TMI Blog2016 (1) TMI 715X X X X Extracts X X X X X X X X Extracts X X X X ..... the mandate of the legislature. So far as catena of the judgments submitted by the AR of the assessee, we notice that they only pertain to section 80IA(4)(i)(b) i.e. regarding the issue of contractor viz-a-vis developer. Hence, we do not deem it appropriate to decide on the said issue since the assessee does not fulfill the condition enumerated in the first part of the statutory provision. - Decided against assessee - ITA Nos.620/Mds/2013 and ITA No.360/Md/2015 - - - Dated:- 6-11-2015 - SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI DUVVURU R.L. REDDY, JUDICIAL MEMBER For The Appellant : Shri. A.V.Sreekanth, IRS, JCIT. For The Respondent : Shri.N. Devanathan, Advocate ORDER PER CHANDRA POOJARI, ACCOUNTANT MEMBER These two appeals by Revenue are directed against the different orders of the Commissioner of Income Tax (Appeals)-VIII V, Chennai for the above assessment years. 2. The only issue in these two appeals is with regard to allowability of deduction u/s.80IA(4) of the Act. Since the issue in these appeals are common in nature, these appeals are clubbed, heard together, and disposed of by this common order for the sake of convenience. 3 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... evelopment infrastructure facility. A developer would have income only if he is paid for the development of infrastructure facility, that he is having the riqht /authorization to operate the infrastructure facility and to collect toll there from, has no other sources of recoupment of his cost of development. After taking a contract from the Government, if the assessee develops infrastructure facilities, the assessee would be regarded as '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 sections 80 IA(4)(i)(a) of the act. It is 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 u/s 80IA(4). The Bombay Bench of the Tribunal while deciding the case of Patel Engineering Limited Vs. DCIT 94 ITD 411 (Mumbai) held that a civil contractor, having executed a part of contracts of irrigation and water supply on build and transfer basis and handed over them over to contractee Government ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... erprise. It applies to a work contract entered into between the enterprise and other party 'the Sub Contractor'. The amendment aims at denying deduction to the sub contractor who executes a work contract with the enterprise as held by the ITAT Jaipur 'A' Bench in the case of OM Metal Infraprojects Ltd. Vs. CIT-I, Jaipur ITA No.722 723/JP/2008 dated 31.12.2008. The reliance by the Commissioner of Income Tax (Appeals) on the decision of ITAT, Chennai Bench in the case of ACIT vs. Indwell Lianings Pvt. Ltd. 313 ITR (AT) 118, has been enlarged its findings by the ITAT Mumbai F Bench in its decision rendered in the case of ACIT vs. Bharath Udyag Ltd. by holding that such a deduction is only to be denied to a sub contractor and not to a main contractor. Similar view has been taken by the Chennai Bench of the Tribunal in the case of ACIT Vs. Smt.C.Rajini in which the difference between works contractor and a developer has been examined in detail. The main thrust of the decision is that a developer need not be the owner of the land on which development is made. The incentive provisions allowed to the assessee, the construction should be liberally given as held by the Su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... uthorised Representative for assessee submitted that the main issue involved in the appeals before this Tribunal is allowability of deduction under section 80IA(4)(i) of the Act. This issue is common for all the assessment years under appeal. He dealt with the introduction and changes made by the legislature to Section 80IA(4) of the Act till date. The said section is meant for allowing deduction in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development. The assessee claimed deduction as it is engaged in development of infrastructure and as it satisfied all the conditions mentioned therein. The provisions of Section 80IA(4)(i) as introduced by the by the Finance Act, 1999 and as amended from time to time are applicable to the assessee. 7.1 He submitted that from a reading of the section, 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. The purpose for which the said section was amended with effect from the assessment year 2000-01, can be traced to a brochure i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... leting the sub section (4A), the legislature provided deduction for any enterprise carrying on the business either developing or operating and maintaining or development, operating and maintaining instead allowing deduction only to the enterprises engaged in activity covering all the three activities together. 7.2 According to ld. Authorised Representative for assessee the provision extended to an enterprise carrying on any one of the three activities. It makes the matters more clear that the sub section (4) is amended again by the Finance Act, 2001 with effect from 01-04- 2002.The legislature specifically added the conjunction 'OR' between the words (developing), (operating and maintaining) (developing, operating and maintaining). It makes it clear that the provision would apply to any enterprise carrying on the business 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 Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itable area and handing over the developed one to the Government. Therefore, the activity of the assessee is to develop an existing two lane road into four lane road thereby making the road more useful and profitable. The ld. Authorised Representative for assessee further submitted that as per the explanation introduced by the Finance Act, 2007, any assessee who entered into a contract with the enterprise mentioned in Sub- Section (4) would not be eligible for deduction. It clearly indicates that any sub-contractor who undertakes a part of the work from the undertaking which was allotted the work would not be eligible for such deduction. The said explanation has no application to the assessee. The assessee did not claim such deduction or any income pertaining to a sub contract work undertaken from the enterprises referred to in Section 80IA(4). Therefore, the explanation introduced by the Finance Act, 2007 shall not affect the claim made by the assessee. The explanation introduced by the Finance Act, 2009 added that those enterprises undertaking simple works contracts by entering into agreements with the enterprises or with the government or government organizations. As per this ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... facility. All the activities necessary in the process of development and the losses suffered in the process, the material to be used including the expertise shall be of the assessee. The maintenance of the existing facility during the period of development also shall be of the assessee. Therefore, the assessee is a developer and not a works contractor. He relied on the Circular No. 4 of 2010 dated 18-05-2010, which is after introduction of the explanation by the Finance Act, 2009, for the proposition that widening of existing road is an infrastructure facility and any enterprise carrying on the activity of widening of an existing road would be eligible for deduction under section 80IA(4) of the Act. 7.5 The ld. Authorised Representative for assessee submitted that as per Circular No.4/2010, dated 18.5.2010 wherein the Central Board of Direct Taxes has clarified that widening of existing roads constitutes creation of new infrastructure facility for the purposes of section 80IA(4)(i) of the Act. 7.6 The ld. Authorised Representative for assessee also relied on the following decisions. (i) CTI vs. Radhe Developers, 341 ITR 403 (Guj) (ii) Patel Engineering Ltd. vs. DCIT, 84 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... utive assessment years. (2) .. (2A) (3) .. (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 this section as the transferor enterpri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r (c). It is mandatory for the assessee to first satisfy sub-section clause i(a), then (b) then (c), then proviso and so on. In case the concerned assessee fails in any one of the clauses, even if it satisfies the other part of the sub-section, the claim has to be rejected. Now we proceed to decide as to whether the assessee proprietorship concern satisfies sub-section 4(i) of the Act or not. For the said subsection, a reading of the provision makes it unambiguous that the concerned claimant has to be an enterprises carrying on the business of developing or operating and maintaining or developing, operating and maintaining any infrastructure facility and it has to be owned by a consortium of such company or by an authority or a board or a corporation or any other body established or constituted under any Central or State Act. Admittedly, the assessee is a proprietorship. As we notice from the relevant statutory provision, the enterprise in the nature of proprietorship nowhere finds mention in the mandate of the legislature. Although it was emphasized from the definition of the word body in the Law Lexicon which reads as follows: Statutory definition, includes partnership, ..... X X X X Extracts X X X X X X X X Extracts X X X X
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