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TMI Blog2018 (11) TMI 1968X X X X Extracts X X X X X X X X Extracts X X X X ..... ee fairly admitted that in earlier years, this issue was not agitated before the Tribunal. Considering the smallness of the amount involved in all these years, the issue was not pressed by the assessee, hence these grounds are rejected in all three years. Interest income on FDR has rightly been assessed as income from other sources and rightly been excluded from eligible profit from the amount of deduction u/s 80IA. Accordingly, this issue is decided against the assessee. Disallowance of employees contribution towards PF and ESI, which was deposited after expiry of time limit - Assessee did not dispute that the issue is covered against the assessee by the decision of Gujarat State Road Transport Corpn. [ 2014 (1) TMI 502 - GUJARAT HIGH COURT ] wherein Hon ble Court has held that if employee s contribution is not being deposited within time limit prescribed in provident fund and ESI Act then deduction of such amount will not be admissible to the assessee. Disallowance of additional depreciation - assessee has claimed additional depreciation on water treatment plant - claim of the assessee was disallowed by the AO on the ground that it is just engaged in development of infrastructure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tt. Year 2010-11. 3. Brief facts of the case are that the assessee-company at the relevant time was engaged in the business of development of infrastructure projects. It has filed its return of income on 30.9.2012 declaring total income at NIL after claiming deduction at Rs. 1,61,33,833/- under section 80IA of the Income Tax Act. Similarly, in the Asstt. Year 2011-12 it has shown additional income at Rs. 75,97,540/- and claimed deduction under section 80IA at Rs. 1,78,72,268/-. In the asstt. year 2012-13 the assessee has declared NIL income and claimed deduction under section 80IA at Rs. 3,35,57,706/-. The case of the assessee was selected for scrutiny assessment in all these three years. Notice under section 143(2) was issued and served upon the assessee. On scrutiny of the accounts, it revealed to the AO that the assessee has claimed development of various infrastructure projects during these assessment years. The ld.AO took note of these projects while taking cognizance of the written submissions made by the assessee. The AO thereafter made analysis of section 80IA(4) of the Act and observed that the assessee is not owner of these projects, and therefore, it could not be constru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... MAINTENANCE Asstt. Year 2011-12 2. Sr. No. (4) of the notice u/s. 142(1) dt. 30-10-2013 You have asked the assessee company to demonstrate with necessary evidences that the undertaking fulfills all the conditions of section 80IA. (A) In respect of the following infrastructure projects the Hon'ble Commissioner of Income Tax (Appeal): VI, has allowed the claim u/s. 80IA hence, to avoid the repetitiveness the assessee company do not furnish the information as it is very much on record of the Department and rely on the appellate orders: Project Date of commencement 1st A.Y. of claim Nature of Work Ahmedabad Municipal Corporation, 01-04-2007 2008-09 O M Ahmedabad Municipal Corporation 12-09-2008 2009-10 O M GWSSB - Gondal - Kothaira 02-11-2004. 2005-06 Development MPAKVN 02-03-2006 2007-08 Development (B) The development of following infrastructure projects have been considered in the assessment for A.Y. 2010-11 for the first time. The claim u/s. 80IA has been disallowed in A.Y. 2010-11 and the assessee company is in appeal before the Hon'ble Commissioner of Income Tax (Appeal): VI, Ahmedabad: Project Date of commencement Ist A.Y. of claim Nature of work Vadodara Municipal Corp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Tax (Appeal): VI, Ahmedabad. Project Date of commencement 1st A.Y. of Claim Nature of work Khambhat Nagar SevaSadan, Khambhat 24-09-2009 2011-12 Development of WTP Gujarat Urban Development Company (GUDC) - Tarsadi 13-04-2010 2011-12 Development of WTP (C) The development of following projects have been awarded during the previous year relevant to A.Y. 2012-13 Project Date of commencement 1st A.Y. of Claim Nature of work Rajasthan Urban Infrastructure Development Project Bundi (RUIDP) 21-07-2011 2012-13 Development of Sewerage Treatment Plant (STP) Ex. Engineer (R B Division) Tarapur, Anand (Tarapur) 19-09-2011 2012-13 Development of Sewerage Treatment Plant (STP) (A) The assessee company relies on the following appellate orders of the Hon'ble Commissioner of Income Tax (Appeal): VI, Ahmedabad in respect of all the four (4) projects listed in section (A) above: A.Y. Order No. Dated 2005-06 CIT(A)-VI/ITO/Wd-l(3)/89/10-ll 24-12-2012 2007-08 CIT(A)-VI/ITO/Wd-l(3)/304/09-10 29-12-2010 2008-09 CIT(A)-VI/ITO/Wd-l(3)/214/10-ll 26-12-2012 2009-10 CIT(A)-VI/Addl. R-l/180/11-12 02-01-2013 2010-11 CIT(A)-VI/Wd. l(3)/7/13-14 13-11-2014 (B) The assessee company has made detailed submission ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e infrastructure facilities created by it for some time and also trained the personnel when required. Considering these facts it cannot be said that appellant was a mere contractor and not a developer. All the decisions referred by the assessing officer and appellant were analysed and in the light of facts of the appellant, it is quite clear that in respect of these three projects, appellant was developer. Appellant relied upon a recent decision of ITAT, Rajkot dated 23.9.10 in ITA No. 1111/RJT/2010 in the case of M/s Tarmet Bel (JV) KCL, Rajkot vs. ITO Wd 1(4), Rajkot. All relevant decision of the issue were discussed in this decision. The relevant extract of this order is as under :- In the present case, we have already held that although the appellant entered into a contract with the Govt., the contract is part of the primary condition of Sec. 80IA(4) and further the nature of work carried out shows that the appellant not only directly (and not indirectly) carried out work as per the contract but it employed various resources of its own by way of machineries, technical knowledge, technical and other manpower, materials etc. and also funded the same out of its own capital and bor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ydraulic, structure, equipment and aesthetically) providing, constructing and commissioning conventional water treatment plant consisting of all civil, mechanical and electrical components including necessary hydraulic testing, structural testing, equipment testing, trial run etc. The assessee is also required to arrange cement, sand steel and equipments etc. and undertake soil investigation and other exploration work. In all the assessee company has to design, construct, commission, test/operate and maintain water treatment plant. All these conditions akin to the contract awarded to the assessee duly come within the ambit of the conditions laid down u/s 80IA sub-section (4) of the Act. 27. We further observe that similar issue came up before the Co- ordinate Bench, Hyderabad in the case of GVPR Engineers Ltd. vs. ACIT (2012) taxmann.com 25 (Hyd) wherein it has been held as under :- HELD-I The provisions of section 80-IA(4), when introduced afresh by the Finance Act, 1999, the provisions under section 80-IA(4A) were deleted from the Act. The deduction available for any enterprise earlier under section 80-IA(4A) is also made available under section 80- JA(4) itself. Further, the ver ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contract and it is not eligible for deduction under section 80-IA(4). Whether the assessee is a developer or works contractor purely depends on the nature of the work undertaken by the assessee. Each of the work undertaken has to he analysed and a conclusion has to be drawn about the nature of the work undertaken by the assessee. The agreement entered into with the Government or the Government body may be a mere works contract or for development of infrastructure. It is to be seen from the agreements entered into by the assessee with the Government. The Government handed over the possession of the premises of projects to the assessee for the development of infrastructure facility. It is the assessee's responsibility to do all acts till the possession of property is handed over to the Government. The first phase is to lake over the existing premises of the projects and thereafter developing the same into infrastructure facility. Secondly, the assessee shall facilitate the people to use the available existing facility even while the process of development is in progress. Any loss to the public caused in the process would be the responsibility of the assessee. The assessee has to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nter into an agreement with the Government or Government undertakings. Such an agreement is a contract and for the purpose of the agreement a person may be called as a contractor as he entered into a contract. But the word 'contractor' is used to denote a person entering into an agreement for undertaking the development of infrastructure facility. Every agreement entered into is a contract. The word 'contractor' is used to denote the person who enters into such contract. Even a person who enters into a contract for development of infrastructure facility is a contractor. Therefore, the contractor and the developer cannot he viewed differently. Every contractor may not be a developer hut every developer developing infrastructure facility on behalf of the Government is a contractor. {Para 29] Section 80-IA intends to cover the entities carrying out developing, operating and maintaining the infrastructure facility keeping in mind the present business models and intend to grant the incentives to such entities. The CBDT, on several occasions, clarified that pure developer should also be eligible to claim deduction under section 80-IA which ultimately culminated into amend ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h involve Resign, development, operating and maintenance, financial involvement, and defect correction and liability period is to be computed by the Assessing Officer on pro rata basis of turnover. The Assessing Officer is directed to examine the records accordingly and grant deduction on eligible turnover as directed above. [Para 30] 28. Further similar issue also came up before the Tribunal, Hyderabad Bench in the case of Sushee Hi Tech Constructions (P) Ltd. vs. DCIT (2013) 33 taxmann.com 236 (Hyderabad-Trib), wherein dealing with the issue has decided the same by observing as below :- FACTS -1 The assessee had undertaken the development of irrigation canals and railway tracks including conversion of gauge. The project premises was handed over by the Government to the assessee for developing into an infrastructure and the scope of work involved taking over of the site and developing the site, re-handing over of the site after due development. Thereafter, the assessee would have to maintain the developed infrastructure facility for a certain period as provided in the agreement. The risk involved during the period from the date of taking over till the date of handing over of the i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... would mean that only companies are eligible for deduction under section 80-1 A(4) and not any other person like individual. HUF, firm. etc. [Para 31] According to sub-clause (a), clause (/) of sub-section (4) of section 80- IA. the word 'it' denotes the enterprise carrying on (he business. The word 'it' cannot be related to the infrastructure facility, particularly in view of the fact that infrastructure facility includes Rail system. Highway project, Water treatment system, Irrigation project, a Port, an Airport or an Inland port which cannot be owned by any one. Even otherwise, the word 'it' is used to denote an enterprise. Therefore, there is no requirement that the assessee should have been the owner of the infrastructure facility. [Para 32] Assessee is a developer and not a works contractor Whether the assessee is a developer or works contractor is purely depends on the nature of the work undertaken by the assessee. Bach of the work undertaken has to be analyzed and a conclusion has to be drawn about the nature of the work undertaken by the assessee. The agreement entered into with the Government or the Government body may be a mere works contract or fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, it is clear that from an undeveloped area, infrastructure is developed and handed over to the Government and as explained by the CBDT vide its Circular dated 18-05-2010. such activity is eligible for deduction under section 80-IA (4). This cannot be considered as a mere works contract but has to be considered as a development of infrastructure facility. Therefore: the assessee is a developer and not a works contractor as presumed by the revenue. The circular issued by the Board clearly indicates that the assessee is eligible for deduction under section 80- IA (4). The department is not correct in holding that the assessee is a mere contractor of the work and not a developer. [Para 33] Assessee is entitled to deduction under section 80-IA As per the provisions of the section 80-IA, a person being a company has to enter into an agreement with the Government or Government undertakings. Such an agreement is a contract and for the purpose of the agreement a person may be called as a contractor as he entered into a contract. But the word 'contractor' is used to denote a person entering into an agreement for undertaking the development of infrastructure facility. Every ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and maintaining or (///') developing, operating and maintaining any infrastructure facility. Prior to amendment the 'or' between three activities was not there, after the amendment 'or' has been inserted with effect from 1-4-2002 by Finance Act, 2001. Therefore, the assessee should not be denied the deduction under section 80-IA, as if the contracts involve development, operating, maintenance, financial involvement and defect correction and liability period, then such contracts cannot be called as simple works contract. The contracts which contain above features are to be segregated and on this deduction under section 80-IA has to be granted and the other agreements, which are pure works contracts hit by the Explanation to section 80- IA(13), are not entitled for deduction under section 80-IA. The profit from such contracts which involve development, operating, maintenance, financial involvement, and defect correction and liability period is to be computed by Assessing Officer on pro-rata basis of turnover. The Assessing Officer is directed to examine and grant deduction on eligible turnover as directed above. [Para 35] Further, where the assessee has carried o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... h the aid of section 2(24)(x) of the Income tax Act. The ld.counsel for the assessee did not dispute that the issue is covered against the assessee by the decision of Hon ble Gujarat High Court in the case of CIT Vs. Gujarat State Road Transport Corpn., 366 ITR 170 wherein Hon ble Court has held that if employee s contribution is not being deposited within time limit prescribed in provident fund and ESI Act then deduction of such amount will not be admissible to the assessee. The ld.CIT(A) has rightly based its reliance upon the decision of Hon ble jurisdictional High Court cited supra. We do not any reasons to interfere on this issue accordingly, this ground of appeal is rejected in all three assessment years. 10. Next ground raised in CO No. 98/Ahd/2015 is that the ld.CIT(A) has erred in confirming the disallowance of additional depreciation. It emerges out from the record that assessee has claimed additional depreciation on water treatment plant. This claim of the assessee was disallowed by the AO on the ground that it is just engaged in development of infrastructure and not engaged in any manufacturing activity. Hence, additional depreciation is not admissible. On appeal, the l ..... 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