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M/s. Khajurho Builders & Construction Co. Ltd. Versus Commissioner of Income-tax, Gwalior

2016 (3) TMI 407 - ITAT AGARA

Revision u/s 263 - entitlement to claim u/s. 80IA(4) allowed by AO - Held that:- The admitted facts of the case are, therefore, clear that while making original assessment, the assessee submitted proper explanation and evidence before the AO to justify the claim u/s. 80IA(4) of the IT Act. The assessee is engaged in the business of developing and constructing infrastructure facilities in the form of railway tracks and canals on behalf of the Government and their agencies. The assessee was grante .....

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r claim of assessee u/s. 143(3) of the Act. Copies of the assessment orders are placed on record. Therefore, the AO in preceding assessment years as well as in the assessment year under appeal has considered the Explanation to section 80IA(13) of the IT Act and was satisfied with the explanation of the assessee on the eligibility for deduction u/s. 80IA(4) of the IT Act. The AO, therefore, took one of the plausible view in the matter and therefore, the assessment order could not be treated as er .....

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ct. 2. The record reveals that earlier this appeal was heard by the Division Bench of ITAT, Agra on 24.06.2014. The draft order was put up before the learned Accountant Member, who, however, kept it pending for a very long period and ultimately did not pass any order and then the order sheet further reveals that the learned Accountant Member fixed this matter for fresh hearing before the Division Bench with the approval of the Zonal Vice- President. The notings of the learned Accountant Member a .....

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hat the assessee had claimed and has been allowed deduction u/s. 80IA(4) of the IT Act amounting to ₹ 2.24 crores. As per Explanation to section 80IA(13), the deduction will not be allowed u/s. 80IA(4) to the persons engaged in the contract work (works contractors). The assessee was considered as works contractor provided by the Government and thus, was not found entitled to deduction. The AO moved proposal u/s. 263 of the IT Act before the learned Commissioner who accordingly issued notic .....

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the same. The explanation to section 80IA(13) was also considered and the assessee made submissions in this behalf. The assessee has been allowed deduction u/s. 80IA on the basis of evidence and material on record. The explanation of the assessee revealed that the decisions relied upon by the ld. CIT were clearly distinguishable on facts. The ld. CIT, however, found that the assessee executed the works contract in respect of each of the projects, for which deduction u/s. 80IA(4) has been claime .....

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as considered to be an error which is prejudicial to the interest of Revenue and accordingly, assessment order was set aside and the matter was restored to the AO to decide the same by carrying out proper enquiries as per law by providing the assessee adequate opportunity of being heard. 4. The learned counsel for the assessee relied upon the submissions made before the authorities below and also filed synopsis of his arguments. He has contended that the assessee is engaged in the business of de .....

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elied upon the order of ITAT, Agra Bench in the case of Shree Narayan Built-up (I) Pvt. Ltd. 40 taxmann.com 104 and also referred to detailed reply filed before the AO, copy of which is filed at pages 66 to 68 of the paper book and submitted that Explanation to section 80IA(13) was also considered at the assessment stage as per explanation of the assessee. The AO examined the record and books of account of the assessee and verified the claim of the assessee. The assessee relied upon certain deci .....

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enquiry in the matter. The amendment in Explanation to section 80IA(13) was also on record before the AO when he passed the assessment order on 05.05.2010. It was further submitted that the Explanation to section 80IA(13) introduced by Finance Act 2007 and Finance Act 2009 are almost same and deal with the works contract. Both the Explanations in sum and substance were similar in so far as they deny exemption to assessees who were acting as mere works contractors. Both these Explanations were b .....

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the Explanation. Thus, it is not a case of introduction of new provision of law by retrospective operation. The ld. Counsel for the assessee submitted that it is a fact that the assessee is a developer and not merely a works contractors and this point is examined by the AO and accepted by him. He has relied on the decision of Supreme Court in the case of Malabar Industrial Co. Ltd. 243 ITR 83 on the proposition that where two views are possible and the ITO has taken one view, with which the CIT .....

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l to the interest of Revenue. He has also relied upon the order of ITAT Pune Bench dated 08.06.2011 in the case of Laxmi Civil Engg. P. Ltd. vs. Addl. CIT, copy of which is placed on record. The ld. CIT has not given any reasons as to how the assessee is a works contractor. The assessee has substantial interest in the project, as the assessee has fixed assets of ₹ 4.30 crores (PB-30) and also furnished security deposit to the tune of ₹ 3.23 crores for getting the development contract .....

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34.2. The tax benefit was introduced for the reason that industrial modernization requires a massive expansion of, and qualitative improvement in, infrastructure (viz., expressways, highways, airports, ports and rapid urban rail transport systems) which was lacking in our country. The purpose of the tax benefit has all along been for encouraging private sector participation by way of investment in development of the infrastructure sector and not for the persons who merely execute the civil cons .....

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Indore Bench in the case of Sanee Infrastructure Pvt. Ltd. vs. ACIT, 23 taxmann.com 345, in which it was held as under : After amendment by Finance Act, 2002 for claiming deduction under section 80-IA(4) infrastructure facility is only required to be developed and there is no condition that assessee should also operate same. 5. On the other hand, the learned Departmental Representative relied on the impugned order and submitted that the AO should have passed a speaking order and in assessment ye .....

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s inserted by Finance Act, 2007 w.e.f. 01.04.2000 reads as under : For the removal of doubts, it is hereby declared that nothing contained in this section shall apply to the person who executes works contract entered into with the undertaking or enterprises, as the case may be. 6.1 The above Explanation was substituted by the Finance Act, 2009 w.e.f. 01.04.2000, which reads as under Explanation. - For the removal of doubts, it is hereby declared that nothing contained in this section shall apply .....

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after considering the material on record, accepted the claim of the assessee u/s. 80IA(4) of the IT Act. Copies of the replies of the assessee are filed in the paper book, in which the assessee explained that it is registered company in India engaged in development for Railway Department since 2002. The work of the assessee is to develop railways tracks and after the tracks are developed the same are handed over to the department. After entering into the agreements with the railways, the assesse .....

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respect of the context. The assessee also explained that Explanation to section 80IA(13) first inserted by Finance Act, 2007 and amended by Finance Act, 2009 as reproduced above would not apply to the assessee s case first because the nature of the work is not of work contract and second, that this Explanation applies to only sub-contractors. ITAT, Pune Bench in the case of Laxmi Civil Engg. P. Ltd. vs. Addl. CIT vide order dated 08.06.2011, considering the decision of Bombay High Court in the .....

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stion are provided by the judgment of the Bombay High Court in the case of ABG Heavy Engg. Ltd. (supra). In this regard we perused the above cited para -22 of the said judgment and for the sake of completeness, the said paragraph is reproduced as under : 22. The submission which was urged on behalf of the Revenue is that Clause (iii) of sub-section (4A) of section 80- IA, one of the conditions imposed was that the enterprise must start operating and maintaining the infrastructure facility on or .....

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essentially means is that the infrastructure facility should have been operational after 1st April, 1995. After Section 80 IA was mended by the Finance Act, 2001, the section applies to an enterprise carrying on the business of (i) developing; or (ii) operating and maintaining; or (iii) developing, operating and maintaining any infrastructure facility which fulfills certain conditions. Those conditions are (1) ownership of the enterprises by a company registered in India or by a consortiums; (II .....

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tains an infrastructure facility. A harmonious reading of the provisions in its entirety would lead to the conclusion that the deduction is available to an enterprise which (i) develops; or operates and maintains; or (iii) develops, maintain and operates that infrastructure facility. However, the commencement of the operation and maintenance of the infrastructure facility should be after 1st April, 1995. In the present case the assessee clearly fulfilled this condition. Before the amendment that .....

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a contractor for the NJP Trust and that contractor, assessee is found to be an eligible developer for making claim of deduction u/s. 80IA (4) of the Act. From the above, it is evident that the person who only develops the infrastructure do not have the occasion to operate and maintain the infrastructure. It is further evident that the harmonious reading is necessary and mandatory in view of high Court s judgment in the case of an enterprise carrying on business or developing which is the case of .....

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d requirement of harmonious reading of sub-clause (c) vis-à-vis of clause (i) of section 80IA(4) of the Act. Thus, the discussion in High Court s decision in paragraph-22 extracted above, is directly applicable to the facts of the case and eventually is entitled for the deduction under section 80IA (4) of the Act. Accordingly, the modified ground, which is common in all the four appeals is allowed in favour of the assessee. 7. In the result, all four appeals of the assessee are allowed. 7 .....

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cepting that the assessee is engaged in developing of infrastructure facilities. Similar claim was also allowed in assessment year under appeal. Thus, the AO was satisfied that the assessee was entitled for exemption u/s. 80IA(4) of the Act. It is also proved on record that the assessee has a history of granting exemption u/s. 80IA(4) of the Act. In preceding assessment years 2006-07 and 2007-08, the AO allowed similar claim of assessee u/s. 143(3) of the Act. Copies of the assessment orders are .....

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acts and circumstances of the case. Hon ble Gujrat High Court in the case of Ganesh Housing Coprn. Ltd. 31 taxmann.com 359 in para 17 to 19 held as under : 17. After hearing the learned counsel for the parties and after going through the aforesaid materials on record, we find that the main reason for opening the assessment is that in the light of the Explanation inserted to section 80-IB(10) by the Finance (No. 2) Act, 2009 with retrospective effect from April 1, 2001, deduction under section 80 .....

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proceedings, nothing prevents the Assessing Officer to take a suitable remedial action by way of reopening the assessment. 19. It is now a settled law that if an Explanation added to a section of a statute for the removal of doubts, the implication is that the law was the same from the very beginning and the same is further explained by way of addition of the Explanation. Thus, it is not a case of introduction of new provision of law by retrospective operation. We find that the petitioner had di .....

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that if an Explanation is added to a section of statute for removal of doubts, the implication is that the law was the same from the very beginning and the same is explained by way of addition to Explanation. Thus, insertion of Explanation to section 80IA(13) by Finance Act, 2007 and Finance Act, 2009 were in conscious consideration of the AO not only in assessment year under consideration but in preceding assessment years as well. Hon ble Allahabad High Court in the case of Goyal Private Family .....

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e has been dismissed as reported in 313 ITR (Statute) 5. 8. The learned CIT in para 32 of the impugned order has set aside the original assessment order because no adequate enquiry has been carried out by the AO on the issue of allowability of deduction u/s. 80IA(4) of the IT Act as raised in the show cause notice, but such finding of the CIT have not been approved by the Hon ble Delhi High Court in the case of CIT vs. Anil Kumar Sharma, 335 ITR 83, in which it was held that inadequate enquiry w .....

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where two views are possible and ITO has taken one view with which the CIT does not agree, it cannot be treated as erroneous or prejudicial to the interest of revenue unless the view taken by the ITO is unsustainable in law. The same view has been taken by the Hon ble Supreme Court in the case of CIT vs. Max India Ltd., 295 ITR 282. Since the assessee has been granted similar deduction in preceding assessment years and no change in the facts have been reported, therefore, when the AO accepted th .....

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by the judgment of Hon ble Delhi High Court in the case of CIT vs. Escorts Ltd. 338 ITR 435, in which it was held - Where a fundamental aspect of a transaction is found to have permeated through different assessment years and this fundamental aspect has stood uncontested then the Revenue cannot be allowed to change its view taken in earlier assessment years unless it is able to demonstrate a change in circumstances in the subsequent assessment year. Held, that the Commissioner s order did not co .....

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