 2008-09 & 2009-10." 56. Having regard to the facts and circumstances of the case and on the identical issue decided by the Co-ordinate Bench, we do not find any reason to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ld that once TDS is paid before due date of filing of return, no disallowance is called for. The copy of the said judgment has also been handed over to us. It is pertinent to mention that Ld. DR has failed to make any contrary submission in respect of the said contention made by the Ld. AR. While doing so, the Hon'ble Apex Court has been pleased to discuss the amendment made in the provision of Section 40(a)(ia) of the Act by Finance Act, 2010, which has given effect from 01.04.2001. The observation made by the Hon'ble Apex Court is as follows: "22) In order to remedy this position and to remove hardships which were being caused to the assessees belonging to such second category, amendments have been made in the provisions of Section 40(a) (ia) by the Finance Act, 2010. 23) Section 40(a)(ia), as amended by Finance Act, 2010, with effect from 01.04.2010 and now reads as under: "4(a)(ia) any interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sequences and the injury caused, if disproportionate do and can result in amendments which have the effect of streamlining and correcting anomalies. As discussed above, the amendments made in 2008 and 2010 were steps in the said direction only. Legislative purpose and the object of the said amendments were to ensure payment and deposit of TDS with the Government. 27) A proviso which is inserted to remedy unintended consequences and to make the provision workable, a proviso which supplies an obvious omission in the Section, is required to be read into the Section to give the Section a reasonable interpretation and requires to be treated as retrospective in operation so that a reasonable interpretation can be given to the Section as a whole. 28) The purpose of the amendment made by the Finance Act, 2010 is to solve the anomalies that the insertion of section 40(a)(ia) was causing to the bona fide tax payer. The amendment, even if not given operation retrospectively, may not materially be of consequence to the Revenue when the tax rates are stable and uniform or in cases of big assessees having substantial turnover and equally huge expenses and necessary cushion to absorb the effe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it of the amendment made by Finance Act, 2010 to the provisions of Section 40(a)(ia) of the IT Act. 31) In light of the forgoing discussion, we are of the view that judgment of the High Court does not call for any interference and, hence, the appeals are accordingly dismissed. In view of the above, all the connecting appeals, interlocutory applications, if any, transferred cases as well as diary numbers are disposed off accordingly. Parties to bear cost on their own." As it appears from the above judgment, the Finance Act, 2010 further rigors of Section 40(a)(ia) of the Act to provide all TDS made during the previous year can be deposited with the Government by the due date of filing of return of income. Further that, the amendment has been made effect from 01.04.2010 and therefore will apply in relation to A.Y. 2010-11 and subsequent year. In that view of the matter, the submission made by the Ld. Counsel for the assessee that the TDS since paid before filing of return under Section 139(1) of the Act, the disallowance made by the Revenue is not permissible is found to be acceptable, particularly, in view of the ratio laid down by the Hon'ble apex Court. Therefore, respectfully ..... X X X X Extracts X X X X X X X X Extracts X X X X
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