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2022 (10) TMI 650 - AT - Income TaxDeduction u/s 80IA(4) - Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc. - CIT-A treating the assessee as a "Developer" of infrastructure projects instead of "Work Contractor" as treated by the A.O.- HELD THAT:- To sum up, (i) first to see any new infrastructural facility has been put in place (and not mere repairs/ restoration/ upgradation/ strengthening etc. is done of the existing facility) (ii) In addition to works contract, the assessee undertakes addition responsibilities and risks attached to the project being undertaken, both financial risk as well as undertaking responsibility towards various other obligations attached towards successful completion and handling over the project including post completion performance guarantee, then he would, in our considered view, be eligible to deduction u/s 80-IA(4) of the Act. Deduction u/s 80-IA (4) in respect of project Number 6 Sabli Dam work - We are of the considered view that the assessee is not acting as a mere “works contractor” in respect of this project. The assessee has taken the responsibility of complete handholding of the project and also additional maintenance after 12 months post completion of project. Accordingly, we are of the view, that Ld. CIT(Appeals) has not erred in facts and in law in holding that the assessee is eligible for claim of deduction under section 80-IA (4) of the Act in respect of project Number 6. Contract No. 7: Tapi River, Kathor PKG-6 Irrigation - From the terms of the contract, primarily the work seems to involve restoration/upgradation/strengthening/maintenance of “existing” flood protection earthern embankment on the bank of river Tapi. The scope of work, in our view does not involve “development” of an infrastructure facility, as envisaged within the meaning of section 80-IA (4) of the Act. The work primarily has upgraded/strengthened the existing projects, but no development of infrastructural facility, in our view has taken place. Although, the assessee has undertaken responsibility of maintenance of the safer. 12 months after completion of the project, however, looking into the totality of facts, we are of the considered view that the assessee is not eligible for deduction under section 80-IA (4) of the Act We are of the view that Ld. CIT(Appeals) has erred in facts and in law in holding that the assessee is eligible for claim of deduction under section 80-IA (4) of the Act in respect of contract number 7 as mentioned above. Accordingly, we are of the view that the assessee is not eligible for claim of deduction under section 80-IA (4) of the Act in respect of contract number 7. Contract number 8 Tapi River, Kathor PKG-3 Irrigation - From a perusal of the contention of the order passed by Ld. CIT(Appeals), the scope and contents of contract number 8 and contract number 7 mentioned above are similar. Accordingly, observations in respect of contract number 7 would apply to contract number 8 as well. Accordingly, Accordingly, we are of the view that Ld. CIT(Appeals) has erred in facts and in law in holding that the assessee is eligible for claim of deduction under section 80-IA (4) of the Act in respect of contract number 7 as mentioned above.Thus assessee is not eligible for claim of deduction under section 80-IA (4) of the Act. Contract number 9: Bharuch 4, Lane Road - In this case, it may be useful to refer to CIRCULAR NO. 4/2010 [F.NO. 178/14/2010-IT(A-I)], DATED 18-5-2010, wherein Board considered the issue as to whether widening of existing roads constitutes creation of new infrastructure facility for the purpose of section 80-IA(4)(i) of the Income-tax Act, 1961. Vide the above Circular, CBDT clarified that widening of an existing Road by constructing additional lanes as a part of a highway project by an undertaking would be regarded as a new infrastructure facility for the purpose of section 80-IA(4)(i). However, simply relaying of an existing Road would not be classifiable as a new infrastructure facility for this purpose. Accordingly, in view of the above circular and in light of the observations made by ld. CIT(A), we are of the view that Ld. CIT(Appeals) has not erred in facts and in law in holding that the assessee is eligible for claim of deduction under section 80-IA (4) of the Act in respect of contract number 9 as mentioned above. CONTRACT NUMBER 10: GIDC CHEMICAL ZONE DAHEJ ROAD - As per terms of the contract, we are of the considered view that the assessee is not acting as a mere “works contractor” in respect of this project. The assessee has taken the responsibility of complete handholding of the project and also additional maintenance for 60 months post completion of project.Accordingly, we are of the view, that Ld. CIT(Appeals) has not erred in facts and in law in holding that the assessee is eligible for claim of deduction under section 80-IA (4) of the Act in respect of contract number 10 mentioned above. Contract number 11: GIDC Dahej Road - Assessee is not acting as a mere “works contractor” in respect of this project. The assessee has taken the responsibility of complete handholding of the project and also additional maintenance after 60 months post completion of project. In this case, it may be useful to refer to CIRCULAR NO. 4/2010 [F.NO. 178/14/2010-IT(A-I)], DATED 18-5- 2010, wherein Board considered the issue as to whether widening of existing roads constitutes creation of new infrastructure facility for the purpose of section 80-IA(4)(i) of the Income-tax Act, 1961. Vide the above Circular, CBDT clarified that widening of an existing Road by constructing additional lanes as a part of a highway project by an undertaking would be regarded as a new infrastructure facility for the purpose of section 80-IA(4)(i). However, simply relaying of an existing Road would not be classifiable as a new infrastructure facility for this purpose. CIT(Appeals) has not erred in facts and in law in holding that the assessee is eligible for claim of deduction under section 80-IA (4) of the Act in respect of contract number 11 mentioned above. Contract number 13: Bhopal Vidisa Road - We are of the considered view that the assessee is not acting as a mere “works contractor” in respect of this project. The assessee has taken the responsibility of complete handholding of the project and also additional maintenance for 12 months post completion of project. We would like to further add that in respect of the mobilisation advance received by the assessee, subject to certain conditions - CIT(Appeals) has not erred in facts and in law in holding that the assessee is eligible for claim of deduction under section 80-IA (4) of the Act in respect of contract number 13 mentioned above. Morbi Maliya Rural P-2 Road - It is evident that the assessee has not developed any infrastructure facility but only rendered services of civil work in the form of repairing and restoration of the existing road. A clear distinction can be made between widening an existing road by constructing additional lanes as part of the highway project vis-à-vis improving, maintaining and refurbishing an existing road. For a specific patch of road, as the taxpayer was only operating and maintaining an already existing four lane road by strengthening it, no new infrastructure facility came into existence. Laying a service road and laying a main line were two different activities and laying a service road could not be termed as a new infrastructure facility, to claim deduction under section 80-IA of the Act. See GMR Tambaram Tindivanam Expressways Ltd [2018 (11) TMI 1794 - ITAT BENGALURU]. We find no infirmity in the order of Ld. CIT(Appeals) with respect to Contract Number 1. Accordingly, in our view, the assessee is not eligible for claiming deduction under section 80-IA of the Act in respect to Contract number 1. Contract No. 2: KKS RJTI-A Road, Contract No. 3: Morbi Malaiya KP/RAJ/P-2 ROAD, Contract No. 4: Morbi TankaraKP/RAJ/P-3 ROAD, Contract No. 5:Nabard/RAJ/P-4WMT ROAD AND Contract No. 12:GKA KM42 TO 248 NH-8 NHAI ROAD - From perusal of the observations made by Ld. CIT(Appeals), it is evident that the assessee has not developed any infrastructure facility but only rendered services of civil work in the form of repairing and restoration of the existing road. In this case, it may be useful to refer to CIRCULAR NO. 4/2010 [F.NO. 178/14/2010-IT(A-I)], DATED 18-5-2010, wherein Board clarified that widening of an existing Road by constructing additional lanes as a part of a highway project by an undertaking would be regarded as a new infrastructure facility for the purpose of section 80-IA(4)(i). However, simply relaying of an existing Road would not be classifiable as a new infrastructure facility for this purpose. Accordingly, in our view, we find no infirmity in the order of Ld. CIT(Appeals) with respect to Contracts as not eligible for claiming deduction under section 80-IA(4).
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