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TMI Blog2012 (5) TMI 181X X X X Extracts X X X X X X X X Extracts X X X X ..... and taxed accordingly. The CIT(A) held that the Assessing Officer has specifically not brought into the assessment order as to the debit of a specified amount in a specific year. In a general manner, the assessment order speaks of the claim of the assessee in the earlier year which does not show the year of assessment, the amount allowed by the Department warranting taxation of the sales tax refund in this year. Since the assessee has taken into account the sales tax refund from the Departmental recoveries and deducted only the net recoveries, the adjustment has already taken place while arriving at the gross bills on which 11.5 per cent income has been estimated and according to the CIT(A) no separate addition is warranted. According to the DR the provisions of section 41(1) of the Act are clearly applicable and he submitted that the assessment order to be sustained. On the other hand, the learned AR submitted that the profit of the assessee is estimated at 11.5% of the gross bills after deducting the departmental recoveries and material purchases. The departmental recoveries include sales tax deducted by the Department. Sales tax refunded by the Department has been reduced from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 12.5% of gross contract receipts. 5. We have heard both the parties and perused the material available on record. In our opinion, the estimating of income at 4% of the sub contract for the A.Ys. 2001-2002 and 2002-03 and at 12.5% for the A.Y 2003-04 is very reasonable. The Tribunal is consistently holding that income of the assessee at 9% on main contract executed by the assessee, it would be 8% of gross receipt in case of contract taken by the assessee on sub-contract basis and 4% in case of contract given by the assessee to third party on sub-contract basis and thereafter the assessee is entitled for no deduction towards depreciation as all other deductions deemed to have been allowed u/ss. 30 to 38 of the Act. For this purpose, we place reliance on the order of the Tribunal in the case of Teja Constructions v. Asstt. CIT [2010] 39 SOT 13 (Hyd.) (URO). Further as noted by the CIT(A) in his order for the A.Y. 2003-04 the Tribunal has already confirmed the application of net profit at 12.5% on contract receipt in the case of this assessee for the earlier years. In view of this discussion, we confirm the order of the CIT(A) for all these assessment years. This ground is dismissed. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referring the explanations inserted in Finance Act 2009 retrospectively. The learned CIT(A) confirmed the view taken by the Assessing officer and for these assessment years, the assessee is in appeal before us. 11. The assessee is a company which derives income from construction contract works. For the sake of convenience, we take the appeal pertaining to the assessment year 2007-08. The assessee has filed its return of income on 30-10-2007, showing income of Rs. 16,51,57,700/- after claiming deduction of Rs. 36,11,58,788/-under section 80-IA of the Act. During the assessment proceedings, the assessing officer has asked the assessee to furnish the details of projects which are executed by it during the previous year. In response to this, the assessee has furnished the list of those project works which were executed during the previous year and in respect of which it has claimed deduction under section 80-IA of the Act. During the assessment proceedings, the assessing officer has obtained the copies of works contract agreements entered into by the assessee in respect of such project works and examined the same for verifying the claim of the assessee for deduction under section 80- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... it is clear that the deduction is allowable to: (a) any company incorporated; (b) which entered into agreement with Government; or any government body; and undertakes development of infrastructure facility. 14. The purpose for which the said section was amended with effect from the assessment year 2000-01, can be traced to a brochure issued by the Government of India, Ministry of Roads, Transport and High Ways in August, 2001. He has taken support from the aforesaid brochure, a copy of which is filed which is kept on record. In the said brochure, the Government of India extracted some of the decisions taken by it to bring in the development of infrastructure facility in the country. He pointed out that the Government provided the benefits to the Indian entrepreneurs by providing contract packages to the private enterprises. While providing benefits, the government specifically specified certain grants only to BOT Schemes. For the other schemes all the other benefits are made available. The classification provided in the brochure clearly indicates that the schemes of packages are meant for all the enterprises whether engaged in the development of infrastructure or un ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ss of developing or carrying on the business of operating and maintaining or carrying on the business of development, operating and maintaining the infrastructure facility. Therefore, there is no requirement that all the three activities should have been carried on by a single enterprise so as to enable it to claim deduction under section 80IA(4) of the Act. This view is also supported by the decision of the Bombay High Court in the case of CIT v. ABG Heavy Industries Ltd. [2010] 322 ITR 323/189 Taxman 54. It mentioned clearly that the three conditions development, operation and maintenance were not intended to be cumulative in nature. Therefore, any assessee who has undertaken any one of the activity is eligible for deduction under section 80IA(4) of the Act. The Mumbai Bench of the ITAT in the case of Asstt. CIT v. Bharat Udyog Ltd. [2009] 118 ITD 336/[2008] 24 SOT 412 (Mum.) also held that after the amendment of Section 80IA(4) it is applicable to enterprises who are engaged in developing infrastructural facility. Earlier, the Mumbai Bench in the case of Patel Engg. Ltd., v. Dy. CIT [2005] 94 ITD 411 also observed that the civil contractors who are developing the infrastructure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... who executes the development work and carries out the civil construction work is a developer. The Board is also of the view that those persons working for others are the works contractors and not the developers. In the case of the assessee, the assessee itself undertook the work of development and therefore, it is a developer, even according to the Circular issued by the Board. It is submitted that it is carrying on such development activity and deriving income. 19. He drew our attention to the various activities undertaken by the assessee which are entitled for deduction u/s 80IA of the Act which are as follows: S. No. Description of work along with date of Agreement Name of the Employer Clause under which possession is taken over by the assessee Clause under which possession is handed over to Govt. Clause No. and period of maintenance 1. Widening and strengthening of Cuddapah-Renigunta Road. Agreement dated 1.03.1999. Engineer-in-Chief, PWD (Roads & Buildings), Admn. and EAP, Govt. of Andhra Pradesh. Sub-Clause 42.1 of Agreement Sub Clause 48.2 (a) of Agreement Sub Clause 49.1 of Agreement. Period of maintenance (DLP) is 12 months. 2. Widening an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Period of maintenance (DLP) is 12 months. 9. Widening and strengthening of Kodumur-Yemmiganur road from km 0/0 to km 10/270 and 27/0 to 32/430 and Devanakonda-Pathikonda roads from 0/0 to 18/268 in Kurnool Dist. Agreement dated 01.03.1999. Superintending Engineer (R&B), APHM & ECRP Circle, Nandyal. Site was handed over on 01.03.1999. Period of maintenance (DLP) is 365 days. 10. Executing the work of improvements to Hyderabad to Bijapur Road from km 80/0 to 109/0 in Ranga Reddy Dist. Agreement dated 03.03.1999. Superintending Engineer (R&B), APHM & ECRP Circle, Warangal. Clause 21 of the Agreement Clause 35 of Agreement. Period of maintenance (DLP) is 365 days. 11. Strengthening of SH 151, 60A, 12 from Ladvel-Dakor-Godhra and paving of shoulders (km 18/700 to km 0/500 & km 90/100 to km 135/700) Agreement dated 25.12.2002. Secretary, Roads & Buildings Dept., 14/2, New Sachivalaya, Gandhinagar, Gujarat. Sub Clause 42.1 as per FIDIC Sub Clause 48.1 as per FIDIC Sub Clause 49.1 as per FIDIC. Period of maintenance (DLP) is 12 months. 12. Renigunta-Guntakal section - Rebuilding of double line bridge No. 393 across river Chey ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ed 12.08.2005. National Highways Authority of India, New Delhi. Sub Clause 41.1 of Agreement (commencement of work) Sub Clause 48.2 of Agreement Sub Clause 49.1 of Agreement. Period of Maintenance (DLP) is 365 days. 20. According to AR an analysis of the above works undertaken by the assessee clearly indicates that it carries on the activities of development of infrastructure facility. The counsel for the assessee submitted drew our attention to one copy of the complete agreement entered into by it with NHAI by stating that all the agreements are similar. 21. It is submitted by counsel for assessee that, as per the agreement, the possession of the site is handed over to the assessee by the Government. The assessee takes possession and access to the property and thereafter it shall be the responsibility of the assessee to develop the said area into more useful infrastructure facility. In the process, every act required (whether mentioned in the agreement or not) in converting the area into more useful one shall be that of the assessee. The assessee has to undertake the responsibility of maintenance of the existing traffic and there should not be inconvenience to the regular tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... se companies entering into agreement with the government or other Government bodies/corporations. It is also made clear that the deduction is available for the corporate bodies entering into agreement with the government organizations. Therefore, the main provision makes it clear that the deduction is available to companies entering into agreement with government bodies or Government. Therefore, it is not correct to read the explanation to mean that the government body is eligible for deduction under section 80IA of the Act and the company entering into agreement with such government body is not eligible for deduction. 23. In so far as the meaning of the word "works contract" is concerned, the ld. AR placed reliance on the judgement of Bombay High Court in the case of CIT v. Glenmark Pharmaceuticals Ltd., [2010] 324 ITR 199/191 Taxman 455 (Bom.) wherein held that in a works contract, the contractee would provide the material and all other requirements in the process of manufacture/production. The contractor merely carries on the work with the material supplied by the contractee and the knowledge supplied by the contractee. Further, in a works contract, the risk is undertaken by th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted by the AR that the word "contractor" used in the agreements entered into would not debar the assessee from being a developer. In fact the assessee entered into agreement for development of infrastructure facility and therefore, it is a contractor. Therefore, the authorities are not justified to hold that the assessee is not a developer simply because he is mentioned as a contractor in the agreement. The Revenue authorities cannot make a distinction between the words "Contractor" and "developer". The conditions mentioned in the Income-Tax Act in Sec. 80-IA are that the assessee shall be a company and should have entered into an agreement with the Government or Government body for development of the infrastructure facility. Even if it did so in the process of fulfilling the contract, it would be eligible for deduction under the said section. Therefore, it was submitted that both the Assessing Officer and the learned Commissioner of Income-tax (appeals) are not correct in rejecting the claim made by the assessee for deduction under sec. 80IA(4) of the Act. The lower authorities are of the view that separate books of account were not maintained for each of the work. In this regard ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roduce words into the Act to give a different meaning. They have to read the provisions as they exist in the Act. A plain reading of the provisions of section 80IA(4) does not indicate that the assessee to be eligible for deduction should have introduced its own funds. Various courts have held that the provisions allowing relief should be read liberally and nothing can be added to the words used in the Act so as to disentitle an assessee for the relief and also various courts have held that it is not open for the Department to read what is not there either in the documents or in the statutory provision, for which he placed copies of the case laws in the paper book submitted. 26. On the other hand, the learned departmental representative submitted written submissions based on the arguments put forth before us. He relied on the orders of the lower authorities and submitted that to be eligible for deduction under section 80IA(4) of the Act, all the three conditions mentioned in the sub-section should be cumulatively fulfilled. According to him, the assessee should have been engaged in development and maintenance of infrastructure facility. According to him, a mere developer is not el ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible for deduction. Therefore, it applies to those enterprises which were earlier eligible for deduction under sub section (4A) and which will be continued to be eligible for deduction under sub-section (4). Such provision has no application to the case of the assessee, which became eligible for deduction under sub-section (4) of Sec. 80IA of the Act. Therefore, sub-clause (c) came into play only in respect of those concerns which claimed deduction for maintaining and developing the infrastructure facility and not for the assessee who only develops. The meaning of the word "developer" and the eligibility of the business to claim deduction meant for 'development of infrastructural facilities' within the meaning of section 80IA has to be seen in the context of the genesis and legislative history of the section as held by the Supreme Court in the case of CIT v. N.C. Budharaja & Co. [1993] 204 ITR 412 (SC) the provision as introduced by the Finance Act, 1991 as amended by Finance Act, 1996, Finance Act, 1999, Finance Act, 2001, up to Finance Act 2007 and Finance Act, 2009 and as explained by Circular 794 dated 9-8-2000 Circular 779 dated 14-9-1999 (240 ITR st. 32), Circular 794 dated 9 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... upon. The partial and sectional nature of the proposed work is immediately clear from this notice and it is also apparent from this that the section of the road proposed for improvement has no independent existence capable of satisfying the requirement of section 80IA(2). Therefore, this project is incapable of commencement of operations by itself, or to quality the larger infrastructure facility of which it is a part. The assessee also gets mobilisation advance as well as interest-free advance for machinery purchase and there is no element of entrepreneurial initiative or financial participation of the contractor in this kind of a project. The successful bidder merely executes a Government contract and gets paid for it at mutually agreed rates and the nature of responsibilities assumed under the other contracts as per agreements. It is further stated that during the hearing, the authorised representative of the assessee was at pains to emphasise that the assessee undertook maintenance work and was hence in the same league as a developer. However, it is clear from the document as furnished in the paper book that the maintenance function was actually remedying of defects for a pres ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... mitted that these decisions supported the proposition that (i) the ITAT's decision in the case of B.T. Patil & Sons Belgaum Construction (P.) Ltd. v. Asst. CIT [2010] 35 SOT 171 (Mum.) (LB) is no longer good law, and (ii) the distinction between developer and contractor is no longer relevant in the context of changed law explained by the Mumbai High Court in the case of ABG Heavy Industries Ltd. (supra) and followed within its jurisdiction by the Pune Bench of the ITAT in the case of Laxmi Civil Engg. (P.) Ltd. (supra). It is submitted that such reliance is neither correct nor relevant in deciding the issues on hand. This position is elaborated in the following paras. In the case of Laxmi Civil Engg. (P.) Ltd., (supra) the argument of the assessee that was accepted by the ITAT, Pune Bench is broadly- the assessee is a contractor, every contractor is a developer as per the Mumbai High Court decision in the case of ABG Heavy Industries Ltd. (supra) and a developer need not operate and maintain the infrastructure facility, as held by the Mumbai High Court in the case of ABG Heavy Industries Ltd. (supra). It is submitted that the decision of the Pune Bench of the ITAT in the case of Ci ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ructure contract cases, only in so far as the facts of the case are compatible. For the same reason, there can be no adverse implication for the precedent value of the B.T. Patil case. As submitted hereinabove, on immediate and necessary consequence of the retrospective amendment introduced by the Finance Act, 2009 inserting Explanation below section 80IA(13), is that any business transacted in terms of a works contract stands disqualified from seeking deduction under section 80I(A(4). The decision of the Mumbai High Court in the case of ABG would have no application from this point of view also. Since the agreement in ABG was a BOLT agreement and not a works contract their Lordships had no occasion to consider the Explanation introduced in Finance Act, 2009 with effect from 1-4-2001. Even if it is assumed, hypothetically, that the agreement in ABG was in the nature of a works contract, or that every contractor was a developer, the decision of the Mumbai High Court without considering the Explanation cannot operate to overrule the ITAT's decision in the case of B.T. Patil & Sons Belgaum Constructions (P.) Ltd. (supra) where the Bench of the Tribunal considered the effect of the exp ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lity in question was not upheld because the benefits of the section were held to be available to BOT/BOLT contracts by CBDT Circulars, which were any way binding on the IT authorities. In the case of the present case, it is not even claimed by the assessee that the work was carried out under a BOT/BOLT contract, or that it was not a works contract. It is further submitted that the distinction between business of development operation/maintenance and development/operation/maintenance was removed with the change in law effective from 1-4-2002, and that this was explained by the decision of the Mumbai High Court in the case of ABG Heavy Industries Ltd. (supra) is fallacious for the following reasons: "The Mumbai High Court decision was rendered in the context of a BOLT contract, which was in any case clarified by the Board Circular to qualify for the deduction under section 80IA. It was noticed by their Lordships that the subsequent changes in the law effective from 1-4-2002 merely mirrored this liberalised outlook. That is not the same thing as saying that a business in the nature of a works contract qualified for the deduction in spite of not operating/maintaining the facility. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IA of the Act and submitted that the deduction under sub-section (1) would be available for a period of 10 consecutive assessment years out of 15 years beginning from the year in which an undertaking or enterprise develops, begins to operate any infrastructure facility or starts providing telecommunication system. Therefore, he is of the view that unless operation of the infrastructure facility is also undertaken; the assessee would not be eligible for deduction. It is submitted that this section provides for an option to the assessee to choose to claim deduction for any 10 years out of 15 years commencing from the date of commencement of the maintenance and operation. For that limited purpose of facilitating an assessee who becomes eligible for deduction under section 80IA(4) in choosing the period of 10 years, the said provision was introduced. This cannot be considered as applicable to every enterprise eligible for deduction under section 80IA. This would apply to an enterprise which requires choosing the period of 10 years during which deduction is to be claimed. Only when the assessee has to exercise the choice, this section comes to operation. Other-wise this section would no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evelopment of the infrastructure facility. The assessee has to wait for a period of 56 days/28 days for the payment after submission of the bill. Further the Government of India obtained the finance from outside the Country for the purpose of development of infrastructure facility. 36. The assessee utilized the funds either of its own or borrowed from others for the purposes of undertaking the development activity. Therefore, it cannot be said that the assessee has not utilized its own funds. The assessee also utilized its own technical personnel and undertook risk in the process of the business activity. It is not correct to mention that the assessee did not invest its own funds and did not employ its technical personnel. The requirement of the tender includes possession of capital, capability of obtaining loans from the banks or financial institutions and the availability of the technical personnel. The assessee would be a successful bidder only when such requirements are fulfilled. The requirements of the tender documents are available at page 124 of the agreement submitted before the Honourable ITAT. The assessee undertook all the risks involved in the activity. According to c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as Economic Co-operation Fund, towards the cost of development. Accordingly, a tender was issued by the NHAI. Section 31 of the NHAI Act empowers the Central Government to temporarily divest the NHAI from development by handing it over to any person authorized for the purpose. The NHAI is authorized by the Government to entrust the duty of development of project to any other eligible person. In the process, the assessee became the successful bidder and undertook the work of development. 38. Further the ld. AR submitted that the learned DR mentioned that tax was deducted at source by the Government under sec. 194 C of the Act and therefore, the work undertaken is only a works contract and not development. In this regard the assessee submitted that the provisions of sec. 194 C make it clear that deduction of tax has to be made from payments made in respect of "any works". The work "any work" denotes the work of development of infrastructure facility also. Therefore, the observation of the learned DR is not correct. Further it is submitted that all the works were not entrusted by the NHAI alone. It can be seen from the list annexed that some of the works were entrusted by the Governm ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... referred to by the learned DR not on the point. It also clarifies the position as obtaining prior to 1999-2000 and later. It does not apply to the years under consideration. 40. The learned DR also refers to the Circular No. 3 of 2008 dated 12-03-2008. In the said circular it was made clear that the benefit under section 80IA is allowable in a case where a person makes investment and he executes the development work i.e. carrying out the civil construction work. In contrast to this, a person who enters into a contract with any other person for executing the works contract will not be eligible for the tax benefits under section 80IA. It is submitted that the assessee makes the investment on its own in so far as the works are concerned and itself executes the development work. The circular clarified that the execution of the civil work is equal to development. This makes it very clear that the assessee is eligible for deduction under section 80IA of the Act as the assessee invested its own finance in the process of development and undertakes the development work on its own with all the risks involved. Therefore, the circular supports the claim of the assessee that it is a developer. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the case of ABG Heavy Industries Ltd. (supra) held that the three conditions mentioned in Sec. 80IA(4) need not cumulatively be fulfilled. Therefore, any observation to the contrary by the Special Bench is not relevant at present. The submissions of the learned DR of A Bench are mostly to the effect that the assessee is not a developer, but only a works contractor and that the assessee's who engage themselves in all the three activities alone would be eligible for deduction under sec. 80IA of the Act. It is already submitted in detail that it is a developer and not engaged in the works contract alone and that for the purpose of being eligible for deduction under section 80IA of the Act, one need not carry on all the activities of Develop, operate and maintenance. The learned DR also referred to the copy of the agreement submitted before the Honourable ITAT. According to the learned DR, the agreement used the word "contract" for completion of "works" and the Government made payments including the mobilization advance. Therefore, the learned DR is of the view that the assessee is engaged in mere works contract and undertook the work only with the money belonging to the Government. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80 IA of the Act. We find that the word "owned" in sub-clause (a) of clause (1) of sub section (4) of Section 80IA of the Act refer to the enterprise. By reading of the section, it is clear that the enterprises carrying on development of infrastructure development should be owned by the company and not that the infrastructure facility should be owned by a company. The provisions are made applicable to the person to whom such enterprise belongs to is explained in sub-clause (a). Therefore, the word "ownership" is attributable only to the enterprise carrying on the business which would mean that only companies are eligible for deduction under section 80IA(4) and not any other person like individual, HUF, Firm etc. 45. We also find that according to sub-clause (a), clause (i) of sub section (4) of Section 80-IA the word "it" denotes the enterprise carrying on the business. The word "it" cannot be related to the infrastructure facility, particularly in view of the fact that infrastructure facility includes Rail system, Highway project, Water treatment system, Irrigation project, a Port, an Airport or an Inland port which cannot be owned by any one. Even otherwise, the word "it" is us ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ernment does not provide any material to the assessee. It provides the works in packages and not as a works contract. The assessee utilizes its funds, its expertise, its employees and takes the responsibility of developing the infrastructure facility. The losses suffered either by the Govt. or the people in the process of such development would be that of the assessee. The assessee hands over the developed infrastructure facility to the Government on completion of the development. Thereafter, the assessee has to undertake maintenance of the said infrastructure for a period of 12 to 48 months. During this period, if any damages are occurred it shall be the responsibility of the assessee. Further, during this period, the entire infrastructure shall have to be maintained by the assessee alone without hindrance to the regular traffic. Therefore, it is clear that from an un-developed area, infrastructure is developed and handed over to the Government and as explained by the CBDT vide its Circular dated 18-05-2010, such activity is eligible for deduction under section 80IA(4) of the Act. This cannot be considered as a mere works contract but has to be considered as a development of infra ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e Act, which ultimately culminated into Amendment under section 80IA of the Act, in the Finance Act 2001, to give effect to the aforesaid circulars issued by the CBDT. We also find that, to avoid misuse of the aforesaid amendment, an Explanation was inserted in Section 80IA of the Act, in the Finance Act-2007 and 2009, to clarify that mere works contract would not be eligible for deductions under section 80IA of the Act. But, certainly, the Explanation cannot be read to do away with the eligibility of the developer; otherwise, the parliament would have simply reversed the Amendment made in the Finance Act, 2001. Thus, the aforesaid Explanation was inserted, certainly, to deny the tax holiday to the entities who does only mere works contact or sub-contract as distinct from the developer. This is clear from the express intension of the parliament while introducing the Explanation. 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 section 80IA o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... bsp; (e) Repair/rehabilitation of existing bridges. (f) Construction/reconstruction of bridges. (g) Improvement of drainage system, widening/providing culverts, cattle crossings etc. (h) Other miscellaneous items pertinent to the project. (i) Maintenance of the said infrastructure for a period of 48 months (during the period of development of 36 months and defect liability period of 12 months) 49. For this purpose, the possession of the site is handed over to the assessee by the Government. The assessee takes possession and access to the property and thereafter it shall be the responsibility of the assessee to develop the said area into more useful infrastructure facility. In the process, every act required (whether mentioned in the agreement or not) in converting the area into more useful one shall be that of the assessee. The assessee has to undertake the responsibility of maintenance of the existing traffic and there should not be inconvenience to the regular traffic. The developed area after completion of the development of infrastructure is handed over to the Government. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evelopment of the infrastructure sector and not for the persons who merely execute the civil construction work or any other work contract has been encouraged by giving tax benefits. Thus the provisions of section 80IA shall not apply to a person who executes a works contract entered into with the undertaking or enterprise referred to in the section but where a person makes the investment and himself executes the development work, he carries out the civil construction work, he will be eligible for the tax benefit under section 80IA." 53. The above order was followed in subsequent assessment years 2007-2008 & 2008-09 in ITA Nos. 1312 & 1313/Mds/2011 vide order dated 18.11.2011 in the case of the same assessee. 54. It is also pertinent to mention herein that this Tribunal in similar circumstances, in the case of GVPR Engineers Ltd. v. Asstt. CIT Hyderabad in ITA No. 347/H/08 vide order dated 29th February 2012 has taken similar view and granted deduction u/s 80IA of the Act. We also came across an order of this Tribunal on this issue in the case of R.R. Constructions wherein the Chennai Bench of the Tribunal in its order dated 3.10.2011 in I.T.A. No. 2061/Mds/2010 for assessment yea ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the development of infrastructure facility, for the simple reason that he is not having the right/authorization to operate the infrastructure facility and to collect toll there from, has no other source of recoupment of his cost of development. While filing the return, the assessee had made claim under section 80IA(4) of the Act. 4. The assessee has also produced all six agreements regarding six projects undertaken before the Assessing Officer, whose copies are available before us also. It is a fact that even after taking a contract from the Government, if the assessee develops infrastructure facilities, it would be regarded as a 'developer' and not as a 'works contractor'. The assessee firm has carried on entire construction/development of the infrastructure facilities and satisfy all the conditions of section 80IA(4)(i)(a). It is undeniable fact that the assessee has taken development of infrastructure facility agreement from the State Government/local authority. A contractor who develops the infrastructure facility becomes a developer to claim exemption under section 80IA(4). The Hon'ble Bombay Bench of ITAT while deciding the case of Patel Engineering Ltd. v. DCIT in ITA N ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y declared that nothing contained in this section(i.e. 80IA) shall apply to a person who executes a works contract entered into with the undertaking or enterprise, as the case may be." In contrast to this, a person who enters into a contract with another 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. 10. We have found that the assessee-company is a works contractor, who has entered into agreement with the local bodies to execute certain part of the work awarded to it through contract for infrastructure facility. It is true that where a person who makes infrastructure and himself executes development work and carries out civil work will be eligible for tax benefit u/s 80IA of the Act. In contrast to this, a person who enters into a contract with another person for executing works contract, will not be eligible for tax benefit u/s 80IA. It was clarified by the Circular No. 3 of 2008 dated 12.3.2008 that the provisions of section 80IA shall not apply to a person who executes only work contracts and only those who make the development work will be eligible for tax benefit u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ons for a common business purpose. The mens legis with reference to developer of infrastructure facility can be gathered from the memorandum explaining the provisions in the Finance Bill, 2007, reported in [2007] 289 ITR (St.) 292 at page 312, which reads as under : "Section 80-IA, 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 for 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 person who executes a works contract entered into with the undertaking or enterprise referred to in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g Ltd (supra). In this regard, we perused the above cited para-22 of the said judgment and for the sake of completeness, the said paragraph is reproduced as under:- "22. The submission which was urged on behalf of the Revenue is that Clause (iii) of sub-section (4A) of section 80-lA, one of the conditions imposed was that the enterprise must start operating and maintaining the infrastructure facility on or after 1st April, 1995. The same requirement is embodied in sub clause (1) of sub-clause (4) of the amended provisions. It was urged that since the assessee was not operating and maintaining the facility, he did not fulfil the condition. The submission is fallacious both in fact and in law. " That the assessee was maintaining the facility is not in dispute. The facility was commenced after 1st April, 1995. Therefore, the requirement was met in fact. Moreover, as a matter of law, what the condition essentially means is that the infrastructure facility should have been operational after 1st April, 1995. After Section 80IA was amended by the Finance Act, 2001, the section applies to an enterprise carrying on the business of (i) developing; or (ii) operating and maintaining; or (iii ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... developing the infrastructure facilities since he does not operate and maintain Infrastructural facilities, cannot be expected to fulfil the condition at sub clause (c) which is an impossibility and the requirements to fulfil the said condition shall amount to absurdity and therefore uncalled for. Therefore, we find requirement of harmonious reading of sub-clause (c) vis-à-vis of clause (i) of section 80IA(4) of the Act. Thus, the discussion in High Court's decision in paragraph-22 extracted above, is directly applicable to the facts of the case and eventually is entitled for the deduction under section 80IA(4) of the Act. Accordingly, the modified ground, which is common in all the four appeals is allowed in favour of the assessee. " 12. Let us remind ourselves that the Hon'ble Supreme Court in the case of Bajaj Tempo Ltd v. CIT, 196 ITR 188, has ordained that taxing statute granting incentives for promoting growth and development should be liberally construed. 13. Now, the question arises as to whether the term 'contractor' is not essentially contradictory to the term 'developer'. In fact, in every development the term 'developer' will definitely be a 'works contractor' ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... local bodies, railways, Central/State Governments. In fact, as per the terms of agreement, even the initial proposals formulated by the Department which are stated to be tentative, the assessee has the liberty to make different proposals without detrimental to the general features of the Departmental proposal, like Road level/bottom of deck level, MFL, Sill level, Linear water way, width of the bridge etc. Right from the drawings to the work of construction has been done by this assessee and has borne the cost itself. The company has constructed, delivered and maintained and security is also maintained thereafter. So, this is a case of transfer of property in chattel and not a contract of service. A 'developer' as per the Advanced Law Lexicon means "a person engaged in development or operation or maintenance of Special Economic Zone, and also includes any person authorized for such purpose by any such developer". In the case of ACIT v. Bharat Udyog Ltd, 'F' Bench of ITAT Mumbai, has concluded that any assessee who is engaged in developing the infrastructure facility and also operating and maintaining the same, is entitled to the benefit of deduction u/s 80IA(4). A copy of this dec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... here from whereas in 'BT' it is by way of periodical payment by the Government/Authority. The land involved in infrastructure facility/project always belongs to the Government/Local authority etc., whether it be the case of 'BOT' or 'BOOT' and it is handed over by the Government/Authority to the developer for development of infrastructure facility/Project. The same has been the position in the given case as well. So, deduction u/s 80IA(4) is also available to this assessee which has undertaken work of a mere 'developer'. Rather, the statutory provision as contained in section 80IA which provides for deduction of infrastructure facility no way provides that entire infrastructure facility project has to be developed by one enterprise. Thus, as per section 80IA the assessee should develop the infrastructure facility as per the agreement with the Central/State Government/Local Authority. Entering into a lawful agreement and thereby becoming should, in no way be a bar to the one being a 'developer'. In this regard, as we have already stated, the decision of ACIT v. Bharat Udyog Ltd, 118 ITD 336 and Patel Engineering Ltd v. Dy. CIT, 84 TTJ 646, are relevant. As per Circular No. 4/2010 [F ..... X X X X Extracts X X X X X X X X Extracts X X X X
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