TMI Blog2013 (6) TMI 737X X X X Extracts X X X X X X X X Extracts X X X X ..... DEY, JUDICIAL MEMBER For the Appellant: Shri S. Rama Rao (A.R. For Respondent: Smt. Amisha S. Gupt (D.R.) ORDER Per SAKTIJIT DEY, J.M. These two appeals by the assessee are directed against the Order of the CIT(A)-IV, Hyderabad for the A.Y. 2000-01 2001-02. Since, common issues are involved in these appeals, they were heard together and are being disposed of by single consolidated order for the sake of convenience. The grounds raised in both the appeals are common excepting the figures. For the sake of convenience, we are dealing with the appeal in ITA.No.124/Hyd/2009 relating to the A.Y. 2000-2001 and the assessee has raised the following grounds : 1. On the facts and in the circumstances of the case the order of the learned CIT(A) erroneous in law and facts of the case. 2. On the facts and in the circumstances of the case the order of the learned CIT(A) erred in law and facts of the case in upholding the action of the Assessing Officer in reopening the assessment. 3. On the facts and in the circumstances of the case the order of the learned CIT(A) erred in law and facts of the case in confirming the disallowance of the Assessing Officer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... respect. 4. So far as ground No. 3 and 4 which relates to the issue of disallowance of deduction claimed under section 80IA(4) of the Act, briefly, the facts relating to the issue are that the assessee is a joint venture formed by two companies namely Nagarjuna Construction Company Limited, Hyderabad and East-Coast Construction Company Limited Chennai. For the assessment year under dispute, the assessee entered into following two contracts - 1. Construction of Kalina-Vakile Flyover on the Western Express Highway, Mumbai with NSLDC of Government of Maharashtra. 2. Construction of approaches to road-over bridge and grade separator crossing NH4 along ORR near Benniganhalli Tank on turn key basis with Bangalore Development Authority (in short BDA ). 5. In the course of re-assessment proceedings, the Assessing Officer asked the assessee to show cause as to why the deduction claimed under section 80IA of the Act shall not be withdrawn as the assessee has executed work merely as a contractor. In response to the notice issued, the assessee submitted that it is an enterprise owned by consortium of companies registered in India and is in the business of developing of infras ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd the Memorandum of the Finance Bill introduced by the Finance Minister in the Union Budget 2001 came to a conclusion that the amendment by the Finance Act, 2001 only sought to enlarge the categories of infrastructure projects and the period of exemption. The Assessing Officer referring to the explanatory note to the Finance Act, 2001 and Circular No. 14/2001 opined that the same reiterates that the required condition for availing benefit is that transfer to the Government under BOT and BOOT Scheme has to be made till the A.Y. 2001-02 and for the A.Y. 2002-03 onwards, the compulsory requirement of transfer has been removed. He, therefore, came to a conclusion that the developer has to be the owner of the infrastructure facilities and a mere contractor who executes the work on contract basis on behalf of the owner cannot be eligible for deduction under section 80IA of the Act. He, further held that the statutory provision and the Explanatory memorandum shows that the deduction under section 80IA is available to the person who invests capital in the capacity of a owner and not the one who is depending on the principal for infusion of funds for creating the infrastructure facilities. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in none of the projects the appellant undertook the operation and maintenance of the facility built by it partly. The appellant did not even build the entire facility rather it constructed only the approach road and grade separator, which cannot be considered new infrastructure facility on their own. Obviously, the entire capital investment was that of the government/local authority/statutory body and no fund came from the appellant towards it. Therefore, it cannot be said that the appellant had entered into these contracts for developing and infrastructure facility, which envisages conceiving, designing, planning, financing, building and operating the facility. In fact, the appellant was never supposed to operate the facility to recover its investments and get returns therefrom. Obviously, it was paid on running bill basis for its activities. There was no stipulation in any of such contracts that the facility so built was to be transferred or handed over back to the owner or to the employer. Therefore, I have no hesitation in concluding that such contracts are not envisaged by the legislature for allowing the benefit of Sec.80IA of the Act. 10. In view of the above a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... use 2.03 of the agreement submitted that as per the said clause the assessee is responsible for designing the bridge/flyover. It was submitted that as per clause 4.058 and 4.059 the assessee shall remain fully responsible for the care of the work and materials and plant for incorporation therein from the commencement date until the expiry of defect liability period and the assessee would remain responsible for any loss or damage that may happen to the work or any part thereof or materials or plant for incorporation therein during the period for which the contractor is responsible for the care thereon. Referring to clause 4.100 of the agreement, the learned A.R. submitted that the assessee would remain responsible for rectifying any defect which may happen during the defects liability period. He further submitted that clauses 5 and 5.2 clearly specify the details of designs of drawings provided by the assessee for the infrastructure project. The learned A.R. submitted that considering the contract document as a whole and keeping in view the nature and scope of the work, it cannot be said that the assessee is not a developer and has executed the work merely as a contractor. It was su ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on, Finance Bill 2001 makes it clear that assessee would be eligible for deduction under section 80IA if it invests own funds in development of a project and then exploit the asset and thereafter claim deduction under section 80IA on the income derived from such exploitation. The deduction is provided with a view to encourage private investment in infrastructure whereas in the case of the assessee the assessee does not invest own funds in asset building, neither does he derive any income from exploitation of the developed asset. The entire project is owned by the employer from day one and the assessee only executes the project under the constant supervision of the employer with the funds provided by the employer. In support of such contention, the learned D.R. relied upon the decision of I.T.A.T. Mumbai Bench in ITA.5172/Mum/2008 dated 29.7.2011 in the case of India Humepype Co. Ltd. vs. DCIT. 9. We have heard rival submissions and perused the material available on record. We have also carefully applied our mind to the decisions cited before us. Before we delve into the issue in dispute it would be appropriate to look into the relevant provisions at this stage. Deduction for dev ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... endment was made to sub-section 4 by Finance Act, 2001 w.e.f. 1.4.2002 by substituting the words:- (i) developing, (ii) maintaining and operating or (iii) developing, maintaining and operating with the words; (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining ]- - 12. Therefore, the intention of the legislature from the above said amendment would make it clear that any enterprise which carried on any one of these three activities would become eligible for deduction. It would be evident from the Orders passed by the Assessing Officer as well as CIT(A), claim of deduction under section 80IA was disallowed firstly on the ground that assessee is not the owner of the infrastructure facilities, secondly it has not undertaken all the three activities and thirdly it has executed the work merely as contractor. In case of CIT vs. ABG Heavy Industries Ltd. 322 ITR 323 the Hon ble Bombay High Court held that amendment effected to sec. 80IA(4) by Finance Act, 2001 being clarificatory in nature will be applicable retrospectively from A.Y. 2000-2001. In the case of KMC Constructions Ltd. (supra), the Coordinate Ben ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ferring to a few terms in the contract, has come to a conclusion that the assessee has executed the work as a contractor by relying upon the provision contained under section 80IA(13). It is the contention of the assessee before us, that the assessee has not acted merely as a contractor but was involved in planning, designing, financing and coordinating and all other ancillary and incidental activities of developing the infrastructure facilities as per the contract. In the case of M/s. Sushee Hitech Construction Pvt. Ltd. (supra), the Coordinate Bench of this Tribunal after considering several other decisions of various Benches of the Tribunal held as under : Therefore, in our considered view, the assessee should not be denied the deduction under section 80IA of the Act as the contracts involves development, operating, maintenance, financial involvement and defect correction and liability period, then such contracts cannot be called as simple works contract. In our opinion the contracts which contain above features to be segregated and on this deduction u/s. 80-IA has to be granted and the other agreements which are pure works contracts hit by the Explanation section 80IA(13), ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y the assessee to demonstrate the fact that the assessee has actually developed the infrastructure facilities by undertaking the activities of design, development, engineering, construction, maintenance, financial involvement, defect correction of the contract during the warranty period. If the assessee will be able to establish such facts by supporting evidence, then, the assessee would be entitled to the deduction under section 80IA(4) of the Act. With the aforesaid observations, we set aside the Order of the CIT(A) and direct the Assessing Officer to decide the issue afresh by keeping in view of our observations made hereinabove. Needless to mention that the Assessing Officer shall afford a reasonable opportunity of being heard to the assessee. Accordingly, ground No. 3 is allowed for statistical purposes. 13. In ground No.4 the assessee has challenged the addition of ₹ 4,23,918/-. Before the CIT(A), the assessee raised a ground stating therein that the Assessing Officer had mistakenly included an amount of ₹ 4,23,918/- in the gross total income. The CIT(A), however, sustained the said addition in the absence of proper explanation to substantiate this ground. ..... X X X X Extracts X X X X X X X X Extracts X X X X
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