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TMI Blog2023 (7) TMI 1081X X X X Extracts X X X X X X X X Extracts X X X X ..... below to section 80IA(13) should be read in such a way that the object of the provisions of section 80IA (4) of the Act should not be defeated. As discussed above, the sole purpose of the benefit of deduction under section 80IA(4) of the Act was to bring the development in the area of infrastructure facilities for which the country was in deficient. Thus, if the literal meaning is drawn from the word of the developer and accordingly the deduction of the benefit given under section 80 IA of the Act is denied, then the object for which the provisions of section were brought under the statute will be defeated. Therefore, the provisions of section 80IA (4) of the Act should be read in such a way that the object of the statute should not be defeated. We are inclined to hold that the assessee who is only engaged in the activity of development of infrastructure facility is eligible to claim the deduction u/s 80IA(4). AR before us submitted `that projects in respect of which the deduction was claimed by the assessee were of identical nature. Therefore, we have analyzed one contract/agreement with the government on sample basis. The findings given with respect to the contract elaborat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as it is. Thus, the ground of appeal of the assessee for the AY 2009-10 is allowed and ground of appeal of the Revenue is dismissed. The average profit declared by the assessee in the last immediate three preceding year can be adopted as the parameter for determining the income of the assessee after rejecting the books of accounts. The average profit of the assessee in the last three years i.e. A.Y. 2007-08 to A.Y. 2009-10 stands at 19.30% (21.40 + 18.82 + 17.43) whereas the original Gross profit of A.Y. 2010-11 is declared at 18.95% of the gross turnover. On perusal of the order of the authorities below, nothing was found out whether there was any change in the facts and circumstances of the year under consideration viz a viz in the earlier years. There was no change in the business activity of the assessee. Accordingly, we workout the differential amount of gross profit at .35% (average gross profit of last 3 years @ 19.35% current year GP @ 18.95) of the turnover and direct the AO to make an addition of Rs. 68,36,22056.00 being .35% of Rs. 201,06,53,107.00 only. Thus, the ground of appeal of the assessee for the AY 2010-11 is partly allowed and ground of appeal of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion u/s 80IA(4) of the Act for an amount of Rs. 6,20,01,678/- only. The assessee has claimed the deduction u/s 80IA(4) of the Act during the year on the following projects. S.NO PROJECT NAME AMOUNT CLAIMED U/S 80IA(4) PROJECT AWARDED BY 1 CONSTRUCTION OF CHINDWARAAMARWAR-NARSINGHPUR ROAD 4,96,50,980/- MADHYA PRADESH ROAD DEVELOPMENT CORPORATION LIMITED BHOPAL. 2 CONSTRUCTION OF CANAL SERVICE ROAD TO KUTCHCHH BRANCH CANAL CH. 112.500 TO 122.219. 31,20,355/- SARDAR SAROVAR NARMADA NIGAM LIMITED, BHACHAU, KUCHCHH. 3 UPGRADATION REHABILIATION AND STENGTHENING OF PACKAGE-14, LAKHNADAN-,MANDIA-DINDORI(SH-10) ROAD PROJECT. 80,35,352/ - MADHYA PRADESH ROAD DEVELOPMENT CORPORATION LIMITED BHOPAL. 4 CONSTRUCTION OF SAURASHTRA BRANCH CANAL CH 50.00 TO 59.700KM 20,155/- SARDAR SAROVAR NARMADA NIGAM LIMITED, SURENDERN ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... company is only a sub-contractor. Further, these companies cannot be construed as central Govt or state Govt or local Authority, or any statutory body. The case laws on which the assessee company has placed its reliance are factually different from the facts of the present case. The AO, further on perusal of the work awarded letter issued by the party and contract agreement with them, observed that assessee company has to complete the project within a stipulated time like 21 months and 24 months as per the agreement. The assessee company has agreed to render the services mentioned in the tender and provide its services as required for the project. The assessee company has not invested any money in the project. Therefore, the ownership of the project does not lie with the assessee company. The real ownership lies with the Madhya Pradesh Road Corporation Limited and Sardar Sarovar Narmada Nigam limited. The assessee company has not derived any income from developing or operating and maintaining or developing, operating and maintaining any infrastructure facility. The assessee company has only derived income as per contract receipt. In addition to above, the AO also observed that: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f the Act i.e. it is an enterprise carrying on business of development of infrastructure facility, irrigation project, the enterprise owned by an Indian company, has entered into an agreement with State Government/Statutory body for development of new infrastructure and handed over the projects to such authority after development. It started maintaining the infrastructure facility on or after 01/04/1995. 5.1 The assessee further submitted that as per the amended provisions of section 80IA(4) of the Act, an enterprise which is engaged in carrying out only the work of development is eligible for deduction. The word developer has not been defined under this Act. However, several judicial authorities have defined the developer as the one who makes the things happen by mobilizing plan, technical expertise, fund, manpower, supervision, and control etc. It also mobilized and synthesized people, plan, technical expertise, supervision and by employing all these resources create new infrastructure facility being irrigation project which was not available to the community as a whole for its use. 5.2 It was also submitted that an enterprise, only carrying out the work of development of i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opment of infrastructure facility are eligible for deduction under section 80IA(4) of the Act. 5.4 The assessee also contented that it has made substantial investment in Plant machinery, man material, thought and concepts, design, planning etc. for the development of the infrastructure projects. The assessee has invested in fixed assets of Rs. 1222.30 lacs and further during the year it has invested the sum of Rs. 232.50 lacs in fixed assets. 5.5 The assessee further submitted that it had not claimed the deduction u/s 80IA(4) of the Act in earlier year, solely for the reason that the chartered accountant who was attending to the income tax matters, either out of ignorance or through inadvertence did not bring it to the notice of it (the assessee) about the beneficiary provisions of the section 80IA of the Act and its eligibility to claim deduction under that section. When it came to the notice to the assessee company, then the deduction was claimed in the return of income filed for the FY 2004-05. Further, not claiming the deduction in earlier year does not per se disentitle the company from making such a claim in the assessment year under consideration. 5.6 The assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ter has to execute the construction work in the capacity of a contractor. During the period of execution of project, the developer temporarily become the owner of the site on which the project is executed. In real terms, the ownership always remains with the Government. On the other hand, from the perusal of various clauses of agreement that the appellant cannot be merely termed as a contractor in the facts of this case. I am also of the view that merely the fact that the appellant is termed as 'contractor' in the various agreements and also the fact that TDS is made u/s. 194C, one cannot infer that the appellant as contractor. the issue of ownership as pointed out by the AO has already been settled by the Hon'ble ITAT, Ahmedabad that it is not envisaged in the section that the appellant should be the owner of the infrastructural project 41. Accordingly, Having regard to the facts and circumstances of the case and the ratio of judicial pronouncements cited supra and also the judgment of Bombay high Court in the case of ABG Heavy Industries, judgment of Gujarat High Court in the case of Radhe Developers and the judgment of the ITAT Ahmedabad in the case of Sugam Co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t embedded in the projects was very much apparent. As such the assessee has not undertaken any entrepreneurial risk. The liability of the assessee was limited to the extent of the forfeiture of earnest money deposit and performance guarantee which in any way is also attached with the very nature of works contract. Furthermore, the assessee was not significantly involved in the planning and designing of the project. 9. On the contrary, the learned AR before us filed a paper book running from pages 1 to 483 and synopsis of arguments and contended that the assessee was the project in charge for the entire infrastructure facility. It cannot be said that the assessee was only performing part of the infrastructure facility. For this purpose, the learned AR drew attention on various clauses of the project appearing in the contract awarded to the assessee and demonstrated that the assessee has undertaken numerous responsibilities right from the designing of the project and handing over the project to the contractee. The assessee was at the risk of timely delivery of the project, implementation to the labour laws applicable to the project, procurement of the materials, establishment of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rpose of providing such deduction was for the modernization and expansion of industrial undertaking. 11.2 However, the provision of this section was amended by the Finance Act 1995 because the legislature realized that the modernization of industrial undertaking requires development of infrastructure facilities. This fact can be verified from the memorandum explaining the amendment in the section as reproduced below: Industrial moderanisation requires a massive expansion of, and qualitative improvement in, infrastructure. Our country is very deficient in infrastructure such as expressways, highways, airports, ports and rapid urban rail transport systems. Additional resources are needed to fulfil the requirements of the country within a reasonable time frame. In many countries the BOT (build-operate-transfer) or the BOOT (build-own-operate-transfer) concepts have been utilised for developing new infrastructure. Applying commercial principles in the operation of infrastructure facilities can provide both managerial and financial efficiency. In view of this, it is proposed to allow a five year tax holiday for any enterprise which builds, maintains and operates any infrast ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 00. This explanation denies the benefit of deduction under section 80-IA(4) of the Act to a person who executes a project which is in the nature of works contract. At this juncture, it is pertinent to refer the provisions of the Explanation attached below section 80-IA(13) of the Act as reproduced below: 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 by any person (including the Central or State Government) and executed by the undertaking or enterprise referred to in sub-section (1). 11.7 The explanation reproduced above denies the benefit of deduction under section 80-IA(4) of the Act to a person who executes a project which is in the nature of works contract. 11.8 Coming to the facts of the case on hand, we note that the one of the thrust of the Revenue for denying the benefit to the assessee under the provisions of section 80IA(4) of the Act was revolving around the fact that the assessee is not a developer of infrastructure facility. It is only engaged in the business of work contract awarded to it. The A ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al responsibility. A developer is therefore expected to arrange finance either by private placement or from financial institution for the proper development of the project at its own risk. Thus, the developer is the one who undertakes entrepreneurial and investment risk besides the business risk. (f) That a developer is required to bring the qualitative materials. The Government does not provide any material to the assessee. (g) That a developer is required to bring plant and machineries to be utilized in the project. (h) Any loss caused to the public or the Government in the process of developing the project, it would be the responsibility of the developer. The Government shall not take any responsibility for any such kind of loss except where it is responsible. (i) That a developer stands as guarantor for the project developed by it and in the event of any defect in the project, he shall provide the remedy for the same. (j) That a developer shall be exposed to the penalty if it contravenes any of the clauses appearing in the contract awarded by the Government. Thus, the developer is responsible to complete the construction in a specified manner failing which it wou ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee in the year under consideration has undertaken certain projects and claimed a deduction under section 80IA of the Act. The details of all the projects whether eligible for deduction or not under section 80IA(4) of the Act along with the amount of deduction under section 80IA(4) of the Act stand as under: S. No NAME OF THE PROJECT AMOUNT ELIGIBLE U/S 80IA 1 CONSTRUCTION OF CHINDWARA-AMARWARNARSINGHPUR ROAD 4,96,50,980/- 2 CONSTRUCTION OF CANAL SERVICE ROAD TO KUTCHCHH BRANCH CANAL CH. 112.500 TO 122.219. 31,20,355/- 3 UPGRADATION REHABILIATION AND STENGTHENING OF PACKAGE-14, LAKHNADAN-,MANDIA-DINDORI (SH-10) ROAD PROJECT. 80,35,352/- 4 CONSTRUCTION OF SAURASHTRA BRANCH CANAL CH 50.00 TO 59.700 KM 20,155/- 5 CONSTRUCTION OF EARTH WORK 84 TO 97 KM OF RANI AVANTIBAI SAGAR CANAL PROJECT. 11,74,837/- 11.15 On sample bas ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s valid and enforceable until the contractor has executed and completed the work and remedied any defects. (D) Setting Out, clause 4.2 Page No. 355 i) Contractor shall set out the works in relation to original points, lines and levels of reference specified in the contract or notified engineer. The contractor shall be responsible for the correct positioning of all parts of the work and shall rectify any error in the positions, levels, dimensions, or alignment of the work. (E) Safety Procedures clause 4.8 Page No. 355 Contractor Shall: i) Comply with all safety regulations. ii) Take care of the safety of all people entitled to be on the site. iii) Use reasonable efforts to keep the site and work clear of unnecessary obstruction to avoid danger to these persons. iv) Provide fencing, lighting, guarding, and watching of the work until the completion and taking over the project by the employer. v) Provide the temporary works (including roadways, footways, guard, and fences) which may be necessary, because of the execution of the works for the use and protection of the public and of owners and occupiers of adjacent land. (F) Access Route clause 4.15 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s, deliver to the employer and to the contractor interim payment certificate after determining the fair amount dues. (P) Payment of retention money clause no 14.9 page no 392 When the Taking-Over Certificate has been issued for the Works, the first half of the Retention Money shall be certified by the Engineer for payment to the Contractor. If a Taking-Over Certificate is issued for a Section or part of the Works, a proportion of the Retention Money shall be certified and paid. This proportion shall be half (50%) of the proportion calculated by dividing the estimated contract value of the Section or part, by the estimated final Contract Price. Promptly after the latest of the expiry dates of the Defects Notification Periods, the outstanding balance of the Retention Money shall be certified by the Engineer for payment to the Contractor. If a Taking-Over Certificate was issued for a Section, proportion of the second half of the Retention Money shall be certified and paid Promptly after the expiry date of the Defects Notification Period for the Section. This proportion shall be half (50%) of the proportion calculated by dividing the estimated 2000tract value of the Sec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s undertaken the project as a whole for the development of the road right from the beginning till the end. Thus, on perusal of the terms and conditions in the tender documents furnished by the assessee, it is clear that the assessee was not a works contractor simply but a developer and hence, the explanation to section 80- IA(13) does not apply to the assessee. 11.18 Going forward, we find in this context, the Hon'ble Pune Tribunal in the case of B.T. Patil Sons Belgaum Constructions (P.) Ltd. [2013] 34 taxmann.com 97/59 SOT 61 (URO) after referring to decision of the Hon'ble Bombay High Court in the case of CIT v. ABG Heavy Industries Ltd. [2010] 322 ITR 323/189 Taxman 54 has laid down certain parameters for contractors to be eligible for deduction. The said parameters for a contractor to be eligible for deduction are as follows: (a) Undertaking financial risk by making investment. (b) Shouldering technical risk. (c) Liable for liquidated damages. (d) Employment of technical and administrative qualified team. 11.19 If the above parameters are satisfied, the contractors would be held eligible for the deduction under section 80-IA of the Act. Thus, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ely be concluded that the assessee has undertaken projects which are in the nature of infrastructure facilities in the capacity of the developer as admitted by the ld. CIT-A. Accordingly, we concur with the findings of the Ld. CIT(A) that the assessee has undertaken the projects of infrastructure facility as envisaged under the provisions of section 80 IA(4A) of the Act in the capacity of the developer. 11.23 Moving further, we note that there is no ambiguity to the fact that the word developer and the works contract has nowhere been defined under the provisions of the Act. For this purpose, the rules as applicable to the interpretation of the statute should be applied. One of the rules of interpretation is to analyze the provision in the light of the object for which it was brought under the statute. In holding so we rely on the judgement of Hon ble High Supreme Court in the case of New India Assurance Company Ltd vs Nusli Neville Wadia And Another in civil appeal no 5879 of 2007 vide order dated 31-12-2007 wherein it was held as under: With a view to read the provisions of the Act in a proper and effective manner, we are of the opinion that literal interpretation, if gi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing forward, there is no dispute to the fact that the benefit of deduction under section 80IA(4) of the Act was denied to the assessee based on the explanation brought under the statute below sub-section (13) of section 80 (IA) of the Act which has been elaborated in the preceding paragraph. At this juncture, let us understand the role of the explanation explaining the provisions of the Act. In our considered opinion ordinarily, an explanation is introduced by the Legislature for clarifying some doubts or removing confusion which may be possible from the existing provisions. Normally, therefore, an explanation would not expand the scope of the main provision and the purpose of the explanation would be to fill a gap left in the statute, to suppress a mischief, to clear a doubt or as is often said to make explicit what was implicit. Further, the object of an explanation to a statutory provision is (a) To explain the meaning and intendment of the Act itself, (b) Where there is any obscurity or vagueness in the main enactment, to clarify the same so as to make it consistent with the dominant object which it seems to sub-serve, (c) To provide an additional support to the domi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee for claiming the deduction under section 80IA(4) of the Act must derive income from the use of such infrastructure facility, the argument of the learned DR to our mind is totally misplaced. It is for the reason that the role of the assessee in the given case is limited to the extent of developing the infrastructure facility. Under the old provisions of the Act, it contained the concept of built, operate, maintained, transfer, wherein the assessee after developing the road used to operate those roads and used to collect tax from the vehicles using the infrastructure facility to compensate its investment. But all these requirements have been done away by the revenue as elaborated above. In holding so, we draw support and guidance from the judgment of the Hon ble Bombay High Court in case of CITVs. GB Heavy Industries Ltd. reported in 322 ITR 323 wherein it was held as under: 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) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t would be paid by the Government. Therefore, the mere circumstance that the Indian Railways or DDA paid for development of a housing project carried out by the assessee, did not mean that the assessee did not develop the residential complex. If the revenue's interpretation is accepted, no enterprise, carrying on the business of only developing the infrastructure facility, would be entitled to deduction under section 80-IB (10). The conclusions of the ITAT in this context were rendered after a detailed analysis of the facts and the contracts entered into by the assessee with IRWO and DDA. The narrow ground on which the AO concluded that the projects were owned by IRWO or DDA and that the assessee was only a works contracts, was unwarranted. 11.32 We, therefore, do not have any doubt regarding the admissibility of the claim made by the assessee and entertain the same by giving relief to that effect. 11.33 Further the Ld. DR vehemently argued on the judgment of jurisdictional High Court in the case of Katira Construction Vs Union of India reported in 352 ITR 513 wherein the said matter was decided against the assessee. In our considered view, the matter before the Juri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n the facts of the case in deleting the disallowance of employees contribution to the Provident Fund at Rs. 1,01,354/- u/s 36(1)(va). 4. On the facts and in the circumstances of the case, the Ld.CIT(A) ought to have upheld the order of the Assessing Officer. 5. It is, therefore, prayed that the order of the Ld.CIT(A) may be cancelled and that of the Assessing Officer may be restored to the above effect. 13. The issue raised by the Revenue vide ground No. 1 is that the learned CIT(A) erred in holding that the assessee is entitled to deduction u/s 80IA (4) of the Act. 14. At the outset, we note that the issue raised by the revenue in its ground of appeal for the AY 2005-06 is identical to the issue raised by the revenue in ITA No. 1892/AHD/2013 for the assessment year 2008-09. Therefore, the findings given in ITA No. 1892/AHD/2013 shall also be applicable for the assessment year 2005-06. The appeal of the revenue for the AY 2008-09 has been decided by us vide paragraph No.11 of this order in favour of the assessee and against revenue. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2008-09 shall also be applied for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... business as computed under the head Profits and gains of business or profession as reduced by- (1) ninety per cent of any sum referred to in clauses (iiia), (iiib), (iiic), (iiid) and (iiie) of Section 28 or of any receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in such profits; and (2) the profits of any branch, office, warehouse or any other establishment of the assessee situate outside India . 9. Explanation (baa) extracted above states that profits of the business means the profits of the business as computed under the head Profits and Gains of Business or Profession as reduced by the receipts of the nature mentioned in clauses (1) and (2) of the Explanation (baa). Thus, profits of the business of an assessee will have to be first computed under the head Profits and Gains of Business or Profession in accordance with provisions of Section 28 to 44D of the Act. In the computation of such profits of business, all receipts of income which are chargeable as profits and gains of business under Section 28 of the Act will have to be included. Similarly, in computation of such profits of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... this Section, be allowed, in computing the total income of the assessee, a deduction from such income by way of dividends an amount equal to a certain percentage of the income mentioned in this Section. The Constitution Bench held that the Court must construe Section 80M on its own language and arrive at its true interpretation according to the plain natural meaning of the words used by the legislature and so construed the words such income by way of dividends in sub-section (1) of Section 80M must be referable not only to the category of income included in the gross total income but also to the quantum of the income so included. Similarly, Explanation (baa) has to be construed on its own language and as per the plain natural meaning of the words used in Explanation (baa), the words receipts by way of brokerage, commission, interest, rent, charges or any other receipt of a similar nature included in such profits will not only refer to the nature of receipts but also the quantum of receipts included in the profits of the business as computed under the head Profits and Gains of Business or Profession referred to in the first part of the Explanation (baa). Accordingly, if any q ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ort turnover and, therefore, the inclusion of such items in the profits of the business would result in a distortion of the figure of export profits. The High Court has relied on a decision of this Court in Commissioner of Income-Tax v. K. Ravindranathan Nair [( 2007) 295 ITR 228 (SC )] in which the issue raised before this Court was entirely different from the issue raised in this case. In that case, the assessee owned a factory in which he processed cashew nuts grown in his farm and he exported the cashew nuts as an exporter. At the same time, the assessee processed cashew nuts which were supplied to him by exporters on job work basis and he collected processing charges for the same. He, however, did not include such processing charges collected on job work basis in his total turnover for the purpose of computing the deduction under Section 80HHC (3) of the Act and as a result this turnover of collection charges was left out in the computation of profits and gains of business of the assessee and as a result ninety per cent of the profits of the assessee arising out of the receipt of processing charges was not deducted under clauses (1) of the Explanation (baa) to Section 80HHC. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he deductions from rent and interest in accordance with this judgment. No costs. CIVIL APPEAL No. 4534 OF 2008 This is an appeal against the order dated 19.01.2007 of the Delhi High Court in I.T.A. No. 541 of 2006. 2. The facts of this case very briefly are that Bharat Rasayan Limited (for short 'the assessee') filed a return of income tax claiming a deduction of Rs. 72,76,405/-under Section 80HHC of the Act. In the assessment order, the Assessing Officer held that ninety per cent of the gross interest has to be excluded from the profits of the business of the assessee under Explanation (baa) to Section 80HHC of the Act and deducted ninety per cent of the gross interest of Rs. 50,26,284/- from the profits of the business of the assessee. The assessee preferred an appeal contending that only ninety per cent of the net nterestshould have been deducted from the profits of the business of the assessee under Explanation (baa) to Section 80HHC, but the Commissioner of Income Tax (Appeals) rejected this contention of the assessee. Aggrieved, the assessee filed an appeal before the Income Tax Appellate Tribunal (for short 'the Tribunal') and the Tribunal a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the result, Tax Appeal is dismissed. 17.2 Likewise, the ITAT Ahmedabad Bench in the recent case of M/s Vijay M. Mistry Construction Pvt. Ltd. in ITA Nos. 2938/Ahd/2011 8 Ors. for A.Ys. 2007- 08 to 2013-14 2016-17 has held as under: 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 submissions as were made before the lower authorities. The counsel further submitted that the interest income is earned only on fixed deposits for obtaining bank guarantee and security deposit to be placed mandatorily as per the tender when work was awarded. Hence, such interest income is business income and eligible for deduction under section 80IA(4) of the Act. In support of his contentions, the counsel relied upon the following decisions: i) AVM Cine Products Vs. DCIT, (2021) 123 taxamnn.com 41 (Mad); ii) CIT Vs. Alloys Ltd. (201 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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. ITA Nos. 2938/Ahd/2011 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.- 2007-08 to 2013-14 2016-17. 17.3 In view of the above and respectfully following the ratio laid down by the Hon ble Courts, we hold that only net interest income should be excluded while computing the eligible income u/s 80IA(4) of the Act. Hence, the ground of appeal of the Revenue is hereby dismissed. 18. The next issue raised by the Revenue in ground no. 3 is that the Ld. CIT-A erred in deleting the disallowance of employee contribution to the provident fund at Rs. 1,01,354/- under section 36(1)(va) r.w.s. 2(24)(x) of the Act. 19. On perusal of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... id the sum of employee s contribution towards ESIC on/before the due date in accordance with the provisions of section 43B of the Act. 23. Being aggrieved by the order of the Ld. CIT-A, the Revenue is an appeal before us. 24. The Ld. DR before us vehemently supported the order of the AO. On the other hand, The Ld. AR for the assessee before us filed a paper running from pages 1 to 98 and agreed that the judgment of Hon ble Gujarat High Court in the case CIT v/s Gujarat State Road Transport Corporation reported in 366 ITR 170 is squarely applicable if the payment of employee contribution towards ESI/PF is paid after the due date of the relevant Act then the sum which has been paid after due date should be disallowed as per the provisions of section 36(1)(va) of the Act. 25. We have heard the rival contentions of both the parties and perused the materials available on record. The issue arises before us whether the payment of employee s contribution made by the assessee is eligible for deduction towards ESI if paid after the due date as specified under the relevant Act. In this regard, we note that the assessee has made the payment of the employee s contribution beyond the du ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 1892/AHD/2013 shall also be applicable for the assessment year 2006-07. The appeal of the revenue for the A.Y. 2008-09 has been decided by us vide paragraph No. 13 of this order in favour of the assessee and against revenue. The learned AR and the DR also agreed that whatever will be the findings for the assessment year 2008-09 shall also be applied for the assessment year 2006-07. Hence, the ground of appeal filed by the assessee is hereby allowed. 29. The ground No. 2 of assessee s appeal is consequential in nature and does not require any separate adjudication. Hence, the same is dismissed as infructuous. 29.1 In the result, the appeal of assessee is partly allowed. Coming to ITA No. 2144/AHD/2010, an appeal by the assessee for the AY 2007-08 30. The assessee has raised the following grounds of appeal: 1. That on facts and in law the learned Commissioner of Income-tax (Appeals) has grievously erred in confirming the disallowance of claim of deduction under section 801A (4) Rs. 58,82, 937/-. 2. That on facts and in law the learned CIT (Appeals) has grievously erred in holding that the assessee is a work contractor and not a developer of infrast ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ks of account is just and fair and represented the true profits of the Business. 3. The order passed by the learned CIT(A) is against law and facts of the appellant's case in estimating the GP rate at 19.5% and retaining addition on account of enhanced Gross Profit on the basis of pure guess without reference to any evidence or materials at all including industry comparable. 4. The order passed by the learned CIT(A) is against law and facts on the file in estimating the GP rate at 19.5% by arbitrarily adopting a highest GP rate of one comparable Company and failing to notice the lower GP rate of the other industry comparable as cited by the Appellant. is therefore that the GP addition confirmed by be deleted. 5. The Id. has erred in law and on facts in confirming the action of Id. AO in charging interest u/s 234B/C/D of the Act. 6. The Id. CIT(A) has erred in law and on facts in confirming the action of Id. AO in initiating penalty proceedings u/s 271(1)(c) of the Act. 7. The appellant craves leave to add, amend, alter, edit, delete, modify or change all or any of the grounds of appeal at the time of or before the hearing of the appeal. 35. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ies in respect of subcontract work awarded to them, a survey u/s 133A of Income tax act has been carried out at three premises. During the survey proceedings, it was ascertained that M/s STUP consultant Pvt ltd was appointed as independent inspection agency by the Jharkhand road project implementation company limited who in turn report to JRPICPL. Statements were recorded u/s 131 of the I.T. Act from the team leader and deputy team leader of STUP Consultant Private ltd. They stated that contract work has been done by the assessee company and no subcontract work was done by them. Statement of various employees were also recorded who also stated that earthwork was being done by the assessee itself. 9) Further, the AO was issued a letter vide dated 28-10-2010 to inquire about the engagement of alleged subcontractors in respect of project awarded by the JRPICL to the assessee. In response to such letter JRPICL has denied the engagement of alleged sub-contractors. 10) In addition to the above, the AO also noticed that the profit earned by the assessee from the project where the assessee has done work through the alleged contractor is higher than the profit earned by assessee from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... G.P % 17.43 18.95 19.20 18.53 N.P% 5.44 4.86 7.73 6.01 38.3 The assessee before the Ld. CIT(A) further submitted that assessee is being regularly assessed to tax since past 7 assessment years and even more. All these assessments have been subject matter of scrutiny assessments and some of the cases are yet pending before the ITAT. However, in all the cases, the books of accounts of the assessee were accepted without any rejection u/s 145(3) of the Act. The details of GP ration declared by the assessee during the AYs 2004-05 to 2011-12 is detailed as under and up to AY 2008-09 no addition was made by the AO on account of GP addition. Following is the summary of the Gross Profit earned by the Assessee is the Seven Assessment Years i.e AY 2005-06 to AY 2011-12 to which the Assessee was subject to the Assessment u/s.143(3) r.w.s 153 pursuant to Search u/s.132 of the Act. Assessment year Gross Profit percentage declared by the Assessee in Books G ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d the appeal of the assessee by reducing the GP rate up to 19.5% of the turnover. 39. Being aggrieved by the order of the Ld. CIT(A), both the assessee and Revenue are in appeal before us. The assessee is in appeal against the GP addition determined by the ld. CIT-A whereas the Revenue is in appeal against the direction of the ld. CIT-A for the reduction of GP determined by the AO. The ground of appeal of the Revenue in ITA No. 386/AHD/2013 stands as under: (1) The Ld. CIT(A) has erred in law and in facts in restricting the estimation of GP at 19.50% against the estimation of the GP at the rate of 21% of the turn over adopted by the Assessing Officer. 40. The Ld. AR before us filed a paper book running from pages 1 to 243 and reiterated the submissions made before the authorities below. 41. On the contrary, the Ld. DR before us reiterated the findings of the lower authorities. Both the ld. AR and DR before us vehemently supported the order of the authorities below to extent favourable to them. 42. We have heard the rival contentions of both the parties and perused the materials available on record. From the preceding discussion, we note that the AO rejected ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... able on hand relating to the assessee which should be taken into account and that too after providing the opportunity of being heard to the assessee as well as considering the provisions of the Act and Rules of Income Tax Rules. After rejecting book results, the Assessing Officer has to determine the income in reasonable and scientific manner after considering the results/ performance of the earlier years or some comparable cases. In holding so, we referred the judgment of co-ordinate bench of Jodhpur Tribunal in case of Sriram Jhanwarlal v. ITO [2005] 98 TTJ (Jodh.) 639. The relevant observation is extracted as under: After rejecting the book results, the AO does not get unfettered powers to make assessment at any income. He is supposed to be guided either by the previous results of the assessee or some comparable cases. In the instant case, the AO has allowed deduction of direct expenses at 75 per cent of the gross receipts without any cogent material. His ad hoc estimate of expenses divorced from the relevant facts cannot be upheld. 42.6 Now coming to the facts of the present case, first, we note that the foundation of rejecting the books of accounts and estimating the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ibunal had though confirmed the view of the revenue authorities with respect to the rejection of the books of accounts of the assessee did not accept the re-computation of higher rate of gross profit on the premise that the average gross profit rate of last three years immediately preceding the year under consideration came to 14.79%. On such basis, the Tribunal found that the claim of gross profit rate @ 15.27% cannot be stated to be low. On such basis, the assesee s appeal was allowed. We are of the opinion that the findings of the Tribunal are based on evidence on record and are purely factual in nature. The Tribunal after taking into account relevant materials, came to the conclusion that a certain rate of gross profit presented by the assessee was acceptable. 42.8 The average profit of the assessee in the last three years i.e. A.Y. 2007-08 to A.Y. 2009-10 stands at 19.30% (21.40 + 18.82 + 17.43) whereas the original Gross profit of A.Y. 2010-11 is declared at 18.95% of the gross turnover. On perusal of the order of the authorities below, nothing was found out whether there was any change in the facts and circumstances of the year under consideration viz a viz in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dopted by AO. 47. At the outset, we note that the ground raised by the Revenue has been adjudicated along with assessee s ground of appeal in ITA No 366/AHD/2013 for the AY 2009-10. The ground of appeal of the assessee and Revenue have been decided by us vide paragraph No. 42 of this order. The ground of appeal of the assessee was allowed whereas the ground of appeal of the Revenue was dismissed. For detail discussion, please refer to the paragraph. Hence, the ground of appeal of the Revenue is hereby dismissed. 48. The Next issue raised by the Revenue vide ground No. 2 6is that the learned CIT(A) erred in holding that the assessee is entitled to deduction u/s 80IA (4) of the Act. 49. At the outset, we note that the issue raised by the Revenue in its ground of appeal for the AY 2009-10 is identical to the issue raised by the revenue in ITA No. 1892/AHD/2013 for the assessment year 2008-09. Therefore, the findings given in ITA No. 1892/AHD/2013 shall also be applicable for the assessment year 2009-10. The appeal of the revenue for the A.Y. 2008-09 has been decided by us vide paragraph No. 11 of this order in favour of the assessee. The learned AR and the DR also agreed that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted ground raised by the assessee is that the Ld. CIT(A) erred in estimating the GP at 19.5% without appreciating the fact that GP declared by the assessee in its audited books of accounts represent the true and fair profit of the business. 53. At the outset, we note that the issue raised by the assessee in its ground of appeal for the AY 2010-11 has been decided along with the issue raised by the assessee in ITA No. 366/AHD/2013 for the AY 2009-10. The appeal of the assessee for the A.Y. 2009-10 has been decided by us vide paragraph No. 42 of this order partly in favour of the assessee. Hence, the ground of appeal filed by the assessee for the AY 2010-11 is hereby partly allowed. 54. The next issue raised by assessee is that the learned CIT(A) has erred in confirming the action of AO in initiating penalty proceedings u/s 271(1)(c) of the Act. 55. The issue raised by assessee is premature at this stage and does not require any separate adjudication. Hence, the same is dismissed as infructuous. 56. In the result, the appeal of assessee is hereby partly allowed. Coming to ITA No. 387/AHD/2013, an appeal by the revenue for the AY 2010-11. 57. The revenue has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... law and on the facts of the case in confirming action of the AO in rejecting the books of accounts by neither assigning any defect in the accounts of the Assessee nor issuing specific show cause notice for the same and arbitrarily rejecting the book results with capricious observation that books of accounts of the Assessee does not reflect true and reliable affairs of the company. 2. The order passed by the learned CIT(A) is against law and facts of the appellant's case, in as much as CIT(A) was not justified in again estimating the GP rate at 19.5% merely reducing the percentage of GP as estimate by the AO in utter disregard to the fact that the GP disclosed by the appellant in the audit books of account is just and fair and represented the true profits of the Business. 3. The order passed by learned CIT(A) is against law and facts of the appellant's case in estimating the GP rate at 19.5% and retaining addition on account of enhanced Gross Profit on the basis of pure guess without reference to any evidence or materials at all including industry comparable. 4. The order passed by the learned CIT(A) is against law and facts on the file in estimating the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the CIT(A) has ought to have upheld the order of the AO. (4) It is, therefore, prayed that the order of the CIT(A) be set aside and that of the A.O. be restored to the above extent. 69. The first issue raised by revenue is that the learned CIT(A) has erred in restricting the estimation of GP at 19.50% against the estimation of the GP at the rate of 21% of turnover adopted by AO. 70. At the outset, we note that the issue raised by the Revenue in its ground of appeal for the AY 2011-12 has been decided along with the issue raised by the assessee in ITA No. 366/AHD/2013 for the AY 2009-10. The ground of appeal of the Revenue for the A.Y. 2009-10 has been decided by us vide paragraph No. 42 of this order against the Revenue. Hence, the ground of appeal filed by the Revenue for the AY 2011-12 is hereby dismissed. 71. The Next issue raised by the Revenue vide ground No. 2 is that the learned CIT(A) erred in holding that the assessee is entitled to deduction u/s 80IA (4) of the Act. 72. At the outset, we note that the issue raised by the revenue in its ground of appeal for the AY 2011-12 is identical to the issue raised by the revenue in ITA No. 1892/AHD/2013 for the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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