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TMI Blog2024 (10) TMI 855X X X X Extracts X X X X X X X X Extracts X X X X ..... tional High Court has also taken a view in favour of the assessee in the case of CIT vs. ABG Heavy Industries Ltd. [ 2010 (2) TMI 108 - BOMBAY HIGH COURT] We find the AO in the instant case has not gone through the terms and conditions of each and every project undertaken by the assessee during the year. He has not discussed anything about the clarification given by the CBDT vide Circular No.3/2008, dated 12.03.2008 which is binding on the Revenue. In the case of CIT vs. ABG Heavy Industries Ltd. while discussing an identical issue as to whether the assessee is a developer or merely a works contractor. We find the AO in the instant case without going through the terms and conditions of each of the project that has been undertaken by the assessee during the year has come to the conclusion that the assessee is a works contractor and not a developer. Considering the totality of the facts of the case and in the interest of justice, we deem it proper to restore the issue to the file of the AO with a direction to decide the issue afresh in light of the decision of ABG Heavy Industries Ltd [ 2010 (2) TMI 108 - BOMBAY HIGH COURT] CBDT Circular No.3/2008, dated 12.03.2008 and the terms and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and the turnover in respect of each infrastructure facilities has been furnished while making the claim of the deduction. Out of the 44 infrastructure facilities/projects, 39 infrastructure facilities/projects have been directly awarded by the Government Authorities to the assessee and 5 infrastructure facilities/projects are third party Infrastructure facilities/projects, which have been awarded by the Government Authorities to other persons who have in turn passed on the said infrastructure facilities/projects to the assessee. The turnover in respect of infrastructure facilities/projects directly awarded by the Government Authorities to the assessee comes to Rs. 87,90,27,043/- and the turnover in respect of the third party infrastructure facilities/projects comes to Rs. 7,23,66,581/-. The infrastructure facilities/projects developed by the assessee are relating to Flyovers, Bridges across rivers. Widening of Roads, DP Roads, approach roads, Earthwork and structures on Cannals, Submersible Bridges, retaining walls of Dams, Railway Bridges, Bus Stations, Bridges over Roads, Cannal Bridges, Four laning and Strengthening of Highways etc. These infrastructure facilities/projects have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facilities/projects. The Agreements/Contracts entered into by the assessee with the Government Authorities for development of Infrastructure facilities involve designing the infrastructure facilities/project, the development of the infrastructure facilities/projects, financial involvement and defect removal during the liability period in all such projects, infrastructure facilities/projects the Government Authorities have handed over the possession of project-sites to the assessee company. The assessee utilized its funds, its employs, its expertise and took over the responsibility of development of the infrastructure facilities. On completion of the infrastructure facilities the assessee handed over the same to the Government Authority. Thereafter the assessee had to undertake the maintenance of the said infrastructure facilities for periods running from 48 months to 60 months. During this period if any damages were occurred it would be responsibility of the assessee. It can be seen that the assessee has undertaken all the risks in terms of development of infrastructure facilities/projects, maintaining the technical personnel, keeping plant and machinery, providing technical know h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt private parties and not from the Central Government / State Government / Local authority. According to the Assessing Officer, as per provisions of section 80IA(4) of the Act, to be eligible for deduction, the assessee should have entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for development of infrastructure facility. He noted that the assessee has claimed deduction u/s 80IA(4) of the Act on the profit of Rs. 40,91,541/- from the following projects, the details of which are as under: Sl No Name of party from whom contract is obtained Profits derived and claimed as deduction u/s 80IA(4) (in Rs) 1 Gammon India Ltd. 7,61,207/- 2 Modern Road Makers Pvt. Ltd. 4,85,303/- 3 Manisha construction 13,01,833/- 4 S.K. Yewale and Co 5,59,873/- 5 Sadhbhav Engg Ltd 9,83,325/- Total 40,91,541/- 8. Applying the provisions of section 80IA(4)(b)(i) of the Act, the Assessing Officer disallowed the claim of deduction u/s 80IA(4) of the Act of Rs. 40,91,541/-. So far as the balance amount is concerned, the Assessing Officer noted that the Explanation below section 80IA(13) as inserted by the Finance Act, 2009with retrospec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty is to translate such design into reality. There may, in certain circumstances, be overlapping in the work of developer and contractor, but the line of demarcation between the two is thick and unbreachable. When the person acting as a developer, who designs the project, also executes the construction work, he works in the capacity of contractor too. But when he assigns the job of construction to someone else, he remains the developer simpliciter, whereas the person to whom the job of construction is assigned, becomes the contractor. The role of developer is much larger than that of the contractor. It is no doubt true that in certain circumstances a developer may also do the work of a contractor but a mere contractor per se can never be called as a developer, who undertakes to do work according to the pre-decided plan. 5.10. The contracts executed by the assessee, pursuant to which it has claimed a deduction u/s 80IA(4) must therefore, be measured from the above metrics laid down by the Supreme Court in the matter of works contract. I have perused the copies of the agreements/tender documents (the same has been made available by the assessee during the assessment proceeding in a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... om the above discussion that the assessee is merely an executing agency carrying out the works contract strictly as per the terms laid down in the agreement/tender document and assessee has no control over development of infrastructure facility at any stage. The assessee has executed a works contract in respect of each of the projects for which it has claimed a deduction u/s 80IA(4) of the Act. In view of the above, deduction u/s 80IA(4) of Rs 6,61,77,787/- (Rs.7,21,32,410/- less Rs. 18,63,082/- (already disallowed as per para 5.3) less Rs. 40,91,541/- (already disallowed as per para 5.4)] is disallowed and added to the returned income. 9. In appeal, the Ld. CIT(A) upheld the action of the Assessing Officer by observing as under: [7] I have perused the material on record and the contention of the Appellant carefully, in the assessment order, the AD has carried out a detailed analysis on why the deduction claimed u/s. 80-1A(4) is not allowable to the assessee/appellant. The crux of this claim lies in the fact as to whether work carried out by the appellant falls within the definition of a developer or a works contract . In this regard one has to critically examine the intention and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that none of the projects were conceived by the assessee itself. This fact could not be rebutted by the appellant in any of the submission made before me as it is seen that the work given to them is through a tendering process in which the exact specification and nature of the work to be carried out is already defined. Another argument which can be given against the Appellant's claim as developer is that the ownership of the project sites does not transfer to the appellant and remains with the Central State Body. 7.4 It is very clear on going through the contracts awarded to the appellant that the exact design and specification have been given to the appellant which need to be strictly followed. Any change in such design can be done only with the approval of the Contracting Authority. Along with this, the exact nature of machinery, equipment and material which is to be used for completing such work has been specified in the agreement. This point, in my opinion, clearly indicates that authority granting the contract to the appellant have retained all the authority and decision making regarding the design and development of the Infrastructure projects and it is only an execution ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s defined u/s. 2(e) of Gujarat Infra Structure Development Act, 1999 and, moreover, it was totally controlled by State Government, its claim for deduction u/s. 80IA could not be rejected on the ground that the assessee had failed to fulfill the conditions of clause (b) of section 80IA (4) of the Act. It was further submitted that the SLP filed by the Department in the said case before the Hon'ble Supreme Court was dismissed. However, I find that the said SLP of the Revenue was dismissed by the Apex Court on grounds of delay in filing appeal and there was no discussion on the merits of the case. In his submission, the appellant has further relied on multiple case laws in support of their claim that the work carried out by them constitutes development of infrastructure facilities. However on going through these case laws, it is seen that most of them can be distinguished from the current case on the basis of facts. For instance in the case of BVG Enterprises and of M/s ABG Heavy Industries vs. CIT (Bom) it is seen that the issue was related to infrastructure facilities on BOLT basis (built operate and transfer basis), in the case of GVPR Engineers Vs. ACIT(ITAT Hyd.) the issue re ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s are taken without prejudice to each other On facts and in law 1. The learned CIT(A) has erred in confirming the disallowance of deduction u/s 80IA(4) made by the AO amounting to Rs. 7,21,32,410/- without appreciating the contention of the appellant that: a. The appellant company qualifies for the deduction u/s 80IA(4) of the Act. b. The various infrastructure facilities/projects awarded to appellant company cannot be described as mere works contract but the appellant's role is that of developer. 2. The learned CIT(A) has further erred in confirming the disallowance of deduction u/s 80IA(4) made by the AO amounting to Rs. 18,63,082/- in respect of three projects namely Bus station, Primary health clinic sub-centre and retaining wall from Khadakwasla Dam to Nanded Phata without appreciating the contention of the appellant that: a. Bus station will also have to be regarded as an infrastructure facility since it is an integral part of the highway system. b. The retaining wall from Khadakwasla Dam to Nanded Phata is a part of both water supply project and an irrigation project and thus it is eligible for deduction as per clause (c) of the explanation to sub section (4) of section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relied upon certain decisions which are not at all applicable to the facts of the present case. 13. So far as the decision in the case of HAL Ltd. vs. State of Orissa (supra) is concerned, he submitted that the same is not applicable to the facts of the present case since, in that case, the Hon'ble Supreme Court was concerned in respect of a transaction to decide whether it was a contract for sale or a contract for work and labour. 14. Similarly, in the case of State of Tamilnadu vs. Anandam Vishwanathan (supra), he submitted that the assessee in this case had entered into contracts with universities and other educational institutions in the country for printing question papers for the said educational institutions. The controversy involved in this case was whether it was a case of sale or works contract. Therefore, this decision was also not applicable to the facts of the present case. 15. So far as the case of State of Gujarat vs. Variety Body Builders (supra) is concerned, he submitted that in that case, the Court was concerned with the provisions of the Bombay Sales Tax Act regarding three contracts for construction of coaches on the under-frames supplied by the Railway Ad ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mann.com 516 (Ahmedabad Trib.) v) ACIT vs. Ho Hup Simplex JV (2018) 92 taxmann.com 106 (Kolkata Trib.) vi) ACIT vs. Pratibha Industries Ltd. (2012) 28 taxmann.com 246 (Mumbai-Trib.) vii) Patel Engineering vs. DCIT (2004) 84 TTJ (Mumbai) 646 19. Referring to the above decisions, he submitted that in a development contract, responsibility is fully assigned to the developer to do all acts for the execution and completion of the work right from designing the project till handing over of the project to the government. As such, the agreement is not for a specific work, it is for development of facility as a whole. He submitted that the ownership of the site or the ownership over the land remains with the government / owner but during the period of development agreement, the developer exercises complete realm over the land or the project. However, in some cases there can be a situation that the developer has to take the approval of the design from the government / contractee but that will not change the status of the developer as a works contractor. He submitted that the assessee in the instant case has invested its own funds, given bank guarantee, engaged requisite qualified / skilled/se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on 80IA, matter was to be restored back to Commissioner (Appeals) for fresh adjudication. 21. Referring to various decisions which were relied on by the Assessing Officer as well as the CIT(A), he submitted that the assessee in the instant case is not entitled to claim the benefit of deduction u/s 80IA(4) of the Act since the assessee is merely a works contractor and not a developer. He accordingly submitted that the order of the CIT(A) be upheld and the grounds raised by the assessee should be dismissed. 22. We have heard the rival arguments made by both the sides, perused the orders of the Assessing Officer and the CIT(A) and the paper book filed by both the sides. We have also considered the various decisions cited before us. We find the Assessing Officer in the instant case denied the claim of deduction u/s 80IA(4) of the Act on the ground that the assessee has claimed deduction u/s 80IA(4) of the Act in respect of 44 infrastructure facilities developed by it, out of which some infrastructure facilities do not fall within the definition of infrastructure facility such as reconstruction of bus station with sub work at Karad in Satara Division, Clinic for Primary Health sub cente ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Heavy Industries Ltd. (supra) while discussing an identical issue as to whether the assessee is a developer or merely a works contractor has observed as under: 16. Now, it is in the background of the evolution of the law that the controversy in the present case would have to be considered. The contention of the Revenue is that the assessee was not engaged in developing the facility at all and that under the Contract that was entered into between the assessee and JNPT all that the assessee was required to carry out was to supply and install cranes at the Port. The submission cannot be accepted. The expression 'development' has not been artificially defined for the purposes of Section 80IA of the Act and must, therefore, receive its ordinary and natural meaning. Under the terms of the contract between the assessee and JNPT, the assessee undertook an obligation for supplying, installing, testing, commissioning and maintenance of Container Handling equipment namely, the cranes in question. JNPT has a dedicated Container Handling Terminal. The case of the assessee is that the only activity at the Terminal consists of the loading, unloading and storage of containers. Under the c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... deduction under Section 80IA. The condition of a certificate from the Port Authority was fulfilled and JNPT certified that the facility provided by the assessee was an integral part of the port. The assessee developed the facility on a BOLT basis under the contract with JNPT. On the fulfillment of the lease of ten years, there was a vesting in the JNPT free of cost. 18. Before the Tribunal, material was placed on record by the assessee to indicate the nature and extent of the activities undertaken by it in ensuring that the equipment which was supplied was fully operational. The assessee had in its employment diverse employees, including a Senior Manager, a Manager, Assistant Manager and five Deputy Managers (Operations) in addition to Assistant Engineers, Technical Officers and Operators-cum-Technicians. On considering the material on record including letters of the Port Authority, the Tribunal came to the conclusion that as a matter of fact the assessee was also engaged in activities of operating the equipment. The finding that the assessee had developed the infrastructure facility and that it was engaged in operating the cranes is, therefore, based on the material on record. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ote that neither in the memo of appeal nor in the submissions before us has any effort been made to suggest on the part of the Revenue that the circulars of the Board are not binding on the Revenue. Nor for that matter was it the submission of the Revenue that the circulars issued by the Board from time to time were in violation of or contrary to legal provisions. Plainly, right from 1996 CBDT was seized with the question, as to whether infrastructure facilities developed under a BOLT project would qualify for exemption under Section 80IA of the Act. The first circular in that regard that was issued on 23rd January 1996 specifically dealt with whether Section 80IA (4A) of the Act would be applicable to a BOLT Scheme involving an infrastructure facility for the Indian Railways. The circular clarified that an infrastructure facility set up on a BOLT basis for Railways would qualify for a deduction. That was followed by the two circulars of the Board dated 23rd June 2000 and 16th December 2005. The first of those circulars recognizes that structures for storage, loading and unloading etc. at a port built under a BOT and BOLT Scheme would qualify for a deduction. Now, there is no quest ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... al view of the scope and ambit of the provisions of Section 80IA of the Act. Parliamentary intervention endorsed the administrative practice. A provision inserted by the legislature to supply an obvious omission and to make a section workable has in certain circumstances been regarded as retrospective particularly when it was intended to remedy unintended consequences. Allied Motors P. Limited 1 196 ITR 188 (S.C.) V/s. C.I.T. 2 and C.I.T. V/s. Alom Extrusions Limited.3 The Tribunal having only followed these provisions, we do not find any just reason to interfere in our appellate jurisdiction. 22. Another submission which was urged on behalf of the Revenue is that under clause (iii) of sub-section (4A) of Section 80IA, one of the conditions imposed was that the enterprise must start operating and maintaining the infrastructure facility on or after 1st April 1995. The same requirement is embodied in sub-clause (c) of clause (i) of sub-section (4) of the amended provisions of Section 80IA. On this basis, it was urged that since the assessee was not operating and maintaining the facility, he did not fulfill the condition. This submission is fallacious both in fact and in law. As a mat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... developing, operating and maintaining an infrastructure facility was reflective of a position which was always construed to hold the field. Before the amendment that was brought about by Parliament by Finance Act of 2001, we have already noted that the consistent line of circulars of the Board postulated the same position. The amendment made by Parliament to Section 80IA (4) of the Act set the matter beyond any controversy by stipulating that the three conditions for development, operation and maintenance were not intended to be cumulative in nature. 23. In view of the aforesaid observations, the question of law shall accordingly stand answered in favour of the assessee and against the Revenue. 24. For all these reasons, we are of the view that there is no merit in the appeals. The appeals shall accordingly stand dismissed. 24. We find the Assessing Officer in the instant case without going through the terms and conditions of each of the project that has been undertaken by the assessee during the year has come to the conclusion that the assessee is a works contractor and not a developer. Considering the totality of the facts of the case and in the interest of justice, we deem it p ..... X X X X Extracts X X X X X X X X Extracts X X X X
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