TMI Blog2012 (12) TMI 338X X X X Extracts X X X X X X X X Extracts X X X X ..... undertaken in an economical and efficient manner in accordance with the conditions of the contract, technical specifications and engineering drawings and any amendments thereto, to optimize the use of the available resources and to minimize the cost, maximize the quality of the work, to expedite the construction so as to meet the completion deadlines, to ensure that there is no cost over-run etc. Supply of material and labour which constitute the physical aspects of the project cannot by itself ensure the execution or completion of the project; it has to be complemented by an equally important aspect of the supply of the designs, drawings and such other technical or technological inputs as well as supervisory and engineering services rendered by the assessee company Both the physical as well as technical aspects of the project are equally important and one cannot be separated from the other. Therefore assessee is entitled to the deduction both u/s 80HHB and u/s 80HHBA. In favour of assessee - ITA No.1186/2008 - - - Dated:- 9-10-2012 - S. Ravindra Bhat And R.V. Easwar, JJ. Appellant Rep. by : Mr. Sanjeev Rajpal, Sr. Standing Counsel Respondent Rep. by : Mr. S ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e s role in the above works are of consultancy and supervisory nature which cannot be treated as an integral part of execution of any project. The consultancy and supervisory services may be treated as an essential aid in the modern age of advance technology but it cannot be an essential and integral part of any project. From the services of any consultant, the original agreement holder uses its resources to the optimal potential without wastage of time, manpower and terms of contracts and increases its efficiency to some extent. It cannot be said that merely giving consultancy or supervising the design or making the work cost effective is the actual execution of any project. In view of this, the deductions u/s 80HHB 80HHBA is disallowed. 2. The CIT(Appeals), to whom the assessee appealed, examined the agreements and concluded that the role of the assessee constituted an integral part of the execution of the foreign projects or the World Bank aided projects. He noted that the assessee had undertaken foreign projects for construction of highways etc. pursuant to a contract entered into with the foreign governments/authorities. The primary condition of Section 80HHB was thus sat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consultants for roads, bridges, highways or airports and other infrastructural project under contract with the Ministry of Surface Transport, National Highway Authority of India, State PW highways and other Government departments both in India and abroad. There appears to be no dispute that the assessee was awarded a contract on the basis of global tender and the said project is aided by the World Bank. The National Highway Authority of India entered into two contracts for the execution of NH-2 highway, one contract was with the contractor for supply of material, equipment and labour and other contract was with the assessee as Engineers to the project. Thus, as per said agreement the assessee was required to provide engineering and technical inputs for the said construction of the Highway. The expression execution of housing project would include all the necessary activities for the execution and completion of the project such as survey, design, engineering supervision for construction work. The design consultancy and engineering supervisions are considered to be the most important part of execution of the project. Therefore, the engineering and consultancy are considered as an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... urpose of Section 80HHBA. In the aforesaid view of the matter, the Tribunal dismissed the appeal of the revenue upholding the order of the CIT(Appeals). 4. The revenue has filed the present appeal against the order of the Tribunal. For the sake of completeness of the record we may mention that the appeal was earlier disposed of by a Division Bench of this Court on 11.12.2008, upholding the view of the Tribunal on the basis of the rule of consistency alone, without examining the merits. Against the order of the High Court, the revenue filed Civil Appeal No.8509/2011 to the Supreme Court. By order dated 10.10.2011 the Supreme Court directed the High Court to give an authoritative pronouncement on the scope of Sections 80HHB and 80HHBA Act and to deal with the claim of the assessee de novo. 5. It is pursuant to the above order of the Supreme Court that the matter has come now before us. The substantial question of law which arises under section 260A is this: - Whether the Tribunal was right in law in holding, for the purposes of Section 80HHB and 80HHBA, that the services rendered by the assessee fell within the scope of the expressions execution of a foreign project or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ousing project . 8. The contention of the assessee right through was that the definition of the word project cannot be restricted to the mere physical activity of putting up the super-structure, plant and machinery, but should be expansively understood to take within its fold of utilisation of technical knowledge or rendering of technical services necessary to bring about the construction, assembly and installation. It is urged that in any project there are two sets of activities i.e. (1) construction of the work or assembly or installation of the plant and machinery or putting up the super-structure and (2) utilisation of the technical knowhow, imparting technical knowledge or information and also rendering all technical services including drawings, designs etc. A project, according to the assessee, takes within its fold both the activities namely, the physical as well as the technological aspects and the word project appearing in both the sections should be construed accordingly. The dictionary meaning of the project was relied upon to show that it includes not only the actual execution but also the planning, designing or devising the project or doing of such technical or ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... execution of the foreign projects as well as the World Bank housing projects on a day-to-day basis, or to apply a modern terminology, hands-on basis. The CIT (Appeals) also found that the agreement, besides detailing the nature of the services to be rendered by the assessee, also gives comprehensive details of the specific services to be rendered on site by the assessee s staff. These staff are to work at site on full time basis with full involvement in the project right from inception to completion. In other words, the finding is that there is a combination of efforts of both the contractor who would supply the material and labour and the services in the technical/consultancy/supervision field rendered by the assessee, in the fruition of the project. The interdependence of both the aspects is essential for the completion of the project and one cannot stand without the other. It is therefore, impossible to say that the assessee company is not involved in the execution of the project, both for the purpose of Section 80HHB and for the purpose of Section 80HHBA. Even taking into consideration the argument of the revenue that the expression to be interpreted is execution of a projec ..... X X X X Extracts X X X X X X X X Extracts X X X X
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