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2015 (11) TMI 1665 - AT - Income TaxDeduction under section 80IA(4) - whether assessee was a developer and not contractor - Held that:- After analyzing the major clause of the agreement to determine the scope and nature of work undertaken, we found that assessee was a developer, therefore, eligible for claim of deduction u/s.80IA(4). After considering and deliberating on the meanings of the words "developer" and "contractor", scope of the work, responsibilities and risks undertaken by the assessee in each of the contracts the CIT(A) recorded a finding to the effect that the assessee is not a contractor but a developer. In coming to the above finding, in para 6.15, the CIT{A} also considered the clarificatory amendment by way of Explanation below sub section (13) of section 80IA by the Finance Acts 2007 and 2009 and held, after considering various judicial pronouncements, that the amendment does not impact development contracts. CIT(A) noted that for the Koyna and Udhampur projects, the assessee has already been held to be a developer by the Hon'ble ITAT in its own case in the earlier years. Moreover, the Koyna project has also been held to be eligible for deduction in B.T. Patil& Sons Belgaum Construction Pvt. Ltd. After analyzing the terms of the contract, the CIT(A) reiterated that for all the projects, based on the investment, financial and technical risks undertaken by the contractor, the assessee is a developer of the respective projects. As regards the issue whether, to be eligible for deduction, the assessee has to develop the entire infrastructure facility and not only a part thereof, the CIT(A) relied on the CBDT circular no. 4/2010, the decisions of the ITAT in the assessee's own case, B.T. Patil& Sons Belgaum Construction Ltd. [2013 (11) TMI 197 - ITAT PUNE ] and the Hon'ble Bombay High Court in ABG Heavy Industries Ltd. [2010 (2) TMI 108 - BOMBAY HIGH COURT ] We also found that the CIT(A) has dealt in great detail the scope of the work, risk and responsibilities undertaken by the assessee and after applying the proposition of law laid down in the following decisions arrived at the conclusion that assessee was a developer and not only a contractor. We uphold the action of CIT(A) for allowing claim of deduction u/s.80IA(4) in respect of all the projects. - Decided in favour of assessee. Disallowance under s.14A - Held that:- We have considered rival contentions and found that a clear finding has been given by the CIT(A) to the effect that amount was receivable on account of hire charges on machinery from JV or on account of assessee’s share in the JV firm. The question of disallowance of interest u/s.14A arises only when the funds have been given to JV/sister concern income from which is not liable to tax. The detailed finding recorded by CIT(A) at para 7.3 has not been controverted, accordingly, we do not find any reason to interfere in the order of CIT(A) for deleting the disallowance made u/s.14A Income assessable in the hands of the assessee on substantive basis - Held that:- No infirmity in the order of CIT(A) for taxing assessee’s share of income in assessee’s hand on substantive basis rather than on protactive basis. Accordingly, we dismiss the ground of assessee. Expenses incurred by the assessee to the projects eligible for deduction under s.80IA(4) - Held that:- Certain expenditure incurred by Panvel workshop and the USA office was attributed by the AO to the eligible units, consequently profit claimed as deduction was reduced. The contention of ld. AR was that these expenses were not directly incurred for earning the income which is liable to deduction u/s.80IA(4). However, it has not been brought on record by lower authorities to show that expenses incurred at Panvel workshop and USA office was incurred directly for assessee’s projects eligible for deduction u/s.80IA(4). As relying on M/s Liberty India Versus Commissioner of Income Tax [2009 (8) TMI 63 - SUPREME COURT ] we do not find any merit for reducing the profit of eligible undertaking by these expenses. Accordingly, we direct the AO not to reduce the profit eligible for deduction u/s.80IA(4). We direct accordingly. Disallowance of credit of TDS in respect of advances received - Held that:- Where tax is deducted at source on an amount which is not at all chargeable to tax, command of section 199 will have to be harmoniously and pragmatically read as providing for allowing credit for tax deducted at source in the year of receipt of amount, in which the tax was deducted at source.In respect of advance against work and material, we found that the said advance is reflected as a reduction from construction work in progress, which itself is valued at contract rates i.e. selling price. In other words, the income pertaining to such advance is already impregnated in the work in progress offered for tax during the impugned year itself. Thus we direct the AO to allow the credit for TDS in year of deduction itself. We direct accordingly. Denial of deduction u/s.80IA(4) in respect of NHPC project - Held that:- Resources are earmarked for NHPC in the budgetary allocations of the India budget, more particularly for Teesta Lower Dam project also. NHPC has signed a MOU whereby the commitments/assistance to be received by NHPC from the Government are enumerated. In the Ministry of Power, Government of India work allocation is made for NHPC, including in respect of Jammu & Kashmir; co-ordination, forwarding of returns to Prime Minister's office, Ministry of Home Affairs and other Departments, concerning power issues of J & K. in sum and substance, the objects to be pursued are ordinarily performed by Government Thus, assessee's contract with NHPC fulfills the condition prescribed in section 80IA(4)(i)(b) of the Act as it performs functions akin to state.No reason to disallow assessee’s claim for deduction u/s.80IA(4) in respect of project awarded by NHPC. We found that assessee’s contracts with NHPC fulfills all the conditions prescribed u/s.80IA(4)(1)(b) of the Act as it performs functions akin to estate. Accordingly, the AO is directed to allow deduction u/s.80IA(4) in respect of project awarded by NHPC. See Som Prakash Rekhi Versus Union of India [1980 (11) TMI 113 - SUPREME COURT OF INDIA ]
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