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TMI Blog2025 (1) TMI 807X X X X Extracts X X X X X X X X Extracts X X X X ..... clined the deduction on the ground that the assessee has not himself conceived the idea of infrastructure but has merely entered into a contract with the Govt.; entering into a contract with the Govt. is a sine qua non for claiming the deduction u/s. 80-IA(4) in this regard we rely upon the decision in the Adhunik Infrastructure [ 2018 (6) TMI 89 - ITAT KOLKATA] and the same view was also adopted by the Coordinate Bench of the Tribunal in the case of Bhinmal Contractors Property Land Developers P. Ltd. [ 2018 (5) TMI 244 - ITAT MUMBAI] even the recent decision of Montecarlo Construction Ltd. [ 2024 (1) TMI 383 - GUJARAT HIGH COURT] also supports the case of the assessee Thus we are of the view that the facts, nature of contracts, nature of works in the present years are same identical to the facts before the Hon'ble ITSC. And the eligibility of the assessee to claim deduction u/s. 80IA of the Act is squarely covered in favour of the assessee, by the order of the Hon'ble ITSC in the assessee's own case. Department has not brought anything on record to disturb the order of the Settlement Commission for the prior years and the order of the CIT(A) for A.Y 2018-19 both allow ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ? 6. Whether on the facts of case and in law, the Ld.CIT(A) was justified to allow the assessee's appeal by considering additional evidences such as Form No.10CCB and copy of the agreement of the enterprises with the Central Government or a State Government or a local authority or a statutory body for carrying on the tate Government or a local authority or a statutory body for carrying on the business of developing or operating and maintaining or developing, operating and maintaining a new infrastructure facility without following the statutory procedure including Rule 46A of the I.T. Rules in this respect. 7. The Appellant prays that the order of the CIT(A) on the above ground be set aside and that of the ACIT-1(2)(1), Mumbai be restored. 8. The Appellant craves leave to amend or alter any grounds or add a new ground which may necessary. 3. There is a delay of 4 days in filing of these appeals by the revenue. After perusing the petition for condonation filed by the revenue dated 24/09/2024 and hearing the parties on this application, we are convinced that the revenue was prevented by sufficient cause from filing the appeals in time. Therefore, keeping in view the principles la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ified as a new infrastructure facility for the purpose of section 80IA(4)(i) of the Income Tax Act. 9. Mainly relying upon two reasons, disallowance of claim was made. It was also argued by the revenue that the department has filed appeal against the order of ITSC allowing deduction u/s 80IA(4)(i) of the Act. 10. In order to support their contentions, Ld. AR submitted that assessee has carried out the contracts of road widening and renovation of existing road and therefore the assessee cannot be termed as work contractor, as the work that is being done by the company is construction and of maintaining the infrastructure and for that assessee has to purchase the material and is bearing the risk by way of indemnifying the agencies of any defect in the construction of road. 11. Apart the assessee has also submitted that the issue in question has been thoroughly examined by the Board and it has been decided that widening of an existing road by constructing additional lanes as a part of a highway project by an undertaking would be regarded as new infrastructure facility for the purpose of Sec. 80IA(4)(i) of the Act. 12. Even otherwise assessee has filed paper book containing details of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is carrying on the business of either developing or maintaining and operating or developing, maintaining; and operating the infrastructure facility' (ii) The applicants have then dealt with the meaning of ' infrastructure facility' as envisaged in the Explanation of the Section and highlighted that it will include 'a rood including toll rood', a bridge or a rail system' and 'a highway project including housing or other activities being an integral part of the highway project (iii) They have then dealt with the Dictionary meaning of the word 'develop ' and stated that it includes 'act of making some area of land or water more profitable or useful/ or 'cause to grow, to elaborate or expand in detail', (iv) The applicants have then relied upon the CBDT Circular no 3 of 2008 dated 12.3.2008 according to which where a person makes the investment and himself executes the development work 'i.e. carries out the civil construction work, he will be eligible for tax benefit under sec 80IA'. In contrast to this, a person who enters into a contract with another person including Govt or on undertaking or enterprise referred to in section 8 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r Section 80IA (i) first time claimed in the returns filed under Section 153A on the book-profits and (ii) claimed in the returns filed under Section 153A on the additional income computed with reference to the seized papers. He dealt at length with the various decisions of the ITAT, as mentioned above. He then explained as to how the impugned contracts should be treated as development - contract as distinct from the works-contract. He filed certificates from the Pune Municipal Corporation regarding 11 (The contracts/ The certificates mention the contract amount and nature of work. They also mention that the works pertained to the road widening, which is part of the Highway Road Project and Infrastructure Development; that the Construction material was not supplied by the Corporation; that the defect liability period is for 60/30 months and that the Company employed its own Machinery and Technical Staff for execution of the work. With reference to the other contracts, the learned AR relied upon the contract documents. As an illustration, the learned AR referred to page 51 of the Paper Book filed on 06.02.2015, wherein the extracts from the contract relating to the work of widening ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... truction in Sept 2010 even though its business had already been taken over by the company w.e.f. 01.04.2010. e) Widening to intermediate lane and improvement to Bejurapalli- Parsewadi -Moybinpetta- Venkatpur- DeolmariAheri-Allapalli Road(SH-25): PWD Nagpur: Only letter dated 01.01.2011 asking to proceed with the work (and not all papers) is submitted. It is not known as to how much work is done during three months ending 31.03.2011. f) Projects done by PMC: The eleven certificates filed by the applicants describe the work as improvement of roads . 35.7 In the reply, it was stated that i. No deduction has been claimed on the work done by M/S Patil Construction. Since the original bid was made by M/S Patil Construction, the contracts were awarded and cheques were received in that name. The note in accounts is merely given to clarify it. ii. It has been mentioned in the SOF that receipts of the three main entities were from the road contract awarded by the Govt. Agencies and that peak of 'MB Patil-BB Patil' a/c was formed on account of bogus billing resorted by the three main entities, which Deaves no doubt that impugned additional income was out of the development of infrastr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ars issued by the CBDT and the legal issues arising from the various judicial pronouncements have also been examined with reference to the factual aspects of the contracts carried out by the applicants, in respect of which the deduction under Section 80IA has been claimed. We are of the considered opinion that the applicants have satisfactorily established the admissibility of the above deduction on the facts of the cases. We would also like to observe that the department's reliance upon the decision of the Hon'ble Supreme Court in the case of Sun Engineering is apparently misplaced, as the above judgement was rendered in the context of Section 147/148 of the Act and it cannot be applied to the provisions contained under Section 153A of the Act, as reproduced hereunder:- 153A. [(1)] Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31 day of May, 2003, the Assessing Officer shall- (a) Issue notice to such person requiring him to furnish with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the road widening which is part of the Highway Road Project and Infrastructure Development. The Construction material was not supplied by the Corporation (Govt. Body) but was that of the assessee, that the defect liability period is for 60/30 months and that the Company (assessee) employed its own Machinery and Technical Staff for execution of the work. 20. With reference to the some other contracts, the assessee produced extracts from the contract relating to the work of widening of two lane in Km.0 to 50 of Widrafınagar Janakpur Balangi Road (SH-3) in Chhattisgarh. Even the defect liability period is mentioned as 36 months which means that for that much period after the execution of the contract the risk remained with the assessee. The contract mandated the assessee for a minimum deployment of 1 Civil Engineer of 10 years' experience, 1 Civil Engineer of 3 years' experience, and 3 Mechanical Engineers/Diploma holders of specified experience. The contract further gave a list of 15 plant and Machinery to be deployed on the work along with their maximum age, which established that the assessee uses its own expertise and technical skills, in the execution of the contract ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... fied in the prescribed manner and setting forth such other particulars as maybe prescribed and the provisions of this Act shall, so far as may be, apply accordingly as if such return were a return required to be furnished under section 139; (b) Assess or reassess the total income of six assessment years immediately preceding the assessment year relevant to the previous year in which such search is conducted or requisition is made: 36.1 It is very clear from a bare reading of the above provision that the return of income filed in response to the notice issued u/s 153A is required to be treated as a return filed u/s 139 of the Act. It is altogether a fresh return, requiring assessment or reassessment of the total income, as the case may be. The assessee is entitled to make a fresh claim in the said return, which might not have been claimed in the original return filed u/s 139 of the Act. Similarly, the A.O. is also entitled to reexamine the issues and make a reassessment in respect of such return. However, the assessee is required to comply with the necessary conditions, wherever laid down, in support of its claim. In the present cases, there has been no such failure on the part of t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ans any work including supply of labour to carry out work and is not intended to be confined to or restricted to works contract, therefore, a person who credits to the account of or pays to a contractor any sum payable on behalf of organizations specified in section 194C(1) of the Act for carrying out any work (including supply of labour for carrying out any work) is liable to deduct income-tax as required under that subsection. The words in the sub-section (1) of 194C of the Act `on income comprised therein' appearing immediately after the words `deduct an amount equal to two per cent of such sum as income-tax' from their purport, cannot be understood as the percentage amount deductible from the income of the contractor out of the sum credited to his account or paid to him in pursuance of the contract, but deduction is to be made out of payments made to the contractor. We see no reason to curtail or to cut down the meaning of the plain words used in the section. Any work means any work and not a works contract , which has a special connotation in the tax law. Indeed in the subsection, the work referred to therein expressly includes supply of labour to carry out a work. It ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r person (i.e., undertaking or enterprise referred to in section 80-IA) for executing works contract, will not be eligible for tax benefit under section 80- IA. This amendment will take retrospective effect from 1st April 2000 and will accordingly apply in relation to the assessment year 2000-01 and subsequent years. The Explanatory Memorandum clearly lays out that purpose of extending tax benefit u/s 80-IA was to encourage investments from the private sector and hence work contracts, i.e. contracts involving merely labour (or mere execution of construction without making investments) are outside the purview of the provisions of section 80-1A. Thus, the term works contract used in Explanation to section 80-IA(13) means a contract of developing infrastructure by merely employing labour and making no investments. 24. The amended provisions of section 80-IA of the Act clarify that to avail the deduction, the assessee could either (i) develop; or (ii) operate and maintain ; or (iii) develop, operate and maintain the facility. Therefore, any one of the above activities would qualify for the deduction and it is not necessary to carry out all the activities and in this regard we rely upon ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessee is merely developing the infrastructural facility, it is entitled to deduction u/s 80- 1A. Further, condition (b) of section 80- IA(4) stipulates that an assessee enters into an agreement with the Government. Hence, if section 80- IA grants deduction on profits from the activity of development, carried out in pursuance of an agreement with the Government, it presupposes that assessee will earn profits from the amounts it is paid by the Govt/Govt. Bodies and it is such profits which would be eligible for the deduction. 27. And in case, deduction u/s 80-IA is declined on the ground that the assessee had merely entered into an agreement with the Govt. and/or the assessee had received payments from Government, then in that eventuality an assessee who is only a developer will never be entitled to deduction u/s 80-IA. Therefore in our view, merely because the assessee was paid by the Government for development work, it cannot be denied deduction under section 80- IA(4) of the Act. Similarly, an assessee cannot be declined the deduction on the ground that the assessee has not himself conceived the idea of infrastructure but has merely entered into a contract with the Govt.; enteri ..... X X X X Extracts X X X X X X X X Extracts X X X X
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