TMI Blog2017 (5) TMI 406X X X X Extracts X X X X X X X X Extracts X X X X ..... thus the assessee was eligible to claim deduction under section 80-IA of the Act. In the impugned case, which is the succeeding year, on the very same set of facts the findings of the preceding year on the fact that the assessee was carrying out eligible infrastructure project and not works contract, cannot now be disturbed, which is exactly what has been stated by the High Court in the order passed in the case of Micro Instruments Co. (2016 (9) TMI 210 - PUNJAB AND HARYANA HIGH COURT ). Following the same also we hold that the learned Principal Commissioner of Income-tax could not have exercised his revisionary powers since the claim of the assessee had been decided in the preceding year itself and without disturbing the same it could not have been dislodged in the impugned year. Thus we set aside the order of the learned Principal Commissioner of Income-tax on this count. The assessee's claim for deduction under section 80-IA was examined in all respects by the Assessing Officer during the course of assessment proceedings and duly allowed. Moreover the fact that the assessee had been allowed deduction on the same pattern in the preceding and succeeding years lends credence to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... g to the assessment year 2011-12. 2. The grounds of appeal raised by the assessee are as follows : That the orders of the Principal Commissioner of Income-tax-1 assuming jurisdiction under section 263 of the Act are contrary to law and facts of the appellant's case as the orders passed under section143(3) are neither erroneous in so far as it is prejudicial to the interests of the Revenue nor covered under the newly inserted Explanation 2 to section 263 inserted with effect from June 1, 2015 on the issue of allow ability of deduction under section 80-IA, proportionate profit earned on the job work done by the sub-contractors and examination of the provisions of section 80-IA(8)/80-IA(10) on the following grounds. 1. That the proceedings under section 263 of the Act by the Principal Commissioner of Income-tax in the instant case for the assessment year 2011-12 have been initiated on account of 'change of opinion' on the basis of the opinion expressed as a result of the audit objection and by taking another opposite view than the view expressed by the Department in response to the audit objection by not accepting the audit objection and defending that the act ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... at the assessee-company had been awarded a contract which was in the nature of works contract and in view of the Explanation to sub-section (13) of section 80-IA, which excludes business in the nature of works contract from claiming the benefit of deduction under section 80-IA(4), deduction under section 80-IA, was not allowable on the profits derived from this project. Further the learned Principal Commissioner of Income-tax noticed that the assessee had undertaken a project of water supply and had debited a payment of ₹ 2,92,48,936 in the trading account relating to the project on account of job work done by sub- contract. As per the learned Principal Commissioner of Income-tax the assessee was not eligible for deduction under section 80-IA on the proportionate profits earned on job work executed by the sub-contractor. The learned Principal Commissioner of Income-tax also noticed that in respect of two projects relating to water supply and Hamirpur bypass, the expenses incurred on freight and carriage, fuel and wages and salary were not in proportion to the receipts from the same and the same had not been examined by the Assessing Officer with reference to the provision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ee and therefore the present proceeding under section 263 only tantamounted to review due to change of opinion. Further the assessee submitted that even on the merits the assessee was entitled to deduction under section 80-IA since the contract awarded to it was not in the nature of works contract but was a composite contract on build, operate and transfer basis with all the attendant risks relating to investment, entrepreneurship performance guarantee, etc. lying on the assessee itself. Further the assessee submitted that in the case of Kaveri Infrastructure Pvt. Limited/Unipro Techno Infrastructure a similar contract was held as infrastructural contract in the assessment year 2008-09 by another Assessing Officer and also the assessee had been granted certificates for deduction of tax at a lower rate in view of the fact that the contract awarded to it qualified for deduction under section 80-IA of the Act. The assessee further argued that the proceedings had been initiated on receipt of the audit objection. The gist of the submissions made by the assessee before the learned Principal Commissioner of Income-tax are reproduced in paragraph 3.1 of his order, after considering which t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hich cannot be reviewed due to change in opinion. (CIT v. Nahar Exports Ltd. [2008] 173 Taxman 3 (P H)) (iii) In the proposal of the Assessing Officer, it has nowhere been recorded that deduction was granted because of lack of inquiry/verification or as a result of non-application of mind. (iv) The notice has been issued in mechanical exercise of power and non-application of mind in support of which five arguments have been given. (v) The deduction has been allowed by the Assessing Officer on a true and correct interpretation of the provision of the Act. (vi) Power under section 263 cannot be exercised by assessing different interpretation on the same set of facts. 3.1.1 The submissions made by the assessee have been considered. The Explanation to sub-section (13) of section 80-IA has been substituted by the Finance Act, 2009. The Explanation is exclusionary in nature which states that nothing contained in the section will apply in relation to a business referred to in sub-section (4) which is in the nature of works contract awarded by any person (including the Central or State Government). Thus to be eligible for deduction under section 80-IA(4), the busin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o sub-section (13) of section 80-IA in the case of the assessee. Further the facts of issuance of certificate for tax deduction at lower rates or allowing deduction in some other case by any other Assessing Officer are not relevant here. Accordingly, the order passed by the Assessing Officer is erroneous in so far as it is prejudicial to the interests of the Revenue on this issue. 3.2 Regarding the issue at Sr. No. 2 of the show-cause notice, the assessee has admitted that during the execution of the contract, services of the sub-contractors were hired. The assessee has further claimed that the issue has been considered by the Assessing Officer at the time of assessment proceedings though not discussed in the assessment order and that section 80-IA does not expressly debar the assessee from claiming deduction under section 80-IA. 3.2.1 The provisions of section 80-IA(4) are applicable to any enterprise carrying on the business of developing or operating and maintaining or developing, operating and maintaining any infrastructural facility. The deductions are thus clearly not applicable for the contract which is not carried out by the assessee. This aspect has not been subj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rests of the Revenue for the reasons discussed above in view of the provisions of section 263, inter alia, including Explanation 2(a) inserted with effect from June 1, 2015. Accordingly, the assessment order under section 143(3) dated December 26, 2013 for the assessment year 2011-12 is cancelled with a direction to the Assessing Officer to pass an order afresh in accordance with law keeping in view the above observations and after allowing opportunity of being heard to the assessee. 6. Aggrieved by the same the assessee has come up in appeal before us. 7. Before us the learned counsel for the assessee reiterated the contentions made before the learned Principal Commissioner of Income-tax while the learning Departmental representative relied on the order of the learned Principal Commissioner of Income-tax. 8. We have heard the rival contentions, perused the order of the learned Principal Commissioner of Income-tax and the documents placed before us. 9. On a perusal of the order of the learned Principal Commissioner of Income-tax we find that the first reason for invoking the revisionary powers under section 263 was that the Assessing Officer had not examined the claim ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... er supply scheme from the Executive Engineer, IPH and claimed this income as exempt under section 80-IA and got sub-contract from NKG Infra in which income is taxable. Please provide the complete details in this regard along with a copy of contract with them. Please also provide details how you are eligible for exemption under section 80-IA when you are conducting activities under contract. 6. You have also claim exemption amounting to ₹ 52,35,708 under section 10(2A) and ₹ 12,11,810 under section 80-IA. Please provide the complete details in this regard along with documentary evidence. 7. As per the audit report column No. 26, the auditor has shown deduction under Chapter VI-A at 'nil' on the other hand in the computation you have claimed under Chapter VI-A at ₹ 12,11,810. Please explain this. 11. Please state the date on which the company came into existence. As per Form 10CCB annexed with the audit report at paragraph 8 the auditor has mentioned commencement of operation/activity as April 13, 2010. And at paragraph 9 the initial assessment year from when deduction under section 80-IA is for the assessment year 2011- 12. On the other hand, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation and source level augmentation of various schemes in changer area in Tehsil Jaisinghpur, Palampur, Khundian and Dehra in the District Kangra HP complete construction of the project including operation and maintenance of the whole scheme is covered under section 80-IA. The copy of contract with the Executive Engineer HP, IPH Division Thural for lift water supply scheme is enclosed herewith. A copy of agreement as sub-contractor of NKG Infrastructure Ltd. is also enclosed herewith.' (d) Reply dated August 29, 2013 for the purpose of claim of deduct ion under section 80-IA placed at paper book page 41. The relevant portion of the reply is as follows : 'Please refer to the assessment proceedings in the case of Unipro Techno Infrastructure Private Limited, SCO 36, Sector 7, Chandigarh for the assessment year 2011-12, PAN AACFU1025F. The information/documents asked for is as under : 2. The partnership firm of Unipro Techno Infrastructure was converted into private limited company with effect from April 13, 2010 with all its assets and liabilities with the same sales tax registration number. The deduction under section 80-IA was first claimed in the assessment ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ntioned here that the second year for claiming exemption under section (i.e. first year in the hand of Unipro Techno infrastructure for the financial year 2009-10 and the second year in the hand of Unipro Techno Infrastructure Private Limited with effect from April 13, 2010, i.e. for the financial year 2010-11) since the company has awarded the same project by the same Government. This year, the assessee has claimed an amount of ₹ 12,11,810 as deduction under section 80-IA. The assessee vide its reply, which is placed on record, has himself admitted that the year under reference is the second year for claiming deduction under section 80-IA'. 10. Relying upon the above documents the learned counsel for the assessee stated that the relevant queries relating to the eligibility of the claim of the assessee of deduction under section 80-IA was raised by the Assessing Officer during the assessment proceedings, due reply was filed by the assessee after considering which and after applying his mind to which the Assessing Officer passed a detailed reply allowing deduction under section 80-IA to the assessee. Thereafter the learned counsel for the assessee drew our attention t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Techno Infrastructure placed at the paper book pages 70 and 71, which reads as under : August 4, 2015 : The reply to the notices issued under section 133(6) of the Act by respondent No. 2 to the Irrigation Department, H. P. Government was received on August 3, 2015 from the Executive Engineer (I PH) Division, H. P. Government, by the said respondent No. 2, in pursuance of which the case of the petitioner was fixed for August 4, 2015. The Assessing Officer i.e. respondent No. 2, passed the following order in favour of the petitioner which rendered the very initiation of reassessment proceedings for the assessment year in question including the subsequent year as illegal and totally without jurisdiction : Present : Sh. A. K. Sood, chartered accountant. The learned counsel again submits that the proceedings under section 148 need to be dropped as there was no non-disclosure by the assessee. He has again been told that the case is being proceeded with on the merits as the matter is one of interpretation of the statute. The clarification received from the Executive Engineer, I PH, Division Barsar, District Hamirpur vide letter dated August 1, 2016 in response to the query ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ve, on the other hand, we find, relied upon the order of the learned Principal Commissioner of Income-tax and stated that the aspect of application of Explanation to sub-section (13) of section 80-IA, to the contract awarded to the assessee was not examined by the Assessing Officer which being crucial to the claim of deduction under section 80-IA, an error had crept into the order of the Assessing Officer and since apparently the project undertaken by the assessee was covered under the definition of works contract the assessee had been wrongly granted deduction under section 80-IA causing loss to the Revenue and thus the action of the learned Principal Commissioner of Income-tax was justified on this account. 13. We have heard the contentions of both the parties and perused the order of the learned Principal Commissioner of Income-tax as also the documents placed and referred to before us. 14. The only reason for exercising the revisionary powers under section 263 in the present case is that the Assessing Officer had not examined the claim of the assessee to deduction under section 80-IA(4) vis-a-vis Explanation 13 to the said section which excludes profits earned from work ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 80-IA of the Act. Thus, the assessee had clarified that it was not merely works contract awarded to it but a project awarded to it was on a turnkey basis which included post-completion operation and maintenance of the same also for a specified period. Copy of the contract was also placed before the Assessing Officer. The assessee had also clarified that the impugned deduction under section 80-IA was first claimed by it in the assessment year 2010-11 and the year under reference was the second year for claiming the said deduction. 18. It is amply clear from the above that necessary enquiries regarding the assessee's claim for deduction under section 80-IA of the Act vis-a-vis the lift water site scheme contract received from the Executive Engineer, IPH, District Kangra were made during the assessment proceedings by the Assessing Officer. Further all necessary explanations regarding the claim of deduction along with evidences were placed by the assessee to prove its claim of deduction under section 80-IA of the Act. Therefore, for all purposes, it can be said that the claim of the assessee had been duly verified during the assessment proceedings. Clearly the contention of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he very same project had been allowed to it by the Assessing Officer and also that for identical project another Assessing Officer had granted deduction under section 80-IA of the Act to a sister concern of the assessee M/s. Kaveri Infrastructures Pvt. Ltd. in collateral proceedings before the Deputy Commissioner of Income-tax, for the assessment years 2008-09 to 2011-12, that too after exercising powers under section 133(6) and receiving clarification from the Executive Engineer, IPH, on a perusal of which the Assessing Officer found that the contract was on build, operate and transfer (BOT) basis and not in the nature of works contract and that the project was on turnkey basis in which the assessee was involved in operation and management also. The Assessing Officer in that case also noted that such arrangements were typical for infrastructure development projects of the Government and cannot be seen as mere works contract. All these facts have not been rebutted by the learned Departmental representative before us. Therefore, without any doubt it can be said the view taken by the Assessing Officer with regard to the claim of the assessee under section 80-IA of the Act was a plaus ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ifically at paragraph 12 of its order had stated as follows (page 56) : However, while undertaking this exercise, the Assessing Officer is not entitled to reopen an issue that had been decided in respect of a previous assessment year. In other words, an Assessing Officer is not entitled to question the validity of the grant of a deduction under section 80-IB in a previous assessment year on any ground. The Assessing Officer would not be entitled to say that a particular condition was not fulfilled in an earlier assessment year if the assessee had been granted the deduction in that year. The Assessing Officer, therefore, cannot deny a deduction in the assessment year in quest ion before him on the ground that the assessee had failed to fulfil a condition precedent to the grant of a deduction in another assessment year. That would amount to an Assessing Officer reopening an assessment in respect of another assessment year without following the provisions of the Act. 23. The learned Departmental representative, on the other hand relying upon paragraph 11 of the order stated that certain issues could have been disturbed in the succeeding years also. The learned Departmental r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he learned Principal Commissioner of Income-tax proportionate profits earned on the job work executed by a sub-contractor was not eligible for deduction under section 80-IA and since this issue had not been examined by the Assessing Officer during the course of assessment proceedings it had resulted in loss of revenue causing prejudice to the Revenue. 27. Before us the learned counsel for the assessee reiterated the contentions made in relation to the previous issue that the examination of the claim of the assessee for deduction under section 80-IA had been done in detail by the Assessing Officer and after examining the same the Assessing Officer had allowed the claim. The learned counsel for the assessee stated that it cannot now be said that the claim of the assessee had not been duly examined by the Assessing Officer during the assessment proceedings. The learned counsel for the assessee further stated that the job work done by sub-contractors was not a separate contract but sub-contract of the main project awarded to it and the assessee as per the provisions of section 80- IA was entitled to claim deduction of the entire profits earned by it on the project executed on infras ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ther we find that the learned Principal Commissioner of Income-tax has no basis at all for stating that the profit earned on account of job work got done by sub-contractors was a separate contract which was not eligible for deduction under section 80-IA of the Act. What can be gathered from the findings of the learned Principal Commissioner of Income-tax is that the assessee is eligible for deduction under section 80-IA only on account of work/contract/project executed by it. We find that this understanding of the provisions of section 80-IA is incorrect and has no judicial precedents at all and on account of the same we hold that there is no error in the order of the Assessing Officer on this count also and set aside the same for this reason. 30. The third reason given by the learned Principal Commissioner of Income-tax for exercising revisionary powers under section 263 is that while the receipts from the water supply project and Hamirpur bypass project in the ratio of 2.8 : 1, the expenses incurred on the freight and carriage, fuel and wages and salary are comparatively higher in the case of the Hamirpur bypass project and the comparative details have not been examined by the ..... X X X X Extracts X X X X X X X X Extracts X X X X
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