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2016 (11) TMI 75 - ITAT KOLKATA

2016 (11) TMI 75 - ITAT KOLKATA - TMI - Eligible for deduction U/S 80-IA - Held that:- The assessee was not merely responsible for supplying labour for the aforesaid project, but rather was responsible for the development of the entire infrastructure facility. In order to do so, it deployed its various resources, materials, labour, supervisor, Engineers etc. It made substantial investments and exposed itself to various risks. Hence it is clear that the assessee was a developer in the aforesaid p .....

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01.2012. Assessments were framed by DCIT.CC.XXVIII, Kolkata u/s 143(3)/147 of the Income Tax Act, 1961 (hereinafter referred to as the Act ) vide his order dated 29.12.2011 for assessment years 2006-07 & 2009-10 respectively. 2. Both the appeals are heard together and are being disposed of by way of consolidate order for the sake of convenience. Shri Ravi Tulsiyn Ld. Authorized Representative appeared on behalf of assessee and Shri H.K. Lal, Ld. Departmental Representative appeared on behalf .....

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ffice to offer its comments on the rejoinder filed by the assessee in response to the said Remand Report and, thus, has violated the principles of natural justice, c) That the Ld. CIT(A) has failed to appreciate that the definition of the term 'Works Contract' as occurring in Explanation below section 80-IA(13) has not been provided in the Income-tax Act and, hence, the same has to be imported from the related Acts. d) That the Ld. CIT(A) has failed to appreciate that the definitions of .....

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the deduction u/s 80lA within the scope of Explanation below section 80-IA(13) of the Act f) That the Ld. CITCA) has failed to interpret the legislative intent of the provisions of section 80-IA to the extent spelt out in CBDT's Circular No. 3 of 2008 dated 12.03.2008, which states that the incentive of deduction u/s 80-IA has all along been intended to benefit developers who undertake entrepreneurial risk and investment risk and not contractors who only undertake business risk, g) That the .....

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and thus loses the character of a 'Developer' to which the incentive of deduction u/s 80-IA has all along been aimed, i) That the Ld. CLTCA) has failed to appreciate that the simple fact that tax was deducted u/s 194C from all the alleged 'eligible projects' makes it clear that the assessee was into a simple construction contract and thus was not entitled to deduction u/s 80-IA, j) That the Ld. CIT(A) has failed to realise that when an assessee executes a project of infrastructu .....

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) That in view of the grounds (c) to (k) above, the Ld. CIT(A) has erred in facts as well as Il1 the circumstances of the case in directing to delete the disallowance of deduction u/s 80-IA to the tune of ₹ 7,79,20,811/-; and m) That the Department craves the right to add, delete, modify or abrogate the grounds of appeal during the course of hearing of the case. 4. The Revenue has raised several grounds of appeal but the only common issue arising is that Ld CIT(A) erred in providing deduct .....

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ntaldih project 4,08,58,949/- Benihala LIS project 24,54,116/- Urbani LIS 27,18,977/- O&M Bangalore project 35,16,941/- 7,79,20,811/- The aforesaid projects were awarded by Central / State Government / Local Authority / Statutory Body on turnkey basis. The Assessing Officer, during the course of assessment proceedings observed that in all the aforesaid projects, the government / semi government organizations are the employer and assessee is acting as a contractor. All the projects were award .....

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79,20,811/- and added to the total income of assessee. 6. Aggrieved, assessee preferred an appeal before L d CIT(A) whereas assessee submitted that Sec. 80-IA nowhere defines the term works contract , hence the natural meaning of the word shall apply. As per the Oxford dictionary the term work means application of effort to a purpose or use of energy. Thus going by the dictionary meaning we may say that a works contract is a contract which involves effort or in other words labour of the contract .....

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e. Thus as per Sec. 194C also, works contract does not include a contract wherein the contractor in addition to employing labour, procures material from a third party. Thus, contracts involving mere labour of the contractor are included in the purview of works contract . Further assessee submitted that explanatory memorandum in the Finance Bill, 2007 has explained the purpose extending tax benefit u/s 80-IA of the Act was to encourage investment from the private sector. The assessee, in the inst .....

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is appeal are similar to the facts and the legal issue involved in the case of the appellant for the assessment year 2009-10. Ground no 3 and 4 in the present appeal are directed against the action of the AO in disallowing the deduction u/s. 80IA as claimed by the appellant on the projects developed by it on the ground that the appellant is a mere works contractor and is therefore ineligible for deduction by virtue of the Explanation below sub-section (13) of section 80IA. I have dealt with this .....

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-10 is also applicable for the present assessment year since the factual and legal position remains the same. Following the decision in the case of the appellant for the assessment year 2009-10 in Appeal No. 205/CC-XXVIII/CIT(A) C-I/11-12, it is to be held that the appellant is a developer who fulfils all the requirements for claiming deduction u/s. 80IA and is therefore eligible for deduction under the said section. Accordingly, the AO is directed to allow the deduction of ₹ 7,79,20,811/- .....

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nment bodies has undertaken the projects for the development of infrastructure facilities. Accordingly the assessee is entitled for the deduction 80IA of the Act. The ld. AR also submitted that the AO has not disputed the facts of the assessee business activities. The works contract is a contract under which the contractor is merely supplying/ employing the labour but in the instant case the assessee is also provides the material and other requisites including machineries in addition to the capi .....

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astructural facility. Regardless to say the aforesaid activities undertaken by the assessee involved a substantial amount of risk. Like any other entrepreneur who employs his material, plant, machinery, labour etc. in a project and undertakes risk, the assessee was also exposed to a substantial amount of risk by virtue of engaging his establishment in the infrastructure projects. In addition, the assessee was exposed to risk of non-completion of work within time, any damage caused to the works, .....

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the aforesaid project is enclosed at pages 1-60 of paper book. The following conditions listed in the agreement clearly establish that the assessee was a developer and not a mere works contractor: A. Scope of work: (i) Drawings and design: The assessee was responsible for the design of the work under the contract and was also responsible for accuracy of the said designs. (pg. 38, para 9.1) The assessee was to carry out preparatory works such as Topographic survey, soil investigations, geo-techn .....

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ra 8.2 on page 37) (iv) Plant: The assessee was to arrange and supply at its own cost all material, plant, tools, appliances, implements, ladders, cordage, tackle, scaffolding and temporary works required for proper execution of the work. (page 15, clause 18) (v) Cost of Inspection and testing: For all equipment and material required for the execution of the work, the arrangement for inspection and expenses thereto was to be borne by the assessee. (page 40, para 10.2) Further, the assessee was t .....

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ers etc.: The assessee was to have an office near the site and a clerk for service of communication notices.(page 37, para 8.1) Further, all the expenses in connection with purchase or construction or maintenance of site office, staff quarters was to be borne by the assessee. (para 7.13, page 37) (viii) Royalties and taxes: The assessee was to pay all royalties, octroi and other taxes and duties in respect of materials consumed on public work. (Clause 36A on page 19). ix) Insurance: The assessee .....

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) (xii) Security of the site: The assessee was to provide adequate manpower and means for the security of the material, work-in-progress etc. It was responsible for keeping unauthorised persons off the site. (page 36 & 37, para 7.11) (xiii) Defects Liability period: Even after completion of works the assessee was responsible for correcting defects in the works for a period of 24 months from the date of issue of certificate for completion of works. (Pg. 42) (xiv) Operations & Maintenance: .....

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ompletion of the maintenance period (pages 53 & 48). A perusal of Project Balance Sheet on page 68 shows an investment of ₹ 4,41,60,431/- on the said project. C. Risks: (i) The assessee was to finish the work specified in the contract within time failing which the assessee would be liable to compensate the Employer. (page 6) (ii) As already discussed above, the security deposit made by the assessee was to be released not on completion of the works, but after the maintenance period of 5 .....

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make good the damage at his expense. (page 15) D. Conclusion: From the aforesaid conditions, it is clear that the assessee was not merely responsible for supplying labour for the aforesaid project, but rather was responsible for the development of the entire infrastructure facility. In order to do so, it deployed its various resources, materials, labour, supervisor, Engineers etc. It made substantial investments and exposed itself to various risks. Hence it is clear that the assessee was a devel .....

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ble for developing detailed drawings to adopt equipment and materials to be supplied to the requirements indicated in the specification. Further, it was responsible for and was to pay for any alterations of work due to discrepancies in the drawings. (pg. no 92 & 93, para 13) (ii) Materials: The assessee was responsible for arrangement of materials required for the work. (pg. 93). Further, the assessee was required to establish on site testing facilities and was required to conduct tests, at .....

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daily transport to its labour and other personnel. [pg. 135 paras (f) & (g)] (iv) Erection/Construction tools, Tackles and Machinery: The assessee was to provide all construction/erection machinery, tools, tackles and scaffolding required for work. (Pg. 144, para 22.10) (v) Insurance: The assessee was required to arrange, at its own cost, all insurance pertinent to the work. (highlighted portion on Pg. 116) (vi) Site office: The assessee had the responsibility of site office construction and .....

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• Cleaning up the site [para (m) on page 136] • The assessee was to take all the safety precautions during the erection/construction work. [para (r) on page 136] • Provision of sanitary convenience in the site office, stores and for the use of workmen at the site and at labour colony. [para (u) on page 137] • Lights, guards, fencing and watching [Pg 141, para 17.1] (viii) Warranty: The warranty period of the works was 12 months from the date of taking over the completed Plant .....

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eriod. (page 84) A perusal of Project Balance Sheet on page 148 shows an investment of ₹ 13,69,87,730/- on the said project. C. Risks: (i) The assessee was to finish the work specified in the contract within time failing which the assessee would be liable to liquidated damages. (page 91) (ii) As already discussed above, the performance guarantee made by the assessee was to be released not on completion of the works, but at the end of warranty period. Thus, the completion of the work did no .....

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essee was not merely responsible for supplying labour for the aforesaid project, but rather was responsible for the development of the entire infrastructure facility. In order to do so, it deployed its various resources, materials, labour, supervisor, Engineers etc. It made substantial investments and exposed itself to various risks. Hence, it is clear that the assessee was a developer in the aforesaid project and hence is eligible for deduction u/s 80-IA. Ill. Urbani Lift Irrigation Scheme:  .....

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efore starting such work (Para 18.2 & 18.5 of page 184, 185) (ii) Materials required for the Project: The contractor was responsible for procurement of required quantity of pipes, special machinery, electrical items etc. (Pg. 198, para 18) (iii) Labour: The contractor was required to make its own arrangement for the engagement of all staff and labour, for their payment, housing, feeding and transport. (Para 1, pg. 194). Further he was to take adequate provisions for the safety of the workmen .....

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ense, survey stations. He was further required to conduct all the surveys required for execution of the work. (para 4 on page 195) (vii) Temporary fencing: The contractor was required, at his own expense, to erect and maintain temporary fences and gates along the boundaries. (para 5 on page 196) (viii) Royalty: The contractor was to pay all fees, royalties, octroi dues levied by the State Government or any other local body (Clause 36(b), page 234) (ix) Operation & Maintenance of the system: .....

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unded after the final bills are paid or after 12 months from the date of completion of work during which period the work was to be maintained by the assessee in good order [page 210, clause (f)]. A perusal of Project Balance Sheet on page 243 shows an investment of ₹ 1,10,31,129/- on the said project. C. Risks: (i) The assessee was to finish the work specified in the contract within time failing which the assessee would be liable to liquidated damages. (para 41.1, page 190) (ii) As already .....

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any precautions he may take during the execution of the works. The assessee was to make good all claims and loss arising out of such accidents and indemnify the Employer from all such claims and expenses. (Para 2, page 199) (also see clause 19, page 226) D. Conclusion: From the aforesaid conditions, it is clear that the assessee was not merely responsible for supplying labour for the aforesaid project, but rather was responsible for the development of the entire infrastructure facility. In order .....

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was a developer and not a mere works contractor: A. Scope of Work: (i) Design and drawings: The assessee was responsible for drawings and designs for temporary works. (para 18.2 on page 264) (ii) Material: The assessee was responsible for procurement of required quantity of materials like pipes, specials, machinery, electrical items etc.(para 18 on page 278 and clause 20 on page 306) (iii) Labour: The assessee was responsible for the engagement of all staff and labour and also for their payment .....

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would be responsible for payment of compensation. [page 309, clause 30(a)] (iv) Plant: All tools and plants required for the work including sheet piles and timber for shoring and strutting, pump sets etc. was to be supplied by the assessee at its own cost.( para 17 on page 278 and clause 20 on page 306) (v) Water and Electricity: The assessee was to make its own arrangement for the fresh water required for manufacturing of the pipes, construction of civil works and testing of pipelines as well a .....

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fences and gates along the boundaries. (para 5 on page 276) • Provision of septic tank/pit latrines at the construction site/camps (para 15.10 on page 286) • Provision of creches for working women labour (para 15.10 on page 286) • Drinking water (pg. 286) • Provision and maintenance of clean sanitary facilities on the site for use of its employees. (para 7 on page 276) • Watching and lighting (page 278, para 15) (viii) Royalty etc.: All quarry fees, royalties and octroi .....

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the system: As per scope of work on page 245, the assessee was responsible for proper operation of the installations for 2 years. Further it was to maintain the system in good order for 1 yr [see page 290 clause (f)] B. Investment: In order to undertake the said project the assessee was to furnish an Earnest money deposit equal to 1 % and further security deposit equal to 6.5% of the cost of work for diligent and due fulfillment of all obligations under the contract (page 289). The said deposit .....

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ii) As already discussed above, the security deposit made by the assessee was to be released not on completion of the works, but at the end of maintenance period. Thus, the completion of the work did not absolve the assessee of all its responsibilities. The said guarantee could have been forfeited by the Nigam in order to recover any sums from the assessee. (see para (e) on page 290 & last para on page 293) (iii) The assessee was wholly responsible for any injury or damage to persons and pro .....

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he entire infrastructure facility. In order to do so, it deployed its various resources, materials, labour, supervisor, Engineers etc. It made substantial investments and exposed itself to various risks. Hence, it is clear that the assessee was a developer in the aforesaid project and hence is eligible for deduction u/s 80-IA. Hence in the light of the above, the assessee is entitled to deduction u/s 80-IA of the Act. In addition to the above, the assessee was even assessed to VAT on the aforesa .....

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;s contention that when the assessee executes a project with advances received from Government, the very purpose of private sector participation is defeated (ground j). In this regard it is clarified that advances (if at all any was received) were received against furnishing of bank guarantee (of an equal or higher amount) by the assessee. Further, a perusal of the project Balance Sheets (already discussed above) have already exhibited the funds deployed by the assessee in the given projects. Th .....

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is owned by a company registered in India or by a consortium of such companies 9 or by an authority or a board or a corporation or any other body established or constituted under any Central or State Act; (b) It has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility; (c) It has started or starts .....

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half in accordance with the agreement with the Central Government, State Government, local authority or statutory 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. From the above i .....

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ity (c) Development, operation and maintenance of infrastructure facility 8.1 Now the assessee in the given case is a company which, pursuant to agreements with various Government bodies, engaged itself in the development of infrastructure facility as defined in the Explanation to sub section 4 of section 80-IA . These set of facts have not been disputed by the AO. The Ld. AO disallowed the claim on the ground that the assessee was a mere works contractor conducting mere civil construction and h .....

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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). " From a plain reading of the above it is clear that deduction u/s 80-IA does not apply to works contract. Now the relevant question arises before us for adjudication is that what constitutes a works contract. Section 80-IA nowhere defines the term "works cont .....

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nd for the benefit of the employer. Thus as per Blacks's Law also a works contract is a labour contract under which the contractor merely employs his labour as per the directions of the contractee. Further, attention is invited to relevant extracts of section 194C of the IT Act: "(iv) "work" shall include- (a) Advertising; (b) Broadcasting and telecasting including production of programmes for such broadcasting or telecasting; (c) Carriage of goods or passengers by any mode of .....

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in addition to employing labour, procures material from a third party. Thus, contracts involving mere labour of the contractor are included in the purview of "works contract". Further, attention is invited to the judgment of the Supreme Court in case of Associated Cement Co. Ltd. vs. CIT [201 ITR 435], wherein the Hon'ble Court while interpreting the term 'work' u/s 194C held that Words any work' in sub-s. (1) of s. 194C means any work including supply of labour to carr .....

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equal to two per cent of such sum as income-tax' from their purport, cannot be understood as the percentage amount deductible from the income of the contractor out of the sum credited to his account or paid to him in pursuance of the contract, but deduction is to be made out of payments made to the contractor. 8.2 We see no reason to curtail or to cut down the meaning of the plain words used in the section. ''Any work" means any work and not a "works contract'', wh .....

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". The Apex Court laid out that the term "work" used in section 194C need not be restricted to "works contracts" (i.e. labour contracts) because the subsection expressly includes supply of labour to carry out work. In other words, it is implied that works contract means supply of labour to carry out work. Thus from the above we may say that a works contract constitutes a contract under which the contractor is merely employing his efforts or labour. Under such a contract, .....

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dertaking 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 passive 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 {or encouraging private sector participation by way of investment .....

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he will be eligible for tax benefit under section 80- IA of the Act. 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 tax benefit under section 80- IA. This amendment will take retrospective effect from 1st April 2000 and will accordingly apply in relation to the assessment year 2000-01 and subsequent years. The Explanatory Memorandum clearly lays out .....

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he following judgments: The Hyderabad bench of Tribunal in case of M/s. GVPR Engineers Ltd. Vs. ACIT (2012) 32 CCH 0296 HydTrib (2012) 51 SOT 0207 (Hyd) (URO). The relevant extract of the order is reproduced as under : The next question to be answered is whether the assessee is a developer or mere works contractor. Whether the assessee is a developer or works contractor is purely depends on the nature of the work undertaken by the assessee. Each of the work undertaken has to be analyzed and a co .....

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the possession of property is handed over to the Government. The first phase is to take over the existing premises of the projects and thereafter developing the same into infrastructure facility. Secondly, the assessee shall facilitate the people to use the available existing facility even while the process of development is in progress. Any loss to the public caused in the process would be the responsibility of the assessee. The assessee has to develop the infrastructure facility. In the proces .....

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with any specific work to be done by the assessee. The material required is to be brought in by the assessee by sticking to the quality and quantity irrespective of the cost of such material. The Government does not provide any material to the assessee. It provides the works in packages and not as a works contract. The assessee utilizes its funds, its expertise, its employees and takes the responsibility of developing the infrastructure facility. The losses suffered either by the Govt. or the pe .....

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without hindrance to the regular traffic. Therefore, it is clear that from an undeveloped area, infrastructure is developed and handed over to the Government and as explained by the CBDT vide its Circular dated 18-05-2010, such activity is eligible for deduction under section 80IA (4) of the Act. This cannot be considered as a mere works contract but has to be considered as a development of infrastructure facility. Therefore, the assessee is a developer and not a works contractor as presumed by .....

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lopers who undertakes entrepreneurial and investment risk and not for the contractors, who undertakes only business risk. Similarly the Chennai Bench of Tribunal in case of R.R. Constructions, Chennai vs Department Of Income Tax 2013) 35 CCH 0547 Chen Trib (2015) 152 ITD 0625 (Chennai) held that "when the assessee makes investment and himself executes development work and carries out civil works he is eligible for tax benefit u/s 80IA of the Act. Accordingly, with the foregoing discussion, .....

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e a works contract under the Explanation to section 80-IA(l3) and the contractor shall be eligible for deduction U/S 80-IA. Now coming to the facts of the case, it is submitted that the assessee was not mere works contractor, who had merely employed its labour under the projects from the various government authorities. The assessee was a developer. In addition to employing labour it made investments, it developed an enterprise/infrastructure to support the work under the various projects. In add .....

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25.10.2013 held that "The next reason given by the CIT(A) is with regard to nonfinancial participation by the assessee, as the assessee has got mobilization advance. The mobilization advance has not been given freely. It has been given only after the assessee furnished a bank guarantee, and the bank guarantee has been given by the bank only after getting enough security from the assessee, to protect itself from any risk on account of any default on the part of the assessee. The assessee ha .....

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; 7,86,75,710.00 for the assessment year 2010-11, as seen from the Balance Sheet of the assessee as on 31.3.2009 and 31.3.2010 respectively, copies of which are furnished by the assessee at pages 21 and 66 of the paper-book. In this view of the matter, the reason given by the CIT(A) on this aspect for denying deduction to the assessee under S.80-IA is also not valid. Thus in light of the aforesaid decision of the Tribunal Hyderabad Bench, the contention of the AO is not valid. Further, merely be .....

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R 323] observed that "Parliament amended the provisions of section 80-lA of the Act so as to clarify that in order to avail of a deduction, the assessee could (i) develop ; or (ii) operate and maintain ; or (iii) develop, operate and maintain the facility. The condition as regards development, operation and maintenance of an infrastructure facility was contemporaneously construed by the authorities at all material times, to cover within its purview the development of an infrastructure facil .....

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esulting in the circulars of the Central Board of Direct Taxes. The fact that in such a scheme. An enterprise would not operate the facility itself was not regarded as being a statutory bar to the entitlement to a deduction under section 80-IA of the Act. " 8.5 From the above it is clear that even if an assessee is merely developing the infrastructural facility (without operating and maintaining the same), it is entitled to deduction u/s 80-1A. Further, condition (b) laid out in sub-section .....

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) pursuant to an agreement with the Government earn profits? The obvious answer is that the assessee will recover its cost of development from the Government otherwise the entire cost of development will be a loss in its hands. Thus, if deduction u/s 80-IA is denied on the ground that the assessee had received payments from Government, then an assessee who is only a "developer" (and not an operator) will never be entitled to deduction u/s 80-IA, which is clearly not the intention of le .....

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il, 2000, the deduction under s. 80-IA(4) has become available to any enterprise carrying on the business of (i) developing, or (ii) maintaining and operating, or (iii) developing, maintaining and operating any infrastructure facility. Sub-cl. (c) of cl. (i) of s. 80-IA(4) is obviously applicable to an enterprise which is engaged in operating and maintaining the infrastructure facility on or after 1st April, 1995. It is not applicable to the case of an enterprise which is engaged in mere develop .....

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erating and maintaining thereof by such person, there cannot be any question of providing a condition for such an enterprise to start operating and maintaining the infrastructure facility on or after 1st April, 1995. Since the assessee is only a developer of the infrastructure project and it is not maintaining and operating the infrastructure facility, sub-cl. (c) of cl. (i) of sub-s. (4) of s. 80-IA is not applicable. The interpretation of Revenue is absurd also in view of the rationale of the .....

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pment, is transferred to the Government, naturally the cost would be paid by the Government. Therefore, merely because the transferee 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 s. .....

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ty of only developing infrastructure facility. Obvious as it is, a developer would have income only if he is paid for development of infrastructure facility, for the simple reason that he is not having the right/authorisation to operate the infrastructure facility and to collect toll therefrom, and has no other source of recoupment of his cost of development. Considered as such, the business activity of the nature of build and transfer also falls within eligible construction activity, that is, a .....

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n agreement with the Government agencies for development of the infrastructure projects, is obviously a contractor but that does not derogate the assessee from being a developer as well. The term "contractor" is not essentially contradictory to the term "developer". On the other hand, rather s. 80-IA(4) itself provides that assessee should develop the infrastructure facility as per agreement with the Central Government, State Government or a local authority. So, entering into .....

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infrastructural facility i.e., road and not engaged in the operating and maintaining the said facility is entitled to the benefits of the deduction under s. 80-IA(4).-Patel Engineering Ltd. vs. Dy. CIT (2004) 84 TTJ (Mumbai) 646 followed. Provisions of sub-cl. (c) of cl. (i) of s. 80-IA(4) are inapplicable to the assessee which is engaged in mere developing of the infrastructure facility and, therefore, an assessee who is only engaged in developing the infrastructure facility and not in operati .....

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s not operating the infrastructure facility. Merely because the assessee was paid by the Government for development work it could not be denied deduction under section 80-IA(4). The Chennai Bench of Tribunal in case of R.R. Constructions, Chennai vs. Department of Income tax held that "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 per .....

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rise carrying on the business of only developing he infrastructure facility would be entitled to deduction under section 80IA(4), which is not the intention of the law. An enterprise, which develops the infrastructure facility is not paid by the Government, the entire cost of development would be a loss in the hands of the developer as he is not operating the infrastructure facility. The legislature has provided that the income of the developer of the infrastructure project would be eligible for .....

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nal in case of Sanee Infrastructure Pvt. Ltd. vs. ACIT [138 ITD 433] held that "As per our considered view, after amendment by the Finance Act, 2002 for claim of deduction u/s 80IA(4) infrastructure facility is only required to be developed and there is no condition that assessee should also operate the same. Thus, after amendment, when the assessee is not required to operate the facility, the payment for development of such infrastructure is required to be made by the Government only. &quo .....

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uction u/s 80- IA. Further, the Revenue in all the grounds has contended that the contracts entered into by the assessee were merely 'construction contracts' since the assessee is not exposed to any entrepreneurial and investment risk. In this regard, the AO has observed that the assessee is executing the contract against predetermined revenue w.r.t the above, it is submitted that under the impugned contracts, the assessee was merely carrying out the civil construction work. It was respo .....

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ility. Hence, it cannot be said that the contract with the Government was to carry out mere civil construction. Attention in this regard is invited to the following: (i) The ITAT (Ahmedabad) in case of Sugam Construction (P) Ltd. vs. ITO [56 SOT 45] held that "It is also gathered (a) That a developer is a person who undertakes the responsibility to develop a project. (b) That a developer is therefore not a civil contractor simplicitor. (c) That if we apply the commercial aspect, then a deve .....

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ned with the duty to develop, maintain and operate such project. (g) That to ascertain whether a civil construction work is assigned on development basis or contract basis can only be decided on the basis of the terms and conditions of the agreement. Only on the basis of the terms and conditions it can be ascertained about the nature of the contract assigned that whether it is a "work contract" or a "development contract". (h) That in a development contract" responsibili .....

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oper is therefore expected to arrange finances and also to undertake risk. (I) That in contrast to the rights of a "contractor" a "developer" is authorized to raise funds either by private placement or by financial institutions on the basis of the project. These are few broad qualities of a developer through which the character of a developer can be defined. " (ii) ITAT(Hyderabad) in case of Koya and Co. Construction (P) Ltd. vs ACIT [51 SOT 203] held that "The expl .....

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sessee clearly demonstrated before the court that the assessee at present has undertaken huge risks in terms of deployment of technical personnel, plant and machinery, technical knowhow, expertise and financial resources. " Thus the fact that the assessee deploys its resources (material, machinery, labour etc.) in the construction work clearly exhibits the risks undertaken by the assessee. Further, the assessee vide the agreements has clearly demonstrated the various risks undertaken by it. .....

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o the assessee is that the assessee has not undertaken any risks. The observations of the ld. CIT(A) in this behalf are also not valid and correct. It was clearly mentioned in the agreement that the assessee shall execute and furnish indemnity bond for a period of four years, indemnifying the Government against any loss or expenditure incurred, to repair any defect noticed due to faulty working done by the contractor or substandard material used by the contractor. Further, it is also mentioned i .....

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ve, it cannot be said that the assessee has not undertaken any risk. 8.7 From the above, it is clear that the contention of the AO that the assessee had not undertaken any entrepreneurial and investment risk is an incorrect interpretation of the facts. Lastly, with regard to the project O&M, Bangalore (on which a deduction of ₹ 35,16,9411- was claimed), it is submitted that it is an operation and maintenance project, to which Explanation to section 80-IA(13) does not apply. Explanation .....

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ee was not a works contractor simplicitor and was a developer and hence Explanation to section 80- IA(13) does not apply to the assessee. Further, in addition to developing the infrastructure facility, the assessee was even operating and maintaining the same. Thus, clearly the assessee is eligible for deduction u/s 80-1A. In our considered view do not find any reason to interfere in the order of ld. CIT(A). Hence this ground of appeal of the Revenue is dismissed. 10. In the result, Revenue s app .....

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omments on the rejoinder filed by the assessee in response to the said Remand Report and, thus, has violated the principles of natural justice, c) That the Ld. CIT(A) has failed to appreciate that the definition of the term 'Works Contract' as occurring in Explanation below section 80-IA(13) has not been provided in the Income-tax Act and, hence, the same has to be imported from the related Acts. d) That the Ld. CIT(A) has failed to appreciate that the definitions of the term 'Works .....

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lA within the scope of Explanation below section 80-IA(13) of the Act f) That the Ld. CITCA) has failed to interpret the legislative intent of the provisions of section 80-IA to the extent spelt out in CBDT's Circular No. 3 of 2008 dated 12.03.2008, which states that the incentive of deduction u/s 80-IA has all along been intended to benefit developers who undertake entrepreneurial risk and investment risk and not contractors who only undertake business risk, g) That the Ld. CIT(A) has faile .....

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character of a 'Developer' to which the incentive of deduction u/s 80-IA has all along been aimed, i) That the Ld. CLTCA) has failed to appreciate that the simple fact that tax was deducted u/s 194C from all the alleged 'eligible projects' makes it clear that the assessee was into a simple construction contract and thus was not entitled to deduction u/s 80-IA, j) That the Ld. CITCA) has failed to realise that when an assessee executes a project of infrastructure development with .....

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e grounds (c) to (k) above, the Ld. CIT(A) has erred in facts as well as in the circumstances of the case in directing to delete the disallowance of deduction u/s 80-IA to the tune of ₹ 61,86,38,683/- m) That as regards the disallowance of deduction u/s 80G, the Ld. CIT(A) has erred in Law in admitting additional evidence without having recorded the reasons for such admission and consequently, in directing to restrict the disallowance to ₹ 2,50,000/-; and n) That the Department crave .....

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1/Kol/2013, may be taken in ITA No. 1292/Kol/2013 for A.Y.09-10 also. We hold accordingly. 14. The second issue raised by Revenue in this appeal is that ld. CIT(A) erred in admitting the additional evidence without recording the reasons and restricting the disallowance to ₹ 2.50 lacs for the deduction u/s. 80G of the Act. 15. At the time of framing of assessment, assessee did not produce the certificate of donation given to Shrutakevali Education Trust for Rs, 10 lakh as specified u/s 80G( .....

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