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2016 (8) TMI 995 - ITAT DELHI

2016 (8) TMI 995 - ITAT DELHI - TMI - Eligibility for claiming deduction u/s. 80IA(4) - civil contract business - The work was allotted by DRDO, Ministry of Defence, Govt. of India for construction of rain water harvesting reservoir, i.e., the development of infrastructure facility. - Held that:- As per section 80IA(4), the appellant should be engaged in the eligible business as defined in the section. For this, it was also to be examined and enquired by the revenue authorities from the agreemen .....

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se. In case the assessee is found to have received the periodic payment as per periodical measure book records of the project, then the assessee cannot be termed to be developer, as in that case no financial risk of the assessee would be there in the project. Furthermore, as per provisions of section 80IA, the eligible entity who claims himself to be a developer for the purpose of this section, is required to maintain separate books of account for the project and according to those accounts, cor .....

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s of payments, maintenance of account books with respect to the project separately etc. before denying the claim of the assessee u/s. 80IA (4). - However, for want of proper enquiries and in absence of correct facts emerged out of such enquiries, the decisions relied upon by the assessee, in our opinion, do not render any help to the assessee. We accordingly deem it proper in the interest of justice to restore the matter to the file of ld. Assessing Officer to decide the matter de novo afte .....

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r L.P. Sahu, Accountant Member: This is an appeal filed by the assessee against the order of the CIT(A)- XVII, New Delhi for the assessment year 2007-08 dated 21.01.2010 on the following grounds : 1. On the facts and in the circumstances of the case and in law, the Worthy CIT(A) in Appeal No. 40-IT/CIT(A)-I/Ldh/09-10 dated 22.09.2010 has erred in passing that order in contravention of the provisions of section 250(6) of the Income Tax Act, 1961. 2. That On the facts and in the circumstances of t .....

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Defence Research & Development Organization (DRDO) under the work order No. CCE(R&D)C/OFN/8311/JO/CA-88 dated 30th November, 2006 for ₹ 11,53,91,745/-. The assessee company filed its return of income on 10.11.2007 declaring total income of ₹ 3,82,56,335/-. The case was selected for scrutiny and statutory notices were issued. During the course of scrutiny proceedings, the ld. AO noticed that the assessee company has claimed deduction u/s. 80IA(4) of the IT Act, 1961 (hereinaft .....

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ofit declared was at ₹ 6,69,58,974/-. The overall profit ratio of this company is 7.03% and he submitted separate Profit & Loss account and balance sheet. The total turnover was declared at ₹ 10,57,95,700/- on which the profit was declared of ₹ 2,47,75,170/-. The total profit rate comes to 23.4%. Thus, the profit worked out for eligible business claimed is much higher than the overall profit of the business. The appellant did not submit actual profit & loss account befo .....

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Officer disallowed the claim of deduction of ₹ 2,47,75,170/- and added the same back to the assessee s total income. 3. The assessee carried the matter before the ld. CIT(A). The ld. CIT(A) examining in detail the facts and submissions of the appellant, found that the appellant is not eligible for claiming deduction u/s. 80IA(4). He, therefore, dismissed the appeal of the assessee. Against the order of the ld. CIT(A), the appellant is in appeal before the Tribunal. 4. The ld. AR of the as .....

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esting reservoir, i.e., the development of infrastructure facility. He referred to section 80IA(4) where it is prescribed that this section applies to any enterprise carrying on the business of developing or operating and maintaining or developing, operating and maintaining of any of infrastructure facility which fulfills all the conditions namely - (i). Developing - BT Type (ii). Operating and maintaining - OLT Type (iii). Developing, operating and maintaining - BOLT Type 5. The case of the app .....

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the paper book. Calculation of indirect expenses of project and indirect expenses of Head Office, have been calculated on the proportionate basis as placed at paper book page No. 24 & 25. Form No. 10CCB was submitted duly signed by the Chartered Accountant before the Assessing Officer which itself is a certificate from a highly competent professional of accounting and is enough to justify the compliance of the conditions referred to in section 80IA(4). The ld. AO has objected only on the rep .....

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hennai Bench) (vi). Om Metal Infraprojects Ltd. vs. CIT, 26 DTR (Jp)Trib) 359 (vii) M/s. Maytas-NCC(JV) v. ACIT (ITA No. 1875/Hyd/11 (Hyd. Tribunal) (viii). CIT vs. ABG Heavy Industries Ltd. & Ors., 322 ITR 323 (Bom. HC) (ix). Patel Engineering Ltd. vs. DCIT, 84 TTJ (Mum) 646(Mum. Tribunal) (x). M/s. Bongaigaon Refinery and Petrochemical Limited (Civil appeal No. 1679 of 2004) (SC) (xi). M/s. Pratibha Industries Ltd. (ITA Nos. 2197 to 2199/Mum/2008) (xii). M/s. GVPR Engineers Ltd. (ITA No. 3 .....

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submitted that in the notification, there is no ambiguity. The cases relied upon by the appellant, being on different facts, are not applicable to the present case. 7. After hearing both the sides and considering the material available on record and orders of the authorities, we find that the ld. CIT(A) has examined in detail and recorded in his order the contentions of the assessee and concluded that the assessee is not eligible for claiming deduction u/s. 80IA(4). The findings of the ld. CIT(A .....

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project. In this regard, it will be convenient to reproduce the provisions of the section of 80IA(4)ofthel.T. Act, 1961 as under:- "(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 .....

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d 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 enterprise) to another enterprise (hereafter in this section referred to as the transferee enterprise) for the purpose of operating and maintaining the infrastructure facility on its behalf in accordance with the agreement with the Central Government, State Government, local authority o .....

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d, a bridge or a rail system; (b) a highway project including housing or other activities being an integral part of the highway project; (c) a water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management system; (d) a port, airport, inland waterway [, inland port or navigational channel in the sea]; (ii) any undertaking which has started or starts providing telecommunication services, whether basic or cellular, including radio paging, .....

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the Central Government in accordance with the scheme framed and notified by that Government for the period beginning on the 1st day of April, 1997 and ending on the 31st day of March, [2006]: [Provided that in a case where an undertaking develops an industrial park on or after the 1st day of April, 1999 or a special economic zone on or after the 1st day of April, 2001 and transfers the operation and maintenance of such industrial park or such special economic zone, as the case may be, to another .....

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ve effect as if for the figures, letters and words "31st day of March, 2006", the figures, letters and words "31st day of March, [2011]" had been substituted;] (iv) an [undertaking] which,- (a) is set up in any part of India for the generation or generation and distribution of power if it begins to generate power at any time during the period beginning on the 1st day of April, 1993 and ending on the 31st day of March, [2011]; (b) starts transmission or distribution by laying .....

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nes at any time during the period beginning on the 1st day of April, 2004 and ending on the 31st day of March, [2011]. Explanation.-For the purposes of this sub-clause, "substantial renovation and modernisation" means an increase in the plant and machinery in the network of transmission or distribution lines by at least fifty per cent of the book value of such plant and machinery as on the 1st day of April, 2004;] (v) an undertaking owned by an Indian company and set up for reconstruct .....

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er before the 31st day of March, [2011];]" 3.1 It can be seen from the provisions of section 80IA (4) that in order to claim a deduction under this section, an assessee must fulfill following conditions: 1. The enterprise should be carrying on the business of (i) Developing or (ii) Operating or maintaining or (iii) Developing, operating and maintaining. any infrastructure facility which fulfills all the following conditions: (a) It is owned by a company registered in India or by a consortiu .....

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nature of a work contract. For the sake of convenience, the Explanation is reproduced below: "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 Government) and executed by the undertaking or enterprise referred to in sub-section (1)." 3.3. In the case under consideration the project w .....

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he developer. But the contractor is not concerned with the profit and loss of the project. A contractor is interested only in the receipt of amount given in the contract. In order to claim a deduction u/s 80IA (4), an enterprise should be carrying on the business of developing, operating or maintaining any infrastructure facility which fulfills all the conditions mentioned at (a), (b) and (c) above. In the statement of facts submitted alongwith appeal memo, the appellant has admitted that they a .....

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be seen that the appellant company is not qualifying even a single condition what to speak of all the conditions. The Ld. AR have not been able to point out even a single condition of section 80IA, which the appellant has fulfilled what to speak of fulfilling all the conditions cumulatively. Regarding the Ld. AR's submission that the AO has wrongly applied the Explanation as the same was applicable to sub-developers, the same is not correct as the Explanation as it stands amended w.e.f. 01. .....

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undertaking engaged in development of infrastructure facilities, Industrial Parks and Special Economic Zones. 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 investmen .....

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, 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-fA. This amendment will take retrospective effect from 1st April, 2000 and will, accordingly, apply in relation to the assessment year 2000-2001 and subsequent years. [Clause 22]." It is clear from the explan .....

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xecutes the development work. It further says that a person who enters into a contract with another person for executing works contract, will not be eligible for the tax benefit u/s 80IA. Admittedly, the appellant was given only a work contract by the DRDO for earth and civil work of the rain water harvesting project. Thus, the Explanation is fully applicable to the appellant's case. Therefore, I .do not find any merit in the submissions of the Ld. AR and hence the same are rejected. Since t .....

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m of the appellant. Therefore, the assessment order passed by the AO is upheld and addition made by the AO is hereby confirmed. These grounds of appeal are rejected. 8. The record reveals that the form No. 10CCB filed by the appellant is also found not complete, as the last para from Sl. No. 25(e) to Sl. No. 30 is missing therein. When the matter in hand came up before us in the second round of hearing fixed for clarification, the ld. Counsel for the assessee placed a strong reliance on a decisi .....

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onstruction works like construction of fly over, under pass, sewerage, water supply and treatment etc., for various local bodies, railways and state/central governments. For the purpose, the assessee had entered into contract with the State/Central Governments and local authorities to execute the infrastructural works as per the contract agreement made and claimed deduction u/s.80IA for the construction of above infrastructural works. During the current year, the assessee has claimed deduction u .....

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the Act by applying the Explanation to sec.80IA of the Act. Against this, the assessee went in appeal before the Commissioner of Incometax( Appeals), who following the earlier order of the Tribunal in assessee s own case for the assessment year 2004-05 in ITA No.544/Mds/2010 dated 13.9.2011 allowed the claim of the assessee, by observing that the assessee is eligible for deduction u/s.80IA of the Act and against this, the Revenue is in appeal before us. 4. The ld. DR relied on the judgment of th .....

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include an enterprise executing a works contract. There would certainly be a demarcation between developing the facility and execution of works contract awarded by an agency engaged in developing such facility. CIT v. RADHE DEVELOPERS [2012] 341 ITR 403 (Guj) relied on. From the inception in the year 1996, deduction under sub-section (4A) of section 80-IA of the Act was available to an enterprise engaged in developing, maintaining and operating any infrastructure facility. At the very first sta .....

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s fundamental concept was not discarded. Sub-section (4) which formed part of the recast section 80-IA did not carry any material changes from the earlier provisions of sub-section (4A) of section 80-IA which existed prior to April 1, 2000. With effect from April 1, 2002, some significant changes were made in the provisions. Such changes were (i) that sub-section (4) of section 80-IA now required the enterprise to carry on the business of developing or operating and maintaining or developing, op .....

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e stipulated in the agreement was done away with. These changes, however, would not alter the situation vis-a-vis the Explanation. The basic requirement of the enterprise carrying on the business of developing or operating and maintaining or developing, operating and maintaining infrastructure facility was not done away with. Even as amended with effect from April 1, 2002, section 80-IA(4) could be construed as not including execution of works contract as one of the eligible activities for claim .....

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in relation to a business which is in the nature of a works contract executed by an undertaking. What the Explanation, did was to clarify a statutory provision which was at best possible of a confusion. If that be so, the Explanation must be seen as one being in the nature of plain and simple Explanation and not either adding or subtracting anything to the existing statutory provision. If the Explanation was purely explanatory in nature and did not mend the existing statutory provisions, the qu .....

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sed the records and gone through the orders of the authorities below. The issue involved in this appeal is whether the assessee is eligible for the deduction under section 80-IA(4) of the Act or not. According to the Assessing Officer the assessee company had constructed water treatment plant for CMWSSB and some private entities and as per the construction contract the assessee had simply executed works contract on job work basis for CMWSSB and therefore was denied the deduction u/s 80-IA(4) of .....

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record that the assessee has executed the works contract, i.e. water treatment plant for CMWSSB and has claimed deduction under section 80-IA(4) of the Act. The assessee is unable to establish as to how it had made investment in the project. Apart from that the assessee is not able to prove that it has not executed the work contract by producing relevant material to contradict the finding given by the Assessing Officer. We, therefore, hold that the assessee is a works contractor. 7. Now the only .....

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is in the nature of a works contract awarded by any person (including the Central or State Government) and executed by the undertaking or enterprise referred to in subsection (1). 8. As per the above Explanation to sub-section (13), works contractor is not eligible for deduction u/s 80-IA(4) of the Act. The very same Explanation was considered by the Tribunal, I Bench Mumbai in ITA No. 5172/Mum/2008 in the case of The Indian Hume Pipe Co. Ltd. v. DCIT for the assessment year 2004-05 (supra) and .....

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in the nature of a works contract awarded by any person (including the Central or State Government) and executed by the undertaking or enterprise referred to in sub-section (1). Such being the legal position, and the assessee having merely executed the works contract for infrastructure development as awarded to him, we are of the considered view that authorities below rightly declined the deduction u/s 80IA to the assessee. We approve the conclusions arrived at by the CIT(A) and decline to inte .....

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allowed the appeal of the assessee ignoring the explanation inserted to sub-section (13) of section 80-IA by the Finance (No.2) Act, 2009. However, we find that the order of the Tribunal in the case of Patel Engineering Ltd. v. DCIT (supra) relied on by the learned CIT(Appeals) no more holds the field as an Explanation has been inserted to subsection (13) of section 80-IA by the Finance (No.2) Act, 2009, reproduced above. Further, no material has been brought to our notice that the order of the .....

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he Assessing Officer. 11. Insofar as the case law relied on by the learned counsel for the assessee in the case of ABG Heavy Industries Limited (supra) is concerned, the Hon ble Bombay High Court has not at all considered the issue, whether works contractor is eligible for the deduction under section 80-IA(4) or not. The only issue before the Hon ble Bombay High Court was whether the assessee has to develop the entire Port in order to qualify for deduction under section 80-IA. Therefore, the Hon .....

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uction under section 80-IA. Therefore this decision has no application to the facts of the present case. 12. In view of the above facts and circumstances of the case and the statutory provisions, the appeal filed by the Revenue has to be allowed and we do so. 13. In the result, the appeal filed by the Revenue is allowed. 5. The ld. AR relied on the order of the Judgment of the Supreme Court in the case of CIT v. Berger Paints Indi Ltd. (266 ITR 99), wherein it was held as follows: If the Revenue .....

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A is available only to a developer who carries on business of developing of infrastructure facility . A person who enters into contract with another person for executing works contracts is not eligible for such a benefit. Explanation to section 80IA was inserted by Finance Act, 2007 with retrospective effect from 1.4.2000 which has further been amended by Finance (No.2) Act, 2009 with retrospective effect from 1.4.2000. The amendment in this Explanation was necessitated due to contrary judicial .....

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Explanation and amendment thereto. To trace the history of this deduction, we find that originally, in the provision of section 80IA, there was no mention of any development of infrastructure facility . It is only with effect from 1.4.2000, this section was divided into two portions 80I and 80IB. Section 80IA(4) prescribes about the deduction available to a developer who develops infrastructure facilities. In view of the amendment inserted by the Finance Act, 2007, with retrospective effect from .....

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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 tax benefit under section 80-IA. 10. We have found that the assessee-company is a works contractor, who has entered into agreement with the local bodies to execute certain part of the work awarded to it through contract for infrastructure facility. It is true that where a person who makes civil work will be eligible for tax b .....

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rs and spirit, we find that this assessee is verily eligible for deduction u/s 80IA, as the assessee-company fulfils all the relevant conditions. The facts of this case go to prove that the assessee is a developer of infrastructure facilities. The reasons for our above conclusion are given in the following paras. Firstly, the assessee-company not only designs but also creates new products. The assessee had undertaken four projects during the relevant year and executed, constructed, delivered and .....

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dge, culvert, factory, workshop, powerhouse, transformers or such other works of the State Government or public undertakings as the State Government may be by notification, specify in this behalf at any of its stages entered into by the State Government or by an official of the State Government or public undertaking and includes an agreement for the supply of goods or material and all other matters relating to execution of any of the said works. The case of ACIT vs. Indwell Lianings Pvt. Ltd. (s .....

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the case may be. According to Attorney s Pocket Dictionary, in relation to a corporation or business, the term undertaking denotes its whole enterprise and the word enterprise connotes all the related activities performed either through unified operation or common control by any person or persons for a common business purpose. The mens legis with reference to developer of infrastructure facility can be gathered from the memorandum explaining the provisions in the Finance Bill, 2007, reported in .....

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ms) 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 construction work or any other works contract. Accordingly, it is proposed to clarify that the provisions of section 80- IA shall not apply to a person who executes a works contract entered into with the undertaking or enterprise referred to in the .....

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I, 2000 and will accordingly apply in relation to the assessment year 2000 -01 and subsequent years." It is made abundantly clear that the prescription of section 80- IA shall not apply to a person who executes work contracts entered into with an undertaking or enterprise. Thus, in a case where a person who makes investment and himself executes development works and carries out civil works, will be eligible for tax benefit under section 80- IA of the Act. In contrast to this, a person who e .....

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r deciding this issue. We, therefore, restore the order of the Assessing Officer and the Commissioner of Income-tax (Appeals). 11. To further elaborate the discussion on this issue, paras 5 & 6 of the decision of ITAT Pune Bench rendered in the case of Laxmi Civil Engg. P. Ltd vs Addl. CIT, order dated 8.6.2011 are being extracted herein below: 5. We heard both the parties and perused the orders of the revenue. The contentious issues before us are (i) whether the contractor is synonymous wit .....

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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-lA, one of the conditions imposed was that the enterprise must start operating and maintaining the infrastructure facility on or after 1 st April, 1995. The same requirement is embodied in subclause (1) of sub-clause (4) of the amended provisions. It was urged that since the assessee was not operating and maintaining the facility, h .....

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se 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 (I) ownership of the enterprises by a company registered in India or by a consortiums; (II) an agreement with the central or State Government, local authority or statutory body; and (III) the Start of operation and maintenance of the infrastructure facility should commence after 1s .....

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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 1" April, 1995. In the present case the assessee clearly fulfilled this condition". Before the amendment that was brought about by parliament by Finance Act, 2001 we have already noted that the consistent line of circulars of the Board postulated the same position. The amendment made .....

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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 the assessee, all the conditions referred to clause (i) of section 80IA (4) should refer to the conditions as applicable to the developer. In other words, th .....

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ecision 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. 12. Let us remind ourselves that the Hon'ble Supreme Court in the case of Bajaj Tempo Ltd vs CIT, 196 ITR 188, has ordained that taxing statute granting incentives for promoting growth and development should be libe .....

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ity and if it maintains the infrastructure facility or to put it in simpler terms, the harmonious reading of the provisions in its entirety would lead to the conclusion that this deduction is available to an enterprise who - develops or operates and also maintains; or develops, maintains and operates that infrastructure facility. The provision for giving the impugned incentives has been examined, reexamined, modified and amended after giving conscious and deliberate discussions by the concerned .....

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oader picture in their mind aiming at acquiring certain facility for which infrastructure development is required. So, to say, when any assessee/enterprise agrees under a contract to develop such an infrastructure facility, it cannot straight away be dubbed as not the brainchild of that enterprise, but only of the authority in question. Therefore, again this provision in so far as the conditions required to be fulfilled to be eligible for this incentive had to be provided by the juridical forums .....

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in the civil construction work like construction of flyover, bridge underpass, sewerage, water supply etc. for various local bodies, railways, Central/State Governments. In fact, as per the terms of agreement, even the initial proposals formulated by the Department which are stated to be tentative, the assessee has the liberty to make different proposals without detrimental to the general features of the Departmental proposal, like Road level/bottom of deck level, MFL, Sill level, Linear water w .....

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d for such purpose by any such developer . In the case of ACIT vs Bharat Udyog Ltd, F Bench of ITAT Mumbai, has concluded that any assessee who is engaged in developing the infrastructure facility and also operating and maintaining the same, is entitled to the benefit of deduction u/s 80IA(4). A copy of this decision is enclosed at page 139 of the paper book. In the case of Patel Engineering Ltd vs Dy. CIT, 84 TTJ (Mumbai) 646 [copy enclosed at page No.145 of the paper book], it has been held th .....

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should develop the infrastructure facility as per the agreement with the Central Government, State Government or a Local Authority. So, entering into a lawful agreement and thereby becoming a contractor should in no way be a bar to the one being a developer . The assessee has developed infrastructure facility as per the agreement with Maharashtra Government/APSEB, therefore, merely because in the agreement for development of infrastructure facility the assessee is referred to as a contractor or .....

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r thereof as per agreement and it cannot be disputed in view of the material on record that the assessee has transferred the infrastructure facility developed by it by handing over the possession thereof to the concerned authority as required by the agreement. The handing over of the possession of developed infrastructure facility/project is the transfer of the infrastructure facility/project by the assessee to the authority. The handing over of the infrastructure facility/project by the develop .....

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elopment of infrastructure facility/Project. The same has been the position in the given case as well. So, deduction u/s 80IA(4) is also available to this assessee which has undertaken work of a mere developer . Rather, the statutory provision as contained in section 80IA which provides for deduction of infrastructure facility no way provides that entire infrastructure facility project has to be developed by one enterprise. Thus, as per section 80IA the assessee should develop the infrastructure .....

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for the purpose of section 80IA(4)(i) . The assessee is not required to develop the entire road in order to qualify for deduction u/s 80IA as has been held by the Hon'ble Bombay High Court in the case of CIT vs ABG Heavy industries Ltd, 322 ITR 323. The newly inserted Explanation 2 to section 80IA vide Finance Act, 2007, does not apply to a works contract entered into by the Government and the enterprise. It applies to a work contract entered into between the enterprise and other party the .....

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in the case of ACIT vs Bharat Udyog Ltd , by holding that such a deduction is only to be denied to a sub-contractor and not a min contractor. Similar view has been taken by the ITAT Chennai Bench in the case of ACIT vs Smt C.Rajini (supra) in which both of us constituted the Bench. In this decision the definition and 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 devel .....

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pment work and carries out civil works, he is eligible for tax benefit u/s 80IA of the Act. Accordingly, with the foregoing discussion, we hold that the assessee is entitled to deduction u/s 80IA(4) of the Act, and therefore, we order to delete the addition made in this respect. 6. We have considered the elaborate submissions made by both the parties and also perused the materials available on record. We have also gone through all the case laws cited by both the parties. We find that the provisi .....

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that any enterprise which carried on any of these three activities would become eligible for deduction. Therefore, there is no ambiguity in the Income-Tax Act. We find that where an assessee incurs expenditure on its own for purchase of materials and towards labour charges and itself executes the development work i.e., carries out the civil construction work, it will be eligible for tax benefit under section 80 IA of the Act. In contrast to this, a assessee, who enters into a contract with anot .....

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see includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (4) (such business being hereinafter referred to as the eligible business), there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of an amount equal to hundred per cent of the profits and gains derived from such business for ten consecutive assessment years. (2)……&he .....

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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 wher .....

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body, the provisions of this section shall apply to the transferee enterprise as if it were the enterprise to which this clause applies and the deduction from profits and gains would be available to such transferee enterprise for the unexpired period during which the transferor enterprise would have been entitled to the deduction, if the transfer had not taken place. Explanation. - For the purposes of this clause, infrastructure facility means- (a) a road including toll road, a bridge or a rail .....

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s hereby declared that nothing contained in this section shall apply in relation to a business referred to in subsection (4) which is in the nature of a works contract awarded by any person (including the Central or State Government) and executed by the undertaking or enterprise referred to in sub-section (1). *It introduced by Finance (No.2) Act, 2009 w..e.f. 1.4.2000 6.1 A perusal of the statutory provisions makes it clear that it does not provide a blanket deduction i.e. in order to succeed i .....

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g of the infrastructure facilities. In our opinion, an assessee while claiming deduction has to satisfy all conditions in sub-section 4(1)(a) or (b) or (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 concern satisfies sub-s .....

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a limited company and it satisfies this condition. 6.2 In our opinion, sec.80IA of the Act, intended to cover the entities carrying out developing, operating and maintaining the infrastructure facility keeping in mind the present business models and intend to grant the incentives to such entities. The CBDT in Circular Nos.779 dated 14.9.1999 and 794 dated 9.8.2000 clarified that pure developer should also be eligible to claim deduction under sec.80IA of the Act, which ultimately culminated into .....

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ld have simply reversed the Amendment made in the Finance Act, 2001. Thus, the aforesaid Explanation was inserted, certainly, to deny the tax holiday to the entities who does only mere works contract or sub-contract as distinct from the developer. This is clear from the express intention of the parliament while introducing the Explanation. The explanatory memorandum to Finance Act 2007 states that the purpose of the tax benefit has all along been to encourage investment in development of infrast .....

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, expertise and financial resources. After the amendment the section 80IA(4) read as (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility, prior to amendment the or between three activities was not there, after the amendment or has been inserted w.e.f.1-4-2002 by Finance Act 2001. Therefore, in the considered view of the Bench, the assessee should not be denied the deduction under sec.80IA of the Act, if the contracts involve .....

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0IA of the Act. The profit from the contracts which involves design, development, operating & maintenance, financial involvement, and defect correction and liability period is to be computed by Assessing Officer on pro-rata basis of turnover. The Assessing Officer is directed to examine the contracts accordingly and grant deduction on eligible turnover as directed above. 7. Further, it is to be noted that while passing the impugned orders, the CIT(A) relied on the order of the Tribunal in as .....

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er the AO nor the CIT(Appeals) have gone through each agreement of the contract entered into by the assessee to carry out the projects. 7.1 It is also pertinent to note that in the case of CIT v. Hi Tech Arai Ltd. (321 ITR 477) the jurisdictional High Court held that simply because a Co-ordinate Bench of the Tribunal had taken a different view, the Tribunal on this occasion also ought to have followed the same, having no merit. When it is found that the Tribunal has applied a law correctly in th .....

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view of this, in our opinion, it is appropriate to remit the issue in dispute back to the file of the AO to consider all the agreements entered into by the assessee and he shall examine the same along with the explanations and also the application of the judgment of the Gujarat High Court cited supra. Accordingly, we remit the issue in dispute to the file of the AO for fresh consideration and decide the issue after examining all the agreements entered into by the assessee. 9. We have properly an .....

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nt or operation and maintenance or development, operation & maintenance of infrastructure facility. As per CBDT Circular Nos. 779 dated 14.9.1999 and 794 dated 9.8.2000, the developer is also eligible to claim deduction under sec.80IA of the Act irrespective of fulfilling the condition of operating and maintaining or developing, maintaining and operating, which ultimately culminated into Amendment under sec.80IA of the Act, in the Finance Act 2001. We also find that, to avoid misuse of the a .....

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to Finance Act 2007 states that the purpose of the tax benefit has all along been to encourage investment in development of infrastructure sector and not for the persons who merely execute the civil construction work as a contractor. It categorically states that the deduction under sec.80IA of the Act is available to developers who undertake entrepreneurial and investment risk and not for the contractors, who undertakes only business risk. After the amendment, the section 80IA(4) read as (i) dev .....

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as a developer, as claimed by assessee, or not. In the decision of Hon ble ITAT Chennai Bench, it has been categorically opined that the deduction under section 80IA of the Act is available to such developers who undertake entrepreneurial and investment risk and not for the contractors, who undertake only the business risk. It is also opined by the Chennai Bench that the contracts, which involves design, development, operating and maintenance, financial involvement and defect correction and liab .....

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tion Engineer R & D (Central) dated 21.08.2008. From this certificate, it reveals that the date of commencement of work was 30.11.2006. In the instance case, it is not clear as to whether the assessee has engaged its own financial resources /risk to develop the rain water harvesting reservoir. A perusal of material available on record shows that the assessee has deposited only the security of ₹ 16,40,183/- as per letter dated 14.03.2007 placed at paper book page 29. The security deposi .....

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Rs.1,11,00,000 4th payment voucher No. 455/06-07/CCE(R&D)C dt. 25.01.2007 Rs.49,00,000 5th payment voucher No. 467/06-07/CCE(R&D)C dt. 07.02.2007 Rs.2,00,00,000 6th payment voucher No. 477/06-07/CCE(R&D)C dt. 15.02.2007 Rs.1,37,00,000 7th payment voucher No. 505/06-07/CCE(R&D)C dt. 08.03.2007 Rs.2,66,00,000 8th payment voucher No. 517/06-07/CCE(R&D)C dt. 19.03.2007 Rs.89,00,000 9th payment voucher No. 523/06-07/CCE(R&D)C dt. 21.03.2007 Rs.65,00,000 From the contract docu .....

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of enquiry whether the assessee has engaged any of its own financial risk in the project so as to ascertain the assessee to be a developer or a works contractor. The periodic huge receipts of payments by the assessee were relatable to development work or civil construction works, has not been examined by the authorities below in terms of agreements entered into between the parties. As also observed by ITAT, Chennai Bench in the aforesaid order, the developers who undertake entrepreneurial and i .....

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the Act. As per section 80IA(4), the appellant should be engaged in the eligible business as defined in the section. For this, it was also to be examined and enquired by the revenue authorities from the agreements and the ground activities of appellant in compliance thereto as to who supplied the drawings and designing etc. of the project. It was also to be enquired as to what was the assessee s risk in the project. The Revenue authorities also did not examine the nature of payments received by .....

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