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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 ..... ct amounting to Rs. 4,40,47,969/-." 2. "Whether on the facts and in the circumstances of the case and in law the Ld.CIT(A) failed to appreciate the fact that the assessee has not fulfilled the conditions laid down for claiming deduction u/s. 80IA of the Act." 3. "Whether on the facts and in the circumstances of the case and in law the Ld.CIT(A) failed to appreciate that the assessee was involved in carrying out work in the nature of rehabilitation whereas there is no reference to the term 'road widening' anywhere in work order and has not carried out any work of development of new infrastructure facility or maintaining the same." 4. "Whether on the facts and in the circumstances of the case and in law the Ld.CIT(A) failed to appreciate the fact that the assessee upon completion of the contractual obligations has been paid the agreed contract price as per work completed whereas section 80IA stipulates development or maintenance of infrastructure facility." 5. "Whether on the facts and in the circumstances of the case and in law the Ld.CIT(A) failed to appreciate the fact that the relationship between assessee and the government is that of the contractor and the contr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... CIT(A) and heavily relied upon the orders passed by the Hon'ble Income Tax Settlement Commission (referred to as "ITSC") in assessee's own case and also relied upon the orders of the Coordinate Bench of ITAT in assessee's own case for the A.Y 2018-19 in ITA No. 303 and 98/Mum/2023. The Ld.AR also relied upon the decisions in the following cases: 1. CIT Vs. ABG Heavy Industries Ltd. 322 ITR 323 (Bom) 2. Adhunik Infrastructure Pvt Ltd.,Vs. JCIT, ITA No. 1281/Kol/2015 3. Bhinmal Contractors Property and Land Developers P Ltd, Vs. ACIT, [2018] 93 taxmann.com 296 (Bom) 4. Pr. CIT Vs. Montecarlo Construction Ltd, [2024] 161 taxmann.com 222 (Guj) 7. We have heard the counsels for both the parties and have gone through the documents placed on record, judgments cited before us and the orders passed by the revenue authorities. 8. From the records, we noticed that the assessee company is engaged in the business of execution of civil and development contracts and during the year under consideration the return of income was filed declaring taxable income of Rs. 65,43,894/- after claiming deduction u/s 80IA of the Act of Rs. 4,40,47,969/-. However the AO disallowed the claim of the ass ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed that there is difference between developing an infrastructure facility and executing a works contrast. The explanation introduced in 2007 w.e.f. 01.04.2000 clarifies that the deduction is not available in the case of execution of works contract'. Since the applicant was only a works contractor and not a developer, the impugned condition is not fulfilled. v. As per the CBDT circular, deduction is to the Highway projects. Even in respect of the Highway projects, it is allowable for new roads or creation of new lanes by widening of the existing roads. Relaying of the existing roads are not covered in the scheme. The applicants have not proved that they satisfy this condition. 15. Hence in this scenario it has become more important to evaluate the orders of ITSC wherein identical objections were raised by the department and Hon'ble ITSC dealt with the same after thoroughly examining the factual as well as legal propositions. 16. We noticed the assessee in order to meet out the objections of the department had filed documentary evidences before ITSC and raised the contentions which are recorded by ITSC in its order in para No. 35.3 and the same is reproduced below: (i) The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee and inthis regard our attention was dwawn to the copies of extracts of few contacts as were filed as illustrations. 18. In order to further substantiate in his explanation as to how assessee was a developer, in this regard assessee filed certificate from the Pune Municipal Corporation regarding the contracts and also some other contracts. It was further submitted that even before Hon'ble ITSE, the assessee had explained as to how it was developer and detailed explanation was also furnished for the ambiguities pointed out by the department in the contracts. The explanation of the assessee is contained in the paper book at page No. 107 to 112 at para 35.4 to 36.1 and the same is reproduced below: 35.4 In the course of hearing on 06.02.2015, the Department reiterated, its stand as to the first three legal deficiencies in the case of the applicants summarized in para 35.2 above. In respect of the remaining two conditions mentioned therein, the department expressed its desire that the applicants should prove with reference to the individual contracts that their activities were that of a Developer and not of a works contractor. The Bench theri asked the applicants to furnish ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ase of Charchit Agrawal vs ACIT (129 TTJ438) and Home Tex Vs. CIT(2012) 20 Taxman.com 729 were filed and elaborated. Thereafter, the CIT(DR) proceeded to state that in the Assessment Year 2011-12, M/S Patil Construction & Infrastructure P Ltd took over the running business of road contracts from the proprietary concern, M/S Patil Construction and, as per the notes on accounts, the receipts from the ongoing contracts of the said proprietary Concern were shown by the Company in its receipts. It was further pointed out that the additional income on which the two applicants have claimed the deduction, it cannot be said to have been derived from the development of infrastructure, because the additional income has been arrived at by allocating the peak in the ratio of the turnover. The A.O., who was present during the hearing, then pointed out some specific ambiguities in respect of the following contracts: a) 'Improvement of road from Gulbarga Railway Station to join Ring Road": It is not clear whether it is new road or old road. b) 'Widening of lane of Widraf Nagar Janakpur Balangi Road (SH-3) Chhattisgarh: Contract does not give name of Patil Group Company. c) 'I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt, the work consists of 'widening of existing carriageways and strengthening including camber correction; construction of new road/ parallel service lane". Further details of the work will be clear from the drawings attached. The bid amount of Rs. 62.38 Crores is the value of the contract given which is the agreed amount of the work given. All the details are being filed in the certificate from the concerned Govt. Agencies as required including the defect liability period of the contract. d) The applicants have submitted that the bid was made by Patil Construction much before 01.04.2010, the date w.e.f the firm was converted into a company so the name of the firm is mentioned on the letter filed. A certificate with respect to the work done and other criterion as required for the claim of deduction under Section 80IA(4) have been filed. e) Only nominal turnover of Rs. 1,73,40462/- has been shown in the books up to 31.03.2011 as against the contract value of Rs. 24.49 Crores and profit of Rs. 7,95,669/- was claimed as deduction under Section 80IA(4). In the lower portion of the certificates it is clearly mentioned that the work consists of widening of roads. 36. DECISION ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er 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 the applicants. Further, the assessee is also entitled to make an enhanced claim for such deduction, in respect of the undisclosed income shown in the return filed u/s 153A and/or the additional income offered/computed in respect of the settlement application filed. It has been submitted by the learned AR that the applicants have made claim for deduction u/s 80IA of the Act in respect of the eligible contracts only. Further, it has been clarified that the above claim has not been made in respect of the works contract, which are primafacie not eligible for the same. Under the circumstances, we hold that the applicants are entitled to claim deduct ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elied upon by both the parties in respect of the allowability or otherwise of the deduction under Section 80IA of the Act. The statutory provisions, the circulars 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 a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and after meticulously analyzing the facts, we also reach to the conclusion that the assessee is a 'developer' within the meaning of sec.80-IA(4). As the assessee has made investments for carrying out the 'works' and has not merely supplied labour. The assessee has entered into a contract with the Govt. Bodies, which is one of the conditions for claiming deduction u/s. 80- IA(4) and in this regard the Explanatory Memorandum to Finance Bill, 2007{(2007) 289 ITR (St.) 292} states that the section intends to encourage private investment in developing infrastructure. The said memorandum also clarifies that only a person who enters into a contract with an eligible assessee u/s. 80-IA to carry out work, is ineligible that is not the facts of the present, therefore in our view the assessee is a 'developer' and not a mere contractor for the purpose of Sec. 80IA(4) of the Act. For the above proposition we rely upon the decision in the case of Adhunik Infrastructure ITA/1281/Kol/2015, wherein it was held as under: 9.3.2. Thus as per section 194C of the Act also, "works contract" does not include a contract wherein, the contractor in addition to employing labour, procures m ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the material and other requisites (a complete infrastructure) needed to carry out the desired work to the contractor who by applying his labour to the said material turns the material into a desired product. We find further that the memorandum explaining the provisions in the Finance Bill, 2007, reported in (2007) 289 ITR (St.) 292 at page 312 reads as under: "Section 80-1A, inter alia, provides for a ten-year tax benefit to an enterprise or an undertaking engaged in development of infrastructure facilities, industrial parks and special economic zones. The tax benefit was introduced for the reason that industrial modernization requires a passive expansion of, and qualitative improvement in, infrastructure (viz., expressways, highways, airports, ports and rapid urban rail transport systems) which was lacking in our country. The purpose of the tax benefit has all along been (or encouraging private sector participation by way of investment in development of the infrastructure sector and not for the persons who merely execute the civil construction work or any other works contract." Accordingly, it is proposed to clarify that the provisions of section 80- IA shall not apply to a p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ctor participation in development of infrastructure Under contract, assessee was responsible for supplying, installation, testing, commissioning and maintenance of cranes - Contract envisaged two different options, first being one under which assessee would carry out operation and maintenance of equipment, while second consisted of an option to JNPT to carry out operations and only maintenance was to be carried out by assessee - Assessee assumed responsibility of making equipment available for operation for a minimum number of days as stipulated in contract and would become liable to pay liquidated damages for non-availability of equipment after commissioning - After expiry of lease period of ten years, assessee was liable to hand over equipment to JNPT free of cost Whether, on facts, it could be said that assessee had carried on business of developing, maintaining and operating an infrastructural facility so as to entitle it to a deduction under section 80-IA - Held, yes 25. With regard to the AO's contention that an assessee ought to be performing cumulatively all the above three (3) functions in order to claim the deduction, is therefore erroneous and untenable. 26. In the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IA 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. 29. It is also imperative to mention here that the CIT(A) for A.Y 2018-19 has allowed the deduction under section 80IA of the Act for which the Department had preferred appeal before the Tribunal which was dismissed on technical issue. 30. Even before us the 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 allowing the claim of the assessee for claiming deduction under section 80IA of the Act and thus, in our view the intermediate assessment years, i.e., A.Y 2014-15, 2015-16 and 2017-18, cannot be disturbed and therefore the deduction under section 80IA of the Act deserves to be allowed considering the facts and circumstances of the case as narrated and discussed above. 31. No new facts or circumstances have been placed before us to rebut or controvert the findings so recorded by the ld. CIT(A). Therefore, after evaluation the entire facts and circumstances of the present case, we find no reason to interfere into or to deviated from th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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