TMI Blog2011 (8) TMI 1168X X X X Extracts X X X X X X X X Extracts X X X X ..... ontractor, is acceptable. We have seen the Explanation added to section 80IA by Finance Act, 2007 and amended by Finance Act 2009 and found that there is no material difference in the language of Explanation added by Finance Act, 2007 and amended by Finance Act, 2009. There is only difference of words i.e. the Central or State Government were included by the Finance Act, 2009. Otherwise, the language is same. The language of the Explanation says that if the Enterprise is a contractor then deduction under section 80IA (4) will not be allowable. After going through clauses of agreement, according to which assessee has to develop the design and has to be approved by the Engineer-in-Charge and thereafter the manufacturing of Gate has to be started. The awardee has to develop the design itself. If there was no development of design then there could not have been payment on account of development of design. Tender specifications specifically provide the cost of design which is 2%. There is also clause of payment on account of maintenance and running and from all these clauses it is established that assessee is not merely a contractor but a Developer also and as per Explanatio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... laim. Therefore, the expenditures were disallowed by AO and confirmed by ld. CIT (A) - Decision against Assessee. - ITA NO. 911/JP/2010 - - - Dated:- 5-8-2011 - SHRI R.K. GUPTA AND SHRI N.L. KALRA ) For the Petitioner : Shri Vijay Mehta, Mayur Kishnadwala B.V. Maheshwari For the Respondent : Shri Sunil Mathur ORDER PER R.K. GUPTA, J.M. This is an appeal by assessee against the order of ld. CIT (A) relating to assessment year 2007-08. 2. First issue in the appeal of the assessee is against rejecting the claim of deduction under section 80IA(4) on income of Goshi Khurd Project by ₹ 16,89,16,692/-. 3. The brief facts of the case are that the assessee is a Public Limited Company and claimed deduction of ₹ 16,89,16,692/- under section 80IA(4) in respect of Goshi Khurd Project, which is an irrigation project promoted by Government of Maharashtra. The project envisages construction of earthen Dam to provide irrigation to certain parts of Maharashtra and also provide drinking water. The project was implemented by Govt. of Maharashtra undertaking, namely Vidarbha Irrigation Dev. Corporation, Nagpur. The diffe ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce. The payment was receivable by the assessee on the condition that operation and maintenance of the gates were maintained for two years after commissioning and testing of all gates and training of O M to staff of Vidharbha Irrigation Development Corporation. That the words used by legislature intended to allow deduction to enterprise engaging in all the activities enumerated in section 80IA(4). The Corporation is a monitoring agency and developer is the person who executes the work or develops something on the surface or earth. Thus the developer is the assessee company. As any work done for other agency is always done under a contract, hence to do work with Govt. is to be done on agreed terms and it is called contract. That any person who is engaged in the work will do on contract basis only and, there is no other alternative. All the work of infrastructure belongs to Govt. and hence the real developer is the Pvt. Agency. The Govt. is only a planner and monitoring agency, 3.3. On this issue order passed under section 263 by the CIT, Jaipur was appealed before Hon ble ITAT, Jaipur who held the order under section 263 null and void. The ITAT held that the company was eligible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation the explanation then only the claim of deduction was allowed by the Tribunal. Attention of the Bench was drawn on copies of orders of Tribunal placed in the record. It was further submitted that there is no material difference between the explanation added by Finance Act, 2007 and thereafter amended by Finance Act, 2009. Wording is the same and, therefore, the issue is covered by the decision of Tribunal in case of assessee itself. Regarding the amended explanation added by Finance Act, 2007, it was submitted that as there is no substantial change, only the words added i.e. including the Central or State Government. Otherwise, the main provisions in explanation added to section 80IA(4) are same. Attention of the Bench was drawn on both the explanations added under section 80IA(4) (by Finance Act, 2007 and Finance Act, 2009 respectively). Thereafter relevant portion of the order of the Tribunal for assessment year 2003-04 and 2005-06 were read by ld. A/R. Thereafter the meaning of contractor was explained. Attention of the Bench was drawn on page 44 of the paper book and page 59 of the paper book. It was explained that of course, there is a contract between the assessee and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in favour of the assessee by taking into consideration the explanation added by Finance Act, 2007 and amended by Finance Act, 2009, copies of these orders were also filed. Copy of Board Circular was also filed. The ratio of the decision of Hon ble Supreme Court in case of Bajaj Tempo was also relied upon. 6. The ld. CIT D/R on the other hand also filed a copy of brief written note and they were explained also. It was submitted by ld. CIT D/R that the Tribunal while disposing the appeal for assessment years 2003-04 and 2004-05 have followed the order of Patel Engineering Co. Ltd. vs. ACIT, 94 ITD 411(Mum.) which has already been reversed by the Special Bench of the Tribunal in the case of B.T. Patil. It was submitted that the decision of Hon ble Bombay High Court in the case of ABG Heavy Industries is not applicable on the facts of the present case as the facts are different in the case in hand. It was further submitted that the Tribunal while disposing the appeal of the assessee for assessment years 2003-04 to 06-07 have not given any finding in respect of explanation added by Finance Act, 2007 or amended by Finance Act, 2009 as the Tribunal has simply followed the decision of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n of Special Bench in the case of B.T. Patel Sons has not been reversed by the order of Hon ble High Court as the issue was same and Hon ble Bombay High Court has held that even a contractor is eligible for deduction. The issue before the Hon ble Bombay High Court was for supply of crane and it was found by the Hon ble Bombay High Court that supply of specific crane by that assessee was eligible for deduction under section 80IA(4). The decision of Hon ble Bombay High Court is of a later date, therefore, it has to be presumed that the decision of Special Bench in the case of B.T. Patil Sons has been taken into consideration. It laws further submitted that even and otherwise the decision of Hon ble Bombay High Court will prevail upon the decision of Special Bench. It was further submitted that the Tribunal has specifically held while deciding the appeal for assessment years 2003-04 to 06-07 that assessee is developer and now it cannot be said that assessee is not developer in the year under consideration. Attention of the Bench was drawn on relevant finding of the Tribunal given in the appellate order for assessment years 2003-04 and 04-05. The ratio of decision of Hon ble Bombay ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g. 39 to 125) and PB-2 (Pg. 126 to 319). The terms and conditions of this agreement would clearly suggest that assessee has been involved from the stage of designing up to maintenance. All these terms have been considered by the Hon ble Bench in A.Y. 2003-04 and assessee has been held to be developer. 5. Decision of the Hon ble Special Bench in the case of B.T. Patil, rendered after considering subsequent insertion of Explanation vide Finance Act, 2009 would not affect eligibility of assessee to claim deduction under section 80IA(4) of the Act. The decision of the Special Bench (Pg. 322 to 389 of PB-3) has been analysed as under : (a) Para 1 to 30 (Pg. 355 to 372 of PB-3) refers to other incidental issues and arguments of the parties. (b) Para 31 and 32 are preface. (c) In paras 33 to 36, the Tribunal has held that deduction cannot be given to developer for A.Ys. 2000-01 and 2001-02. This has been held in view of provision existed before A.Y. 2003-04 (Pg. 320 of PB-3). However, in para 36, the Tribunal has clarified that deduction would be available to the developer with effect from A.Y. 2002-03. Hence, this part is not relevant as the present case pertains to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dustries Apart from this, this observation is contradictory to para 45. (i) In para 50, the Tribunal has held that the whole does not include part . This has been subsequently reversed by the Bombay High Court in ABG Heavy Industries. (Para 19 of Pg. 401 of PB-3). Apart from this, it has been held by the Supreme Court in the case of Gujarat Industrial Development Corporation v. CIT (227 ITR 414)(Pg. 417 of PB-3) that assessee developing industrial areas satisfies requirement of development of cities, towns and villages . Development of core component or substantial component of facility should be held sufficient for the requirement of development of facility. Reliance is also placed upon the above referred decision of Bombay High Court wherein, after relying upon the decision of Supreme Court in the case of Bajaj Tempo (196 ITR 188), it has been held that provisions granting incentives are to be construed liberally. Apart from this CBDT Circular No. 4/2010 dated 18.05.2010 (Pg. 424 of PB 3) itself suggest that widening of existing road would be eligible for deduction. Admittedly, widening of road does not amount to development of whole facility. (j) In paras 51 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ere a person makes the investment and himself 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, a person who enters into a contract with another person [i.e., 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. - Further, it has been stated in CBDT Circular (314 ITR (St.) 200) explaining provisions of 209 Explanation, that the amendment is clarificatory and carried out with a view to prevent misuse of the provision. - Thus, keeping in mind the Legislative intent, it can be said that the Explanation merely debars those assessees who are carrying on insignificant or non-core activity without taking any risk or reward of the development. Written submission of ld. CIT D/R : May it please your Honours : In respect of the above appeal the following written arguments are submitted in addition to the verbal arguments to be taken during the course of hearing : This appeal has been filed by the assessee against an order of ld. CIT (A) passed under section 250 o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e assessee also wherein in line no. 2 it is clearly mentioned that the assessee is a contractor. By the Finance Act, 2009, the following Explanation was added with retrospective effect from 1.04.2000 and therefore, the same has to be read into the provisions for section 80IA for A.Y. 07-08 : after sub-section (13) for the Explanation, the following Explanation shall be substituted and shall be deemed to have been substituted with effect from the 1st day of April, 2000, namely :- Explanation : For the removal of doubts it is hereby declared that nothing contained in this section shall apply in relation to a business referred to in sub-section (4) which is in the nature of a works contract awarded by any person (including the Central or State Govt.) and executed by the undertaking or enterprise referred to in sub-section (1) . In view of this provision introduced with retrospective effect from 1.04.2000, it is clear that the business of the assessee related to Goshi Khurd Project being in the nature of works contract awarded by VIDC (an undertaking of Maharashtra Govt.) will not be eligible for deduction u/s 80IA(4). 2) In the grounds of appeal the assessee has al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the assessee u/s 80 IA(4) in respect of works executed by it for Goshi Khurd Project. 3. It may not be out of context to mention here that Hon ble ITAT Jaipur Bench itself has taken note on the decision of Larger Bench, Mumbai in the case of B.T. Patil Sons and has given a decision in favour of the revenue in ITA No. 676/JP/2009, A.Y. 2006-07 in the case of DCIT Cir.1, Ajmer vs. Shiva Construction Pvt. Ltd., Ajmer in its order dated 11.06.2010. Ground No. 2 3 : In respect of these grounds, the decision of ld. CIT (A) is relied on. Sd/- (Sunil Mathur ) Dated : 13.07.2011. CIT DR(1), ITAT, JAIPUR. 9. We have heard rival submissions and considered them carefully. We have also perused the material along with the various case laws on which attention of the Bench was drawn and reliance was placed by the respective parties. The case of the department is that the explanation added to section 80IA(4) by Finance Act, 2007 with retrospective effect from 1.4.2000 and thereafter amended by Finance Act, 2009 with retrospective effect from 1.4.2000 is applicable. Since the explanation to section 80IA(4) has been added and as per explanation if any work is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssment year 2003-04 and ₹ 2,38,27,475/- for assessment year 2004-05 in respect of the same project i.e. Goshi Khurd Project. The AO allowed the claim of deduction to the assessee while passing assessment order under section 143(3). Thereafter, on examining the assessment record, the ld. CIT initiated proceedings under section 263 and set aside the order of AO. While setting aside the order of AO, the ld. CIT opined that the enterprises carrying on the business of Developing the Infrastructure facility was eligible for deduction but only the profit earned from Operating and maintaining the infrastructure facility was exempt and not the profit derived from Developing the Infrastructure facility . He was of the view that the assessee company is only a contractor carrying out specific work with respect to the irrigation project and is not the Developer of irrigation project. The ld. CIT referred the amendment introduced by Finance Act, 2007 with retrospective effect from 1.4.2000 wherein position has been cleared in the Explanation that nothing contained in this section shall apply to a person who executes works contract entered into with the undertaking or the enterprise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... apply to a person who executes a work contract entered into with the undertaking or enterprise referred to in the said section. Thus in case when a person makes the investment and himself executes the development work i.e. carries out the civil construction work, he will be eligible for tax benefit under section 80IA. Thereafter it has been explained how the assessee is a developer by developing the design of the gate and thereafter to fix those gates as per assignment. The decision was relied upon in case of Bharat Udyog Ltd., 24 SOT 412 (Mumbai). 12. On the other hand, the ld. D/R on behalf of the department has supported the order of ld. CIT. It was stated that ld. CIT has given the direction to the AO to make a fresh order in the light of discussion in his order after giving due opportunity to the assessee in respect of claim of deduction under section 80IA(4). Therefore, it was submitted that it is clear that ld. CIT in the impugned order has not directed the disallowance of deduction under section 80IA(4) but has merely directed the AO to make a fresh assessment after considering the various facts of the case and provisions of law particularly the retrospective amendment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... disallowed the claimed deduction under section 80IA(4) in respect of Vijaywada Project on the basis that no new infrastructure facility had been developed. No grievance has been expressed by the assessee in this regard before the Tribunal. The sole grievance of the assessee before us is setting aside under the revisional order the claim of deduction under section 80IA(4) on Goshi Khurd Project allowed by the AO after discussing the issue in detail at pages 12 to 18 of the assessment order. 10.1. On perusal of revisional order under section 263 in question, we find that reasons for treating the assessment orders for the years under consideration on the issue as erroneous so far as it is prejudicial to the interest of revenue and setting aside of these orders remained as under :- (i) As per the provisions of section 80IA(4), for the relevant previous year, the enterprise carrying on business of developing the infrastructure facility was eligible for deduction only on the profit earned from operating and maintaining the infrastructure facility ; (ii) The enterprise was not eligible for deduction on the profit derived from developing the infrastructure facility ; ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... essment orders were erroneous in so far as it is prejudicial to the interest of the revenue justifying the revisional action under section 263 of the Act in question by the ld. CIT. In this regard we first prefer to examine the eligibility of assessee to claim deduction under section 80IA(4) of the Act. In this regard we have to examine also as to how the provisions of section 80IA(4) in assessment year 2003-04 are different from those in assessment year 2000-01 and how that difference adversely affects the claim of deduction of the assessee as per the comparative chart of the provisions of section 80IA(4), placed at page 24 of the Paper Book-I and page 277 of the Paper Book-III. It emerges that the journey of this provision started from the assessment year 1995-96 onwards. The comparative chart also suggest that the provisions have been gradually liberalized with every amendment. In the assessment year 2001-02 the deduction under section 80IA(4)(i), subject to fulfillment of prescribed other conditions was available to any enterprise carrying on the business of (i) developing , (ii) maintaining and operating or (iii) developing, maintaining and operating any infrastructure fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Book-II, is merely the sponsor of the project. The term contractor is not essentially contradictory to the term developer . On the contrary, the section 80IA(4) itself provides that the assessee should develop the infrastructure facility as per the agreement with the Government. In our view even the insertion of Explanation 2 to section 80IA vide Finance Act, 2007, as discussed above, has not altered this situation. The said amendment does not apply to a works contract entered into by the Government and the enterprise. It only applies to a work contract entered into between the enterprise and other party the subcontractor . This amendment merely aims at denying deduction to the sub-contractor who executes a works contract with the enterprise. In fact, the insertion of the Explanation supports the case of the assessee that the enterprise earning profit from the project as a infrastructure developer-contractor. The Mumbai Bench of the Tribunal in the case of Patel Engineering Co. Ltd. vs. ACIT (supra) relied upon by the AO vide para 8 thereof, under almost similar facts and circumstances has held that the assessee therein was the developer or infrastructure project and eligible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has performed, in our view, is undoubtedly specialized work for which contract was entered into. In the present case the assessee has manufactured and installed dam gates, radical gates, stop lock as per the specifications agreed upon in the contract involving huge amount. The assessee had established workshop for manufacturing of gate panels, hydraulic girders, checkered plates, drain hoist and embedded parts etc. After manufacturing these items by the assessee these were assembled and installed at dam site. For manufacturing of these articles, there is a requirement of well equipped mechanized work shop and employment of experts. The term contractor is not essentially contradictory to the term developer . On the contrary, the said section itself provides that the assessee should develop the infrastructure facility as per the agreement with the Government. One of the other conditions in the section is that the enterprise should enter into an agreement with the Central Government or 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. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a particular inrastructure. For example, the Government has certain specifications in mind in respect of full length water supply or irrigation system and these have to be specified to each segment developer. Having gone through the decision cited by the parties, we find that the decision of Mumbai Bench of the Tribunal in the case of Patel Engineering Co. Ltd. (supra) fully covers the issue raised herein, as there is no major change in the provisions of this section. From the assessment year 2000-01 to which that decision belongs to and in the assessment years 2003-04 and 2004-05 under consideration rather insertion of the word OR in between developing , operating and maintaining and developing, operating and maintaining any infrastructure facility during the years under consideration in the provisions has brought the assessee in a better position devoid of any ambiguity to claim the deduction. Paras 44, 45 and 46 of the said decision in the case of Patel Engineering Co. Ltd. (supra) supports the case of assessee accepting which, in our view the AO had rightly allowed the claimed deduction to the assessee while placing reliance on the said decision. For a ready reference ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cility. Therefore, from assessment year 2000-01, deduction is available if the assessee carries on the business of any one of the above mentioned three types of activities, and accordingly also when the assessee is carrying on the activity of only developing. When an assessee is only developing an infrastructure facility/project and is not maintaining nor operating it, obviously such an assessee will be paid for the cost incurred by it; otherwise, how will the person, who develops the infrastructure facility project, realize its cost? If the infrastructure facility is, just after its development, ransferred to the Government, naturally the cost would be paid by the Government. Therefore, merely because the Maharashtra Government or APSEB has paid for the development of infrastructure facility carried out by the assessee, it cannot be said that the assessee did not develop the infrastructure facility. If the interpretation canvassed by the Revenue authorities is accepted, no enterprise, carrying on the business of only developing the infrastructure facility, would be entitled to deduction under section 80IA(4). 46. We have noticed above that the amendment brought in by the Fin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ent is made by another person, the creator of the painting will be the artist and not the person who paid for it. We have also noted that the national water policy document furnished by the assessee, on p. 225 of its paper book-1, indicates the purpose of private sector participation. It states that private sector participation may help in introducing innovative ideas, generating financial resources and introducing corporate management an d improving service efficiency and accountability to users. It is revealed from record and has also not been disputed by the Revenue that both the projects executed by the assessee were highly technical and specialized, as also extremely tricky and did involve huge risks as well. It is also revealed from record that for executing such projects, the assessee has deployed people, plant and machinery, technical expertise, know-how and the financial resources as has also been the specific contention of the learned Authorized Representative of assessee as noted by us above. The Tribunal in that decision has specifically rejected the contention of the revenue that the developer is not the assessee but the Government of Maharashtra and APSEB, the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... stified in setting aside the same. The assessment orders on the issue for the assessment years under consideration are restored while setting aside the revisional order under section 263 in question. The issue is decided in favour of the assessee. Grounds raising the issue are accordingly allowed. This order has been followed by the Tribunal while deciding the appeals for assessment years 2005-06 and 06-07 decided in ITA No. 1438 and 1439/JP/2008 vide order dated 24.7.2009. 14.1. After going through the amended provisions of section 80IA(4) with retrospective effect from 1.4.2000 and taking into consideration the decision of Tribunal for A.Ys. 2003-04 to 06-07 it is seen that the Tribunal while disposing the appeals of the assessee has taken into consideration the Explanation added to section 80IA. The ld. CIT D/R has stated that the Explanation added to section 80IA has not been taken into consideration but the Tribunal has decided the issue following the decision of Mumbai Bench of the Tribunal in the case of Patel Engineering Co. Ltd (supra), in our view the contention of ld. CIT D/R is not correct. Whole of the finding of the Tribunal has to be taken into consideratio ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... enderers has been placed in the paper book-I at pages 41 to 75. Clause (f) of the detailed Tender Notice at page 4 reads as under :- (f) Contractor shall mean the person, firm or company who enters into contract, with the Corporation shall include their executors, administrators, successors and submitted assignees. At page 61 of the Paper Book-I and internal page 21 of the detailed Tender Notice the clause 1.4 reads as under :- 1.4. The spillway crest gates of Gosikhurd Project are very large with submerged trunions and the design, manufacture, erection, operation maintenance know-how is not readily available. It is therefore necessary to develop such know-how for such large gates, which will dictate to rope in all these know-how from various experts and consultants in these fields by inviting the public offers in this week. It is absolutely necessary to have a liaison in design manufacture, erection, operation maintenance as well these activities are innovative and, therefore, an integral package for this work is need of this work. The entire package received from consultants/agencies/experts can be studied and evaluated, to the required needs with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of agreement and the clauses of tender notice, it is amply proved that VIDC is not having Know How of design and, therefore, a specific clause was put in the Tender Notice that the contract awardee has to develop the design and has to be approved by the Engineer-in-Charge of the VIDC and thereafter the manufacturing of Gate has to be started. 15.2. There is a Security Guarantee clause also and there is a Payment clause also and in final schedule of the Contract awarded to the assessee again this clause has been provided as tabulated above. 15.3. Payment Schedule has also been provided. It shows that first assessee has to file the tender as per specifications of the VIDC, then there is acceptance of tender and after accepting the tender on behalf of the awardee, 10% of the cost of contract as security has to be provided by way of Bank Guarantee. In this, a specific clause is there that 2% of the payment will be given on account of development of design. It means the awardee has to develop the design itself. If there was no development of design or there was no need of development of design then there could not have been payment on account of development of design. Tender ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nd thereafter the Hon ble Bombay High Court following the decision of Hon ble Supreme Court in the case of Bajaj Tempo, 188 ITR 23 held that assessee is entitled for deduction under section 80-IA(4) on account of supply of cranes. It has been specifically held by Hon ble High Court that assessee developed the facility on BOLT basis under contract with JNPT. On the fulfillment of the lease of ten years, there was a vesting in the JNPT free of cost. The finding that the assessee has developed the infrastructure facility and that it was engaged in operating the cranes was, therefore, based on the material on record. The fact that the assessee was also maintaining the cranes was not disputed. Therefore, the assessee was entitled to the special deduction under section 80 IA(4). The view of the AO that assessee was merely engaged in the business of supply/installing/testing/commissioning and maintaining cranes at the port was not in the business of developing, maintaining, operating a port was found inapplicable by the Hon ble High Court as the Hon ble High Court has held that assessee is a developer. The issue has been discussed at great length by the Hon ble High Court and the factual ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... has to develop the design of gates of dam and thereafter they have to fix the gates in the dam and they have to operate and look after the maintenance also for two years. Therefore, in our humble view the assessee is entitled for deduction under section 80 IA(4) even after the decision of Special Bench in case of M/s. B.T. Patil Sons. 17.1. The ld. CIT D/R has argued that the assessee is not a developer as he is just a contractor because he prepares the Gates as per design given by the Corporation and thereafter it fits the gate and operates only for two years meaning thereby he is just fitting the gates and operating for two years just to train the staff of the Corporation. 17.2. We have analyzed this argument also and found that this argument does not have any weight. First of all it is seen that as per clauses of detailed tender notice and agreement schedule the assessee has to develop the design as the Corporation does not have Know How of design of Gates on its own. Thereafter the assessee fits the gate and operate and maintain for two years to train the staff of the Corporation. This very fact proves that the design is developed by the assessee and developed design h ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 4) as we have held that assessee is a developer. 17.5. We further noted that the Rajkot Bench of the Tribunal in the case of KCL BEL Tarmat Jv. Vs. ITO decided in ITA No. 1112/RJT/2010 for assessment year 2007-08 vide its order dated 23.9.2010 have held that the assessee is entitled for deduction under section 80 IA(4). While deciding the issue in favour of the assessee, the Rajkot Bench has taken into consideration the decision of Special Bench in case of B.T. Patil Sons, 126 TTJ 577 and other decisions. The Tribunal has also taken into consideration the Explanation added to section 80IA(4) by Finance Act, 2007 and amended by Finance Act, 2009 while deciding the issue in favour of the assessee. While deciding the appeal, the Tribunal has also taken into consideration the decision of Jaipur Bench in case of assessee for A.Y. 2003-04 and 2004-05 and at page 10 has observed that in case of M/s. Om Metals Infra Projects Ltd. (supra) it is held that if it is the assessee mobilizing people, plants, technical expertise etc., the assessee can be said to be a developer and that the assessee cannot be denied deduction from the profits of developing the infrastructure facility though it ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... owever, the Tribunal reversed the order of Appellate Assistant Commissioner and the Hon ble High Court confirmed the order of the Tribunal on the ground that though industrial activity was one of the facets of general development, since development of an area would require roads, buildings, sanitation, parks, spots, educational institutions and several other amenities, a city or town or village could be well developed without any industry. This finding of Hon ble Gujarat High Court has been rejected by the Hon ble Apex Court as above. 17.6. After going through the decision of Hon ble Apex Court it is seen that the Hon ble Apex Court has allowed the exemption to the State Industrial Development Corporation by holding that the industries doing the work of development of an area. The ratio of the decision can be applied on the facts of the present case also as the interpretation of provisions of Explanation to section 80IA has to be seen in a broader spectrum. Interpretation of Explanation should be interpreted in a harmonious way and not on a rigid way. The assessee is developing the design of Gates and thereafter Gates are erected on the gates of dam and they are operated and mai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 0/- on account of traveling expenses and ₹ 1,00,000/- on account of telephone expenses and Ground No. 3 relates to confirming the disallowance of ₹ 1,22,000/- being prior period expenses. 21. ₹ 1,00,000/- each on account of traveling expenses and telephone expenses were disallowed by the AO out of total expenses of ₹ 1,56,76,474/- on account of traveling expenses and ₹ 48,69,874/- on account of telephone expenses respectively. The ld. CIT (A) confirmed these disallowances. 22. After considering the orders of the AO and ld. CIT (A) we find that AO has disallowed these expenses of ₹ 1,00,000/- each on account of traveling expenses and telephone expenses on the ground that assessee could not prove that entire expenses were for the purpose of business only. How the expenses are not for business purposes, AO has not brought any material on record. The expenses incurred by assessee are huge i.e. ₹ 1.56 crores or odd on account of traveling expenses and ₹ 48.69 lacs or odd on account of telephone expenses. Full details were filed. Therefore, without any material, adhoc disallowance of ₹ 1,00,000/- each, in our view is without any ..... X X X X Extracts X X X X X X X X Extracts X X X X
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