TMI Blog2013 (10) TMI 1411X X X X Extracts X X X X X X X X Extracts X X X X ..... of convenience. 2. The only effective grievance of the assessee in these appeals relates to disallowance of its claim for deduction under S.80IA of the ACT, by the Assessing Officer, which has been confirmed by the CIT(A). 3. Facts of the case in brief, which are common except for the amounts involved, as taken from the appeal for the assessment year 2008-09, are that the assessee was deriving income from the business of civil contracts. Assessee has been awarded the contract for construction of barrage across river Cauvery in Mayanur Village, Karur District, Tamil Nadu, for approximate value of ₹ 174,01,80,550, of which the assessee received a sum of ₹ 12,25,56,120 during assessment year 2009-10 and ₹ 27,74,35,887 during the assessment year 2010-11, on which it returned a profit of ₹ 1,96,08,979 for assessment year 2009-10 and ₹ 3,88,30,345 for assessment year 2010-11. It claimed deduction under S.80IA for both the years. The Assessing Officer held that the assessee was not the owner of the project, but was merely a contractor executing the work on behalf of the Government of Tamil Nadu. The Assessing Officer also held that the assessee did ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... No.347/Hyd/2008 and others dated 29.2.2012); KMC Constructions Ltd. (ITA No.99/Hyd/2003 dated 16.3.2012); and Koya Company Construction Ltd. (ITA No.180/Hyd/2006 dated march, 2012). The CIT(A) considering the facts of the case on hand, including various clauses of the agreement, in the light of the decisions of the Tribunal in similar case on this issue, upheld the rejection of the claim of the assessee for deduction under S.80-IA of the Act. He summarized his findings in this behalf in para 5.15 of the impugned order, which reads as follows- 5.15 To summarise, the appellant has neither conceived of the project nor been involved with its designing. It had not been involved with the preparation of financial estimates for the project. It had no role in its operation and maintenance. Its financial involvement was of a normal business; it undertook the normal business risks associated with any business and these were not in the nature of 'entrepreneurial and investment risks' associated with a developer. The Agreement provided for supply of material by the Government. Therefore, seen from the various parameters laid down by the ITAT in its decisions cited above, I do ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. The estimate of the probable quantities for the works to be prepared were caused by the Government. Such drawings serially numbered from 1 to 17 and separately prepared specifications were elaborate and self contained and not open to wilful modification by the assessee. For that matter, the extent of variations which the assessee was permitted to make to these designs was specifically noted in the contract itself. He submitted that the assessee was bound to execute the work as per a predetermined scheduled specified in the agreement itself, and the entire work was to eb completed in 24 months, and the agreement also specified the periodical progress which had to be adhered to by the assessee. Referring to the financial risk and commitment, he submitted that the agreement clearly provided for the assessee to be paid as a direct quid pro quo for the amount of work done by it, and the sum of ₹ 174.02 crores was not merely the estimated cost of the project but the amount payable by the Government for the work assigned to the assessee. Learned Departmental Representative submitted that Para 1 of the agreement, reproduced by the CIT(A) in the impugned order, makes it clear that ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee has given a refundable security deposit of ₹ 3.5 crores. The CIT(A) denied deduction under S.80IA of the Act, for the reason that the assessee has not undertaken the works of drawing designs and specifications of the project. The CIT(A) relied on the 'SCHEDULE B - LIST OF DRAWINGS' forming part of the Contract Agreement, a copy of which is filed at pages 113 to 193 of the paper-book. The said Schedule B appears at page 44 of the said contract agreement, appearing at page 161 of the paper-book. It contains Serial Nos.1 to 17 and forms part of the articles of agreement dated 9th February, 2009 (Agreement CR No.90/LS/Floods/2008-2009. We have gone through the said 'SCHEDULE B - LIST OF DRAWINGS' attached to the contract agreement and also plan attached to it. This is the initial plan attached to the contract agreement, on the basis of which the assessee has to execute the project. To execute the work, the assessee has to draw separate designs and drawings. For that purpose, the assessee employed two Project Managers, who are qualified Civil Engineers with BE qualification and twelve years experience in the field, ten site engineers with BE qualificati ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the tender documents that the assessee has to procure high yield strength deformed (H.Y.S.D) BARS of Grade Fe415 confirming to I.S.1786-1985 (I.S. Specification for high yield strength deformed steel bars and mixes for cement concrete) and also steel rods as fresh as possible. It is also mentioned in the tender documents that the assessee shall procure cement which shall conform to specifications, and having capacity of rapid hardening and low heat cement (IS 269-1989) and portland pozzalana cement I.S. 1489-1991. Further, it is also mentioned in the tender documents that in respect of any machineries made available by the Department to the assessee, hire charges would be recovered for such machineries supplied by the Government. It is also specifically mentioned that whatever such machinery is supplied by the Government, shall be handed over back to the Government in proper and same form. This specific clause clearly indicates that the assessee has got any machinery from the Department free of cost. The assessee having paid hire charges of the usage of the machinery, it cannot be said that the assessee has not used machinery either owned or hired by it. In this view of the matter, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 33 of its order dated 16.3.2013, held as follows- 33. The next question is to be answered is whether the assessee is a developer or mere works contractor. The Revenue relied on the amendments brought in by the Finance Act 2007 and 2009 to mention that the activity undertaken by the assessee is akin to works contract and he is not eligible for deduction under section 80IA (4) of the Act. Whether the assessee is a developer or works contractor is purely depends on the nature of the work undertaken by the assessee. Each of the work undertaken has to be analyzed and a conclusion has to be drawn about the nature of the work undertaken by the assessee. The agreement entered into with the Government or the Government body may be a mere works contract or for development of infrastructure. It is to be seen from the agreements entered into by the assessee with the Government. We find that the Government handed over the possession of the premises of projects to the assessee for the development of infrastructure facility. It is the assessee's responsibility to do all acts till the possession of property is handed over to the Government. The first phase is to take over the existing p ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... venue. The circular issued by the Board, relied on by learned counsel for the assessee, clearly indicate that the assessee is eligible for deduction under section 80IA (4) of the Act. The department is not correct in holding that the assessee is a mere contractor of the work and not a developer. 14. As for the decision of the Gujarat High Court in the case of Katira Construction Ltd. V/s. Union of India (352 ITR 513), relied upon by the learned Departmental Representative, it may be noted that this decision relates to constitutional validity of the introduction of Explanation to S.80IA(13), and hence, the said decision has not applicability to the facts of the present case. Similarly, even the decision fo the Karnataka High Court in the case of Yojaka Marine Pvt. Ltd. V/s. Asst. CIT (354 ITR 530) has no application to the facts of the present case, since in that case the project was found to have been designed by the Government itself, as against the facts, as discussed above, which indicate that the assessee has made out its own working designs and drawings. 15. In the light of the above discussion, we hold that the assessee is entitled for deduction under S.80IA of th ..... X X X X Extracts X X X X X X X X Extracts X X X X
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