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2017 (6) TMI 776 - ITAT KOLKATA

2017 (6) TMI 776 - ITAT KOLKATA - TMI - Eligibility to deduction u/s. 80IA - assessee is a AOP [Joint Venture] - whether assessee was not a works contractor as treated by the AO or a a developer as per CIT-A - Held that:- We find that the assessee stood successful in getting the bid for engineering, procurement and construction of elevated corridor project at Hyderabad awarded for such construction of elevated corridor project in Hyderabad by the HUDA. Thereby the assessee is a developer for the .....

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he project. The assess was responsible and was to pay the cost of strengthening any bridge or altering or improving any road communication necessary for smooth execution of works. The assessee is responsible for making all arrangements for and paying all charges in connection with supply of electricity and water. The assessee was to carry out tests in accordance with law. - On perusal of the terms and conditions in the agreement, it is clear that the assessee was not a works contractor and .....

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y the Revenue is against order dt: 29-01-2016 passed by the Commissioner of Income Tax-(Appeals), 9, Kolkata for the assessment year 2011-12. 2. The only issue in this appeal of revenue is to be decided as to whether the CIT-A justified in allowing the claim of deduction of ₹ 41,17,810/- u/s. 80IA of the Act in the facts and circumstances of the case. 3. At the time of hearing before us the ld.AR of the assessee submits that the issue in hand is covered by the earlier order dt. 18-06-2013 .....

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n assessee s own case. The matter is still pending for adjudication. But he did not provide any document or evidence to show that the Hon ble High Court of Calcutta has admitted such appeal filed by the revenue and no order contrary to the said order dt. 18-06- 2013( assessee s own case) has been produced by the ld.DR on which the appeal of the revenue is still pending before the Hon ble High Court of Calcutta for disposal. 5. Taking into consideration the submissions of the ld.AR of the assesse .....

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see AOP filed its return of income for the A.Y under consideration electronically on 09-09-2011 declaring total income of ₹ 8,09,230/-. Under scrutiny, notices u/s. 143(2) and 142(1) of the Act were issued. In response to which, the ld.AR of the assessee appeared time to time and filed various details and supporting evidences in support of the return as filed. The AO found that the assessee has claimed deduction u/s. 80IA being identical amount of net profit for development of infrastructu .....

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as substituted by the Finance Act 2009 and came into force w.e.f 1-4-2000 retrospectively. However, the AO considering the status of assessee as a works contractor the claim of deduction u/s. 80IA of the Act was disallowed and added the same to the total income of the assessee. 7. The assessee challenged the same before the CIT-A. The CIT-A after considering the submissions of assessee held that the assessee was not a works contractor as treated by the AO. The CIT-A was of the view that the asse .....

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hat the only question is to be decided by us for allowance of deduction u/s. 80IA of the Act as to whether the assessee is a developer or a works contractor. The AO found that the assessee raised RA bills in accordance with measurement of works executed and thereby he held that the assessee is not a developer and is a works contractor. We find that the assessee stood successful in getting the bid for engineering, procurement and construction of elevated corridor project at Hyderabad awarded for .....

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of project work. The assessee is also responsible for the payment of supply of labour, water and electric charges for the project. The assess was responsible and was to pay the cost of strengthening any bridge or altering or improving any road communication necessary for smooth execution of works. The assessee is responsible for making all arrangements for and paying all charges in connection with supply of electricity and water. The assessee was to carry out tests in accordance with law. We al .....

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contractor and was a developer and hence Explanation to section 80IA(13) does not apply. Now we refer to the order of the Co-ordinate Bench in assessee s own case, wherein it considered the order of ITAT Hyderabad in the case of M/s. GVPR Engineers Ltd Vs. ACIT. Relevant portion of which is reproduced herein below:- the co-ordinate bench ITAT, Hyderabad B Bench, Hyderabad in the case of M/s. GVPR Engineers Ltd & Ors in ITA Nos. 347/Hyd/2008 & 17 Others dated 29.02.2012, wherein in paras .....

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o made available under Section 801A (4) itself. Further, the very fact that the legislature mentioned the words (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining clearly indicates 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 incurred expenditure for purchase of materials himself and executes the development .....

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Act refer to the enterprise. By reading of the section, it is clears that the enterprises carrying on development of infrastructure development should be owned by the company and not that the infrastructure facility should be owned by a company. The provisions are made applicable to the person to whom such enterprise belongs to is explained in sub-clause (a). Therefore, the word ownership is attributable only to the enterprise, carrying on the business which would mean that only companies are el .....

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h cannot be owned by any one. Even otherwise, the word it is used to denote an enterprise. Therefore, there is no requirement that the assessee should have been the owner of the infrastructure facility. 28. The next question is to be answered is whether the assessee is a developer or mere works contractor. The Revenue relied on the amendments brought in by the Finance Act 2007 and 2009 to mention that the activity undertaken by the assessee is akin to works contract and he is not eligible for de .....

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e assessee with the Government. We find that the Government handed over the possession of the premises of projects to the assessee for the development of infrastructure facility. It is the assessee s responsibility to do all acts till 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 availab .....

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velop infrastructure whether it involves construction of a particular item as agreed to in the agreement or not. The agreement is not for a specific work, it is for development of facility as a whole. The assessee is not entrusted 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 .....

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a period of 12 to 24 months. During this period, if any damages are occurred it shall be the responsibility of the assessee. Further, during this period, the entire infrastructure shall have to be maintained by the assessee alone without hindrance to the regular traffic. Therefore, it is clear that from an un-developed 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 .....

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r of the work and not a developer. 29. We also find that as per the provisions of the section 801A of the Act, a person being a company has to enter into an agreement with the Government or Government undertakings. Such an agreement is a contract and for the purpose of the agreement a person may be called as a contractor as he entered into a contract. But the word contractor is used .to denote a person entering into an agreement for undertaking the development of infrastructure facility. Every a .....

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e order dt.18-06-2013 supra, further considered the order in the case of ARSS Infrastructure Projects Ltd Vs. ACIT, Cir-2(1), Bhubaneswar in ITA Nos. 142,143/CTK/2010 & 483, 484/CTK/2011 dt. 13-06-2013 observed that where an assessee is doing contract work according to the requirement and specification of the customer and the same has been done by using materials purchased from third parties other than the customers and held that though the assessee is doing a works contract the same would n .....

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of the flood flow canal project from SRSP. The name of the contract has been extracted earlier in this order. The scope of the work is also extracted above. Admittedly, the assessee has taken a turnkey contract from the Irrigation Department, Govt. of Andhra Pradesh. The turnkey contract is in respect of the irrigation project. Irrigation project is an infrastructure facility within the scope of Explanation to section 80IA(4) of the Act. The provisions of section 80IA(4) is to be controlled by t .....

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ould come into consideration is whether the substituted Explanation after sub- clause (13) changed the nature of the meaning of infrastructure facility provided in the Explanation to section 80IA(4). Admittedly, the Explanation to section 80IA(4) gives the meaning the term infrastructure facility . The substituted explanation after sub clause (13) brings in the nature of work as a works contract. The provisions of section 194C, which deals with TDS in respect of payment to contractors for carryi .....

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n of all the structures of the whole canal system is to be as per approved design, drawings, specifications of the department etc. The survey is to be done as per investigation and designing criteria of the Irrigation Department. This is also as per article 11.1 of the agreement. The assessee is to procure the materials independently and those materials are to confirm to the specifications provided. The assessee is also to make its arrangements for storage of the materials. This is as per articl .....

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is doing the activity of development of an infrastructure facility as provided under section 80IA(4). The project is a Turnkey project and it cannot form nor have a character of a works contract. Works contract would be applicable to the repairs and maintenance of an existing project. Works contract cannot be in relation to the development of a new project. One of the arguments raised by the learned Sr.DR that the intention of the substitution of the Explanation after sub clause (13) of section .....

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after sub clause(13) of section 80IA.. Here, we may mention that this view finds support from the decision of the co-ordinate of the tribunal, [ITAT, Hyderabad Bench, Hyderabad in the case of GVPR Engineers Ltd & Ors (refer to supra). We may mention here that our view also finds support from the decision of the co-ordinate bench of this tribunal, ITAT Cuttack Bench, Cuttack in the case of ARSS Infrastructure Projects Ltd Vs. ACIT, Circle-2 (1), Bhubaneswar in ITA Nos. 142, 143/CTK/2010 & .....

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e are to accept the contention of the Ld. CIT that the provisions of section 801A(4) of the Act after the substitution of the explanation to section 8OIA of the Act was introduced was only for the purpose of giving the benefit to BUT contracts then, the explanation to section 801A(4) of the Act becomes otiose. This is as explanation to section 801A(4) of the Act specifically provides for the road to include a toll road, a bridge or a rail system. BUT contract in respect of the railway system can .....

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