TMI Blog2012 (12) TMI 760X X X X Extracts X X X X X X X X Extracts X X X X ..... see. 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 24 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 undeveloped area, infrastructure is developed and handed over to the Government and as explained by the CBDT vide its Circular, dated 18-5-2010, such activity is eligible for deduction under section 80-IA(4). This cannot be considered as a mere works contract but has to be considered as a development of infrastructure facility. Therefore, the assessee is a developer and not a works contractor as presumed by the revenue. The circular issued by the Board clearly indicate that the assessee is eligible for deduction under section 80-IA(4). The department is not correct in holding that the assessee is a mere contractor of the work and not a developer. Nothing either on facts or in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rores to the income eligible for deduction under section 80IA for assessment year 2005-06. - IT APPEAL NOS. 2197 TO 2199, 2200 to 2202 (MUM.) OF 2008 - - - Dated:- 19-12-2012 - D. KARUNAKARA RAO AND VIVEK VARMA, JJ. Tralashwala and Harshvardhana for the Appellant. Pravin Kumar for the Respondent ORDER Per Bench - The revenue has filed six appeals against the order of CIT(A)-III, Mumbai, dated 23.01.2008, covering assessment years 2000-01, 2001-02, 2002-03, 2003-04 2004-05 and assessment year 2005-06 also dated 23.01.2008 wherein CIT(A) has deleted the additions on account of disallowances under section 153A of the Income Tax Act, 1961. 2. The assessee has also filed Cross objections (CO) against the same orders of the CIT(A), covering assessment years 2000-01, 2001-02, 2003-03, 2003-04 2004-05. 3. The following grounds have been raised by the department in the appeals, filed : (i) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of deduction under section 80IA of the I.T. Act without appreciating the fact that the assessee is not eligible for deduction under section 80IA in most of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessments would fall and grounds filed by the department would become infructuous. 9. We, therefore, proceed and take up COs filed by the assessee. The AR pointed out that in assessment years 2000-01 to 2004-05, there is just one solitary ground and that is against the legality and applicability of provisions of section 153A on the assessee for the assessment years in question. According to the AR, though, it is a case of search and seizure, provision of section 153A would not be applicable on the assessee. 10. The facts in brief are that the assessee is a company engaged in the development of projects, both, infrastructure and non infrastructure. In the current year, the assessee, besides having its normal business of development of projects also was in the development of water supply projects and other connected infrastructure facilities for government, semi government departments. In development of such infrastructure facilities, the assessee utilizes its own designs/plans, as feasible for the location of site, specifications and technical expertise through its own human, financial material resources. Being in development of infrastructure facilities the assessee uses its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... notice under section 143(2). The point being agitated by the AR, here was, whether the AO was competent to issue 153A where there was no pendency, because according to the AR, as per the 2nd Proviso, provisions of section 153A can only be invoked in those years, where, any proceeding is pending and only such proceedings shall get abated and shall be taken over by the provisions of section 153A. To explain the issue, he referred to the subject head, "Assessment in case of search or requisition". The following sections were inserted by the Finance Act, 2003, w.e.f. 01.06.2003. Section 153A(1) brings about the following sections with the non-obstante expression, "Notwithstanding anything contained in section 139, section 147, section 148, section 149, section 151 and section 153, in the case of a person where a search is initiated under section 132 or books of account, other documents or any assets are requisitioned under section 132A after the 31st day of May 2003, the Assessing Officer shall : (a) issue notice to such person requiring him to furnish within such period, as may be specified in the notice, the return of income in respect of each assessment year falling within six ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ormal procedure prescribed under the statute for assessment or reassessment of income, nor does it, therefore, deprive the assessee concerned of his normal rights of appeal, second appeal and reference to the High Court; (2) that the provisions of the impugned s. 132 made with the object of preventing evasion of payment of tax are limited to getting hold of evidence sought to be withheld from the assessing authorities and getting at income believed to have been undisclosed with a view to bring it under assessment and ensure recovery of tax evaded or sought to be evaded; and (3) that the application of the special provisions of the impugned section is possible only when the appropriate authority on the basis of information in his possession has reason to believe that the assessee is withholding or attempting to withhold evidence or is in possession of undisclosed income either in the shape of money or in the shape of bullion, jewellery or the like, which belief furnishes the criterion for making a separate classification having a reasonable relation with the object of the law". 16. More recently, Hon'ble Delhi High Court in the case of L R Gupta v. UOI reported in 194 ITR 32 expla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 57; [1964] 54 ITR 692 (HL) followed. 18. The AR further submitted that in a recent decision by the Hon'ble Delhi High Court in the case of CIT v. Anil Kumar Bhatia (unreported), it has been specified that the provisions of section 153A refers to assessment/reassessment of total income, i.e. total income as per original return of income or income assessed under section 143(1) or 143(3) plus undisclosed income, if any, for the relevant assessment year (paras 20 and 21) 20. A question may arise as to how this is to be sought to be achieved where an assessment order had already been passed in respect of all or any of those six assessment years, either under Section 143(1)(a) or Section 143(3) of the Act. If such an order is already in existence, having obviously been passed prior to the initiation of the search/requisition, the Assessing Officer is empowered to reopen those proceedings and reassess the total income taking note of the undisclosed income, if any, unearthed during the search. For this purpose, the fetters imposed upon the Assessing Officer by the strict procedure to assume jurisdiction to reopen the assessment under Section 147 and 148, have been removed by the non ob ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ished by the assessee as well as the undisclosed income, if any, unearthed during the search or requisition. The position thus emerging is that where assessment or reassessment proceedings are pending completion when the search is initiated or requisition is made they will abate making way for the Assessing Officer to determine the total income of the assessee in which the undisclosed income would also be included but in cases where the assessment or reassessment proceedings have already been completed and assessment orders have been passed determining the assessee's total income and such orders are subsisting at the time when the search or the requisition is made, there is no question of any abatement since no proceedings are pending. In this latter situation, the Assessing Officer will reopen the assessments or reassessments already made (without having the need to fallow the strict provisions or complying with the strict conditions of Sections 147, 148 and 151) and determine the total income of the assessee. Such determination in the orders passed under Section 153A would be similar to the orders passed in any reassessment, where the total income determined in the original asses ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ional (supra) and M/s Kumar Company (supra) are not to be followed in this case. (1) Anil Kumar Bhatia Ors. (2010) 1 ITR (Trib) 484 (Del) Conclusion:- "In respect of an assessment under s. 153A, where processing returns under s. 143(1)(a) stood completed iii respect of returns filed in due course before search and no material is found in search thereafter, no addition can be made". (2) Suncity Alloys (P) Ltd. (2009) 124 TTJ (Jd) 674 Conclusion:- "Assessments or reassessments made pursuant to notice under s. 153A are not de novo assessment and therefore no new claim of deduction or allowance can be made by assessee where admittedly the regular assessments are shown as completed assessments on the date of initiation of action under s. 132". 22. This decision, has taken into consideration, certain other decisions as well, whose underlying ratio is that the existence of incriminating document is a must. 23. The AR submitted that, once an assessment, whether under section 143(1) or 143(3) has reached the stage of finality, the 2nd Proviso, prescribing the abatement of the assessment shall have no effect, because, only pending proceedings on the date of search, can get a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . (supra). The Special Bench of the Tribunal after considering the various decisions and CBDT circulars including the Circular No. 7 of 2003 dtd. 5-9-2003 and the decision of the [mentioned in the list of cases/circulars] has held as under: "52. The provision comes into operation if a search or requisition is initiated after 31.5.2003. On satisfaction of this condition, the AO is under obligation to issue notice to the person requiring him to furnish the return of income of six years immediately preceding the year of search. The word used is "shall" and, thus, there is no option but to issue such a notice. Thereafter he has to assess or reassess total income of these six years. In this respect also, the word used is "shall" and, therefore, the AO has no option but to asses or reassess the total income of these six years. The pending proceedings shall abate. This means that out of six years, if any assessment or reassessment is pending on the date of initiation of the search, it shall abate. In other words pending proceedings will not be proceeded with thereafter. The assessment has now to be made under section 153A(1)(b) and the first proviso. It also means that only one assessme ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he context of relevant provisions means (i) books of account, other documents, found in the course of search but not produced in the course of original assessment, and (i) undisclosed income or property discovered in the course of search. 59. Having come to this conclusion we need not go into various orders of the Tribunal cited by the rival parties. The decisions inconsistent with aforesaid view/conclusion stand disapproved an.. the decisions ;tent with this view/conclusion are approved" 20. Applying the ratio of the above decisions to the facts of the present case, xxxxxxxxxxxxx. The position thus emerging is that where assessment proceedings are pending completion when the search is initiated, the pending assessment proceeding stood abated by virtue of the second proviso to section 153A of the Act. Instead of complying with the requirements of section 153A of the Act, the A.O. proceeded with the pending assessment proceeding for the A.Y. 2004-05 and passed the impugned assessment order during the pendency of the assessment under section 153A of the Act which is a nullity and a such the assessment order dt. 27-12-2006 passed under section 143(3) of the Act is illegal, arbi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... equisition was made". ** ** ** "With all stops having been pulled out, the Assessing Officer under section 153A has been entrusted with the duty of bringing to tax the total income of an assessee whose case is covered by section 153A, by even making reassessments without any fetters, if need be". 28. The DR emphasized that the assessee has not satisfied all the conditions, as laid down in the provisions, allowing the deduction. He put forth the submissions, as made by the AO, that merely being a developer is not enough, but in case, if the developer does not satisfy all the underlying conditions, as cast by the legislature, the deduction is not allowable. He submits in his conclusions, the relevant portions of the AO's observations, which are extracted as under : "Thus it has been concluded that assessee by virtue of the manner in which it is carrying out its business neither fits in the definition of developer by general concepts nor it fits into the category of persons for whose benefit the provisions were introduced. Without prejudice to the above, it is also to be seen as to whether the assessee fulfills all the other conditions presc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r about developer or about contractor, therefore according to the AR, when the relevant section does not make any distinction between either the developer or contractor, then how can the AO create the distinction. He further submitted that in cases where the infrastructure development is undertaken by the government, the government passes over the entire project along with all its liabilities with respect to delay, legal formalities, legal cases, maintenance and interaction with govt. departments for sanctions and all financial commitments to the so called contractor, who basically is the developer in all sense of the matters. The AR further pointed out that there are plethora of judgments wherein the contractors is held as the developer and the relevant deduction has been allowed. 32. The AR once again reiterated his arguments on the issue of validity of proceedings under section 153A, and once again, he submitted that accept for the change in view with regard to allowance of deduction under section 80IA(4), there is no material, either found in the course of search under section 132 or any other material was brought to the notice, which indicated any concealed income. He submit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ate of search the reassessment proceedings will not abate. The abatement of any proceedings has serious effect inasmuch as it takes away all the consequences that arise thereafter. The material found in the search may be a ground for notice and assessment under section 153A of the Act but that would not efface or terminate all the consequences, which arise out of the regular assessment or reassessment resulting in a demand or proceedings for penalty". 34. He also referred to the decision of Hon'ble Delhi High Court in the case of SSP Aviation Ltd. v. DCIT reported in 346 ITR 177, This decision was also referred to in the case of All Cargo (SB), wherein, at page 187 answers the fate of proceedings which is/are pending. 35. The AR, therefore, pressed his grounds taken in each of the CO, with the arguments that the proceedings for assessment years 2000-01 to 2004-05 were legally not correct. 36. We have heard the rival contentions at length, in the instant COs, the issue being agitated is, when there was no evidence or incriminating material found in the course of search operations, the assessment orders passed, invoking the provisions under section 153A were bad in law and liab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Therefore, a proceeding which is pending, only those proceedings shall get abated. In other words, any proceeding that has reached its finality shall not be disturbed, as per the clarification issued by the CBDT, through Circular no. 7, dated 05.09.2003 (supra), unless there are materials found, indicating existence of income embedded in those incriminating document(s). 40. This has been explained by the Special Bench in the case of All Cargo Global Logistics Ltd. v. DCIT reported in 137 ITD 287 (Mum-SB), which states, "58. Thus, question No. 1 before us is answered a) as under: (a) In assessments that are abated, the A.O. retains the original jurisdiction as well as jurisdiction conferred on him under s. 153A for which assessments shall be made for each of the six assessment years separately; (b) In other cases, in addition to the income that has already been assessed, the assessment under section 153A will be made on the basis of incriminating material, which in the context of relevant provisions means (i) books of account, other documents, found in the course of search but not produced in the course of original assessment, and (i) undisclosed income or property dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w Section 153A, in a case where search is initiated under section 132 or requisition of books of account, documents or assets is made under Section 132A after 31.5.2008, the Assessing Officer is obliged to issue notices calling upon the searched person to furnish returns for the six assessment years immediately preceding the assessment year relevant to the previous year in which the search was conducted or requisition was made. The other difference is that there is no broken period from the first day of April of the financial year in which the search took place or the requisition was made and ending with the date of search/requisition. Under Section 153A and the new scheme provided for, the AO is required to exercise the normal assessment powers in respect of the previous year in which the search took place. 19. Under the provisions of Section 153A, as we have already noticed, the Assessing Officer is bound to issue notice to the assessee to furnish returns for each assessment year falling within the six assessment years immediately preceding the assessment year relevant to the previous year in which the search or requisition was made. Another significant feature of this Section ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t proceedings relating to any assessment year falling within the period of the six assessment years mentioned above, may be pending. In such a case, the second proviso to sub section (1) of Section 153A says that such proceedings "shall abate". The reason is not far to seek; Under Section 153A, there is no room for multiple assessment orders in respect of any of the six assessment years under consideration. That is because the Assessing Officer has to determine not merely the undisclosed income of the assessee, but also the total income' of the assessee in whose case a search or requisition has been initiated. Obviously there cannot be several orders for the sane assessment year determining the total income of the assessee in order to ensure this state of affairs namely, that in respect the six assessment years preceding the assessment year relevant to the year in which the search took place there is only one determination of the total income, it has been provided in the second proviso of sub Sub-Section 153A that any proceedings for assessment or reassessment of the assessee which are pending on the date of initiation of the search or making requisition "shall abate". Once those p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interpreting 2nd Proviso along with clause (b) to section 153A, wherein the Hon'ble Delhi Court observes and hold, "where the assessment or reassessment proceedings have already been completed and assessment orders have been passed determining the assessee's total income and such orders are subsisting at the time when the search or the requisition is made, there is no question of any abatement since no proceedings are pending. In this latter situation, the Assessing Officer will reopen the assessments or reassessments already made (without having the need to fallow the strict provisions or complying with the strict conditions of Sections 147, 148 and 151) and determine the total income of the assessee. Such determination in the orders passed under Section 153A would be similar to the orders passed in any reassessment, where the total income determined in the original assessment order and the income that escaped assessment are clubbed together and assessed as the total income". But when we come to third circumstance i.e. circumstance (c), we find that this has been left unanswered. Para 23 of the judgment, the Hon'ble Delhi High Court mentions that the issue is left open. 43. This ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... then there is no jurisdiction of section 153A, cannot be accepted. It is triate, that whenever a provision begins with a non obstante provision, it shall supersede all other provisions. Since section 153A begins with the word, Notwithstanding, section becomes non porous and it has to be applied first. Therefore, whenever a search is undertaken under section 132 on any person, 153A is triggered automatically. This is a settled provision of law and now well supported by the decision of Hon'ble Delhi High Court in the case of Anil Kumar Bhatia, wherein in para 19. The Hon'ble Delhi High Court observes, Under the provisions of Section 153A, as we have already noticed, the Assessing Officer is bound to issue notice to the assessee to furnish returns for each assessment years, falling within the six assessment years immediately preceding the assessment year relevant to the previous year in which the search or requisition was made". 47. When we look into clause (b) of sub section (1) of section 153A, the legislature has granted an authority on the AO to assess or reassess the total income. This clause has to be read along with 2nd Proviso, where the law has laid restriction over the AO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... riginally assessed and finalized. However, it has to be added here that proceedings under section 153A are linked to the search having been initiated on the person, not with the documents found and seized. The documents so found and seized, may become useful to the AO for making an assessment of total income under section 153A read with 143(3). 51. We refer here, to the arguments of the DR, wherein he pointed out that seized documents no. 18 and 19, which showed that the assessee was co-contractor. As per his arguments, those documents may be considered as incriminating documents for all the years under consideration, particularly from the point of view that the terms of the agreement, on which the assessee was conducting its business on the particular infrastructure facility, was still under continuation. 52. In our opinion, the referred documents may be considered relevant initially, for the purposes of 2nd Proviso to section 153A, but in any case, these documents cannot be read as stand-alone and in isolation, but have to be read along with other connected documents. 53. When we peruse the assessment orders, as well as the denial of deduction under section 80IA(4), at no p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... partments appeals directed against the deletion of disallowance of deduction under section 80IA(4), wherein, the AO held in the proceedings under section 153A, that the assessee was not eligible for the deduction, as the assessee was a contractor and not a developer of infrastructure projects. 58. The facts have been discussed earlier in this combined order, that the assessee entered into an agreement with the Governmental bodies to carry out infrastructures development projects. In the years under consideration, the assessee was carrying on the project concerning water supply. In years covering assessment years 2000-01 to 2004-05, the returns, claiming the deduction under section 80IA(4) was accepted by the AO under section 143(1) and the AO issued refunds, wherever it was required to. In these years, the AO did not regularize the assessment proceedings by the issue of notice either under section 142 or 143(2). 59. Search and seizure operations were carried out on 17.02.2005, i.e. financial year 2004-05, falling in assessment year 2005-06. For the financial year in which the search took place, the assessee offered under section 132(4), an amount of Rs. 1.95 crores under sectio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... -clause (a) of clause (i) of Section 80IA(4) of the I.T. Act is fulfilled. (c) The Assessee has entered into agreements with State Government and /or local authority or statutory body for developing and/or operating and maintaining of infrastructure facility and hence, the condition stipulated in sub-clause (b) of clause (1) of Section 80IA(4) of the I.T. Act is satisfied. (d) The amendment to section 801A in 2000 has made Deduction under section 801A allowable also to the developer of Infrastructure facility. The decision of the Mumbai Tribunal in Patel Engineering Ltd. v. Dy. CIT [2004] 84 TTJ 646 (Mum), relates to the period prior to the amendment where in it was debatable whether deduction was available to the developer of infrastructure facility. Even in the decision the honorable ITAT Mumbai has decided in favour of the Assessee and allowed deduction under section 80IA. Post amendment w.e.f. Assessment year 2000-2001 it has been very clear that deduction under section 80IA is also allowable to the developer. The amendment has specifically included developer of infrastructure facility under sub clause 4 of section 80IA. Post amendment the situation is more favourable to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f Patel Engineering Ltd. v. DCIT reported in 94 ITD 411 (Mum), wherein the Bench of the ITAT was seized with the similar issue, as in the instant appeals/COs, that we are dealing with. The coordinate Bench held, (extracted) : "The amendment in s. 80IA was brought about by Finance Act, 1995 w.e.f. 1st April, 1996. By virtue of this amendment, exemption under s. 80-IA(4A) was provided to any enterprise carrying on the business of developing, maintaining and operating any infrastructure facility. Thus, to be eligible for this deduction an assessee was required to carry out all the three activities i.e. (i) to develop, (ii) to maintain and (iii) to operate. After the modification effected by the finance Act, 1999 w.e.f. 1st April, 2000, deduction under s. 80-IA (4) has been made available to any enterprise carrying on the business of (i) developing or (ii) maintaining and operating, or (iii) developing, maintaining and operating the infrastructure faculty. Therefore, from asst. yr. 2000-01, deduction is available to the assessee carries on the business of any one of the abovementioned types of activities, and accordingly also when the assessee is carrying activity of only developing. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... per of the Infrastructure project and it is not maintaining and operating the infrastructure facility, cl. (c) of sub-sec (4) is not applicable to the present assessee". Thus going by any of the interpretation as discussed above, deduction under Section 80IA(4) of the Income-tax Act could not be denied even in cases where the enterprise merely develops the infrastructure facility and does not operate and maintain the same". 64. The AO, unable to agree with the explanation as given by the assessee, observed, "3.2 Whereas assessee satisfies the conditions referred by it in its reply reproduced in para 3.1(B) (c) and (f) without any doubt. There are several doubts over the satisfaction of the other conditions. For example whether the assessee is a developer or merely a contractor. By way of arguments reproduced in para 3.1 (B)(b) and (c) assessee has claimed that it fulfills the conditions laid down in sec 801A(4)(i)(a) and (b). But conditions laid down in sub clauses (a) to (c) of clause (i) of sub sec. (4) need to be satisfied simultaneously, whereas assessee ignored to comment upon conditions laid down in sub clause (c). Accordingly, assessee was issued show cause notice date ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ubsequent paras. Section 80IA(4) specifies the entities which are entitled for deduction under section. 80IA. In clause (i) while stating that any enterprise carrying business of (i) developing or (ii) operating and maintaining or (iii) developing operating and maintaining infrastructure facility, it has been clearly laid down that such enterprise shall fulfill all the conditions laid down in sub clause (a) (b) and (c). Sub-clause (c) puts a condition that the enterprise has started or starts operating and maintaining the infrastructure facility on or after first day of April 1995. Thus, the plain language of provisions of sec. 80IA(2) and 4(i)(c) makes it very dear that the deduction to an enterprise is available under this section only when enterprise develops and begins to operate or maintain the infrastructure facility". 67. The AO, on these observations, disallowed the deduction under section 80IA to the assessee. 68. The assessee, on denial of deduction under section 153A read with 143(3), approached the CIT(A), wherein, the assessee agitated that provisions of section 153A cannot be construed as regular assessment or reassessment and hence the AO would be barred to u ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion of the Revenue. A person, who enters into a contract with another person will be a contractor no doubt; and this assessee having entered into an agreement with the Government of Maharashtra and also with APSEB for development of the infrastructure projects, is obviously a contractor but that does not derogate the assessee from being a developer as well. The term 'contractor" is not essentially contradictory to the term "developer" On the other hand, rather section 80-IA(4) itself provides that assessee should develop the infrastructure facility as per agreement with the Central Government, State Government or a local authority. So, entering into a lawful agreement and thereby becoming a contractor should, in no way, be a bar to the one being developer. The assessee, presently under consideration before us, has developed infrastructure facility as per agreement with Maharashtra State Government/APSEB. Therefore, merely because, in the agreement for development of infrastructure facility, assessee is referred to as contractor or because some basic specifications are laid down, it does not detract the assessee from the constructing the above mentioned two project, namely Srisailam ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the appellant was not a developer, but merely a contractor. As is clear from the discussion above, the AO's reasoning is faulty. It is further an undisputed fact that the appellant is not a subcontractor. That being so, the appellant is entitled to claim the deduction under section. 80-IA(4). For all these reasons and placing reliance on the decision of the Mumbai ITAT in the case of Patel Engg. Ltd. (supra), it is thus held that even as a developer the appellant, as it is not a sub-contractor, is entitled to claim the deduction under section 80-IA". The CIT(A), therefore, rejected the observation of the AO with regard to the distinction between developer and contractor as well as the concept of BOT/BOOT and that the assessee has not fulfilled the conditions under section 80IA(2) and 80IA(4) completely. The CIT(A) also rejected the observation of the AO that the case of Patel Engineering (supra) was distinguishable on facts. He, therefore, overruled the disallowance made by the AO, and allowed the same for assessment years 2000-01 to 2005-06. 72. Against this decision of the department is in appeal before the ITAT. 73. Before us, the DR supported order of the AO and submitted ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of sec. 80-IA(4) since it would be an impossibility. Therefore, in view of the construction placed by the Hon'ble Bombay High Court on the requirements of clause (c) of sec. 80-IA(4)(i) requiring it to be harmoniously read with the main sec. 80-IA(4), we do not find substance in the objection raised by the Revenue. We thus respectfully following the decision of the Hon'ble Bombay High Court on the issue in the case of CIT v. ABG Heavy Industries Ltd Ors (supra) decide the matter in favour of the assessee with this finding that assessee is eligible to claim the deduction in question under section 80-IA(4). The issue is thus decided in favour of the assessee. The related grounds are thus allowed with this direction to the AO to allow the claimed deduction to the assessee". 76. It was submitted that the decision of Hon'ble Bombay High Court in the case of ABG Heavy Industries has been followed in a number of decisions, which have been made part of the APB, along with a no. of other decisions, which are as follows No. Contents Page No. 1 Mahalakshmi Infraproject Limited v. ACIT (Bom. HC) 247-248 2 Mahalaxmi Construc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hese three activities would become eligible for deduction. Therefore, there is no ambiguity in the Act. Where an assessee incur expenditure for purchase of materials himself and executes the development work, i.e., carries out the civil construction work, he will be eligible for tax benefit under section 80-IA. In contrast to this, an assessee, who enters into a contract with another person including Government or an undertaking or enterprise referred to in section 80-IA, for executing works contract, will not be eligible for the tax benefit under section 80-IA. The word 'owned' in sub-clause (a) of clause (1) of sub-section (4) of section 80-IA refers 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 land 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 80-IA(4) and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duty is to develop infrastructure whether it involves construction of a particular item as agreed to in the agreement or not. The agreement is not for a specific work, it is for development of facility as a whole. The assessee is not entrusted with any specific work to be done by the assessee. The material required is to be brought in by the assessee by sticking to the quality and quantity irrespective of the cost of such material. The Government 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 Government 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 24 months. During this period, if any damages are occurred, it shall be the responsibility of the assessee. Further, during this period, the entire infrastructure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ot 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 do mere works contract or sub-contract as distinct from the developer. This is clear from the express intention 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 80-IA is available to developers who undertakes entrepreneurial and investment risk and not to the contractors, who undertake only business risk Without any doubt, the assessee clearly demonstrated that it has undertaken huge risks in terms of deployment of technical personnel, plant and machinery, technical know-how, expertise and financial resources. After the amendment section 80-IA(4) is read as (1) developing or (ii) operating and maintaining or (iii) developing, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o address the impugned issue, we must first refer to the section which has been debated, i.e. section 80IA(4). The section reads as under: "(4) This section applies to- (i) any enterprise carrying on the business of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining] any infrastructure facility which fulfils all the following conditions, namely :- (a) it is owned by a company registered in India or by a consortium of such companies or by an authority or a board or a corporation or any other body established or constituted under any Central or State Act; (b) it has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility;] (c) it has started or starts operating and maintaining the infrastructure facility on or after the 1st day of April, 1995: Provided that where an infrastructure facility is transferred on or after the 1st day of April, 1999 by an enterprise which developed such infrastructure facility (hereafter referred to in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d that the assessee is in a much better foundation, because, not only it secured the development project from the Government agency, but it itself was developing the same. The case of the assessee is similar to the case of GVPR Engineers Ltd. (supra), wherein who can be called as a contractor in development projects, has been explained, as reproduced in earlier paras. We also found the distinction has been drawn by the legislature itself, because in the impugned section, the words have been used "any enterprise", but when we see section 80IAB, the legislature uses the words, "................an assessee, being a developer, ....". Therefore, tracing the difference, within the legislation itself, proves the fact, that the legislature is inclined to allow the deduction to an enterprise, who is in the business of infrastructure development, irrespective of itself being a developer. 82. We find that, the AO accepts that the assessee is an infrastructure developer. But we look into the main objection of the AO that being a developer by itself is not enough to avail the deduction, but the assessee should have maintained, operated and handed it back to the government. We must observe her ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wance under section 80IA(4), made by the AO. We, therefore, sustain the order(s) of the CIT(A), allowing the deduction under section 80IA(4), as claimed by the assessee. 86. The appeals filed by the department, covering assessment years 2000-01, 2001-02, 2002-03, 2003-04, 2004-05 are dismissed. 87. In the result, the appeals filed by the department, as well as the Cross Objections filed by the assessee for assessment years 2000-01, 2001-02, 2002-03, 2003-04, 2004-05 are dismissed. ITA No. 2202/Mum/2008 : Appeal by the department : Asst. year 2005-06 88. The appeal filed by the department raises the following grounds of appeal : (i) On the facts and in the circumstances of the case and in law, the Ld. CIT(A) erred in deleting the disallowance of deduction under section 80IA of the I.T. Act without appreciating the fact that the assessee is not eligible for deduction under section 80IA in most of the infrastructure projects where the assessee is merely a work contractor and not a developer. (ii) On the facts and in the circumstances of the case and in law without prejudice to above, the Ld. CIT(A) erred in allowing deduction under section 80IA on amount of liabilities w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tinguish the liabilities written back between 80IA Projects and non 80IA projects. He, therefore, pleaded that the CIT(A) was very fair to give a reasonable direction to the AO. 100. We have heard the arguments. It is not the case of the department that these liabilities were non business. When the liabilities which have been written back/offered to tax by the assessee pertains to the business, then it has to be added back as a business income. 101. In the instant case, the CIT(A) has also taken note of the fact that the assessee was having two types of projects, i.e., which qualify for deduction under section 80IA and which do not qualify. But while the assessee is undertaking both types of the projects, it is procuring materials such as cement, steel and all other materials, which are need used for both types of projects. In such circumstance, it is difficult to make precise allocation. As held by the coordinate Bench at Mumbai in Extrusion Process (P) Ltd. v. ITO, ITA no. 630/Mum/2003, reported in 107 TTJ 1001 (Mum) that even for computing deduction under section 80HHC, it would be added as business income. 102. Here, in the instant case, we are concerned with domestic pro ..... X X X X Extracts X X X X X X X X Extracts X X X X
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