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2016 (7) TMI 315 - AT - Income TaxAllowability of deduction u/s.80IA - Held that:- The explanatory memorandum to Finance Act 2007 states that the purpose of the tax benefit has all along been to encourage investment in development of infrastructure sector and not for the persons who merely execute the civil construction work. It categorically states that the deduction under sec.80IA of the Act is available to developers who undertakes entrepreneurial and investment risk and not for the contractors, who undertakes only business risk. The learned counsel for the assessee stated before the Bench that the assessee at present has undertaken huge risks in terms of deployment of technical personnel, plant and machinery, technical know how, expertise and financial resources. After the amendment the section 80IA(4) read as (i) developing or (ii) operating and maintaining or (iii) 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 w.e.f.1-4-2002 by Finance Act 2001. Therefore, in the considered view of the Bench, the assessee should not be denied the deduction under sec.80IA of the Act, if the contracts involves design, development, operating & maintenance, financial involvement, and defect correction and liability period, then such contracts cannot be called as simple works contract to deny the deduction u/s 80IA of the Act. In the opinion of the Bench the contracts which contain above features to be segregated on this deduction u/s.80IA has to be granted and the other agreements which are pure works contracts hit by the explanation to sec.80IA(13), those work are not entitled for deduction u/s.80IA of the Act. The profit from the contracts which involves design, 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 the contracts accordingly and grant deduction on eligible turnover as directed above. Disallowance u/s 14A r.w.r. 8D - Held that:- 2% of the exempt income is allowed. More so, Rule 8D is not in the statute book in the assessment year 2006- 07 which was introduced w.e.f. 24.3.2008. Being so, we do not find any infirmity in the order of the CIT(Appeals) Addition towards license fee - revenue or capital expenditure - Held that:- This issue is squarely covered by the judgment of the Jurisdictional High Court in the case of CIT v. Southern Roadways Ltd. (2007 (6) TMI 193 - MADRAS HIGH COURT ), wherein it was held that the expenses incurred by the assessee for installation of software packages which revolves on the modern communication technology enables the assessee to carry its operation effectively, efficiently, smoothly and profitably and it does not work on a stand alone basis. Such software enhances the efficiency of the operation being an aid in the manufacturing process rather than the tool itself. Therefore, the payment for such application software, though there is an enduring benefit, does not result in acquisition of any capital asset and it merely enhances productivity or efficiency of the assessee. Hence, it is to be treated as revenue expenditure
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