TMI Blog2017 (9) TMI 643X X X X Extracts X X X X X X X X Extracts X X X X ..... re unable to concur with the lower authorities that assessee was merely a ‘contractor’ and not a ‘developer’ so far as it relates to the water treatment systems supplied to the IOC. In this view of the matter, in our view, assessee qualifies for the benefits of section 80 IA of the Act. Assessee has not claimed the deduction in the earlier years therefore, it is ineligible for the said deduction in the instant year - Held that:- On this aspect, the Ld. Representative for the assessee has pointed out that in the earlier years assessee was supplying the water treatment equipment to concerns, such as Thermax, L&T, etc. and that it was only for the first time in assessment year 2008-09 that it was awarded the tender by IOC. It was, therefore, in this context, the claim has been made in the instant year. The Ld. Representative for the assessee also pointed out that the time period prescribed for the deduction under section 80 IA(4) of the Act is 20 years and in that context it is eligible for the claim of deduction in assessment year 2009-10, since the first year was assessment year 1992-93; inasmuch as, assessee was incorporated on 09/10/1991. In our considered opinion, the aforesai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssessment years out of fifteen years beginning from the year in which enterprise develops and begin to operate any infrastructural facility. Whereas such deduction is allowed for any ten consecutive assessment years out of twenty years in case of Water Treatment System as per proviso to section 80IA (2) r.w. Explanation to section 80IA(4). 4) The learned CIT(A) had erred in stating that the appellant carried out work in the nature of contractor and not in the nature of developer . 5) The Learned Commissioner of Income Tax (Appeals) has erred in not appreciating all the facts that were filed before him as well as before the assessing officer. 6) The Learned Commissioner of Income Tax (Appeals) has erred in ignoring various judicial pronouncements which also support the stand taken by the assessee. 7) The Learned Commissioner of Income Tax (Appeals) has erred in not allowing proper sufficient opportunity of being heard. 8) Each of the above grounds be considered as separate from the other grounds. 9) The appellant prays that: i) Deduction of claim of interest paid on credit card loans be allowed at ii) Deduction u/s 80IA(4) be al ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tion 80 IA of the Act, primarily on the ground that activities carried out by the assessee did not fall for consideration under section 80 IA of the Act. Notably, section 80 IA(4)(i) of the Act, which is relevant for the present purpose, prescribes that the benefits of section 80 IA are available to any enterprise which is carrying on the business of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility. Furthermore, Assessing Officer also referred to the Explanation below section 80 IA(13) of the Act, which prescribes that nothing contained in section 80 IA shall apply in relation to a business referred to in sub-section (4), which is in the nature of a works contract. 3.1 The Assessing Officer was of the view that in the process of installation of water treatment plant by IOC, the assessee s role was limited only to the extent of designing of the system and supervision/installation of the system. According to Assessing Officer the water treatment plant supplied to IOC was merely designed by the assessee company as per the requirement of M/s. Indian Oil Corporation and the contract was sub contracted to the f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... - commissioning, testing and commissioning Material Safety 326-350 Statutory Approval Technical requirement Electrical requirement Instrument requirement Piping requirement Unit layout Criteria Special requirement Painting and protection Structure and Support Equipment Piping Inspection and Testing Commissioning Preparation of Checklist before start up Mechanical completion Pre- Commissioning Acceptance test and performance grantee Operability test Acceptance test Commissioning Reliability run Performance guarantee test Training 3 Technical aspects provided by appellant e.g proposed layout of the unit, designs for the proposed facility, specification of equipment's, piping materials, pumps etc required, data sheet for cabling, etc as a part of bidding process 179-180 4 Minutes of Meeting between IOCL and K-PACK dt. 15-16-17 July 2008 - Item - All Civil foundation design, drawings sh ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d as advance from IOCL. 7 14 Purchase order of DAF and Oil Skimmer, showing Sales Tax paid, proving that the said transaction between the Appellant and IOCL is a Sale. 216 409 On the basis of the aforesaid reference to the documents placed in the Paper Book, the attempt of the assessee has been to show that it was the duty of the assessee to carry out all tasks for the IOC i.e right from designing water treatment system, its delivery, sale, supervising installation, commissioning and training of personnel of IOC. It was, thus, sought to be contended that assessee did not act merely as a contractor , but the scope of work executed by it showed that it has acted as a developer and, therefore, profit from such activity is eligible for the benefits of section 80 IA(4) of the Act. 5. In the course of hearing, the Ld. Representative for the assessee has also placed reliance on the judgment of the Hon'ble Bombay High Court in the case of CIT vs. ABG Heavy Industries Ltd.,322 ITR 323(Bom) for the proposition that carrying on of all the activities of developing, operating and maintenance of a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndertaken by the assessee was in the nature of a works contract , which is done by a contractor and cannot be equated to work of development , as envisaged in section 80IA(4)(i) of the Act. Thus, the moot point to be examined in this case is whether assessee has indeed undertaken the work of development of infrastructure facility or not? On this aspect, at the very outset, in our view, the stand of the Assessing Officer appears to be primafacie misdirected. In para 5.8 of the assessment order, the conclusion drawn is that the role of the assessee was limited only to the extent of designing of the system and supervision/installation of the system . Quite clearly, even the Assessing Officer concedes that assessee had designed the water treatment system and, therefore, it could not be straightway said that assessee was not a developer, but a contractor only because a contractor can never be expected to design a facility. Be that as it may, it would be appropriate to touch upon the scope of work undertaken by the assessee in terms of the Tender agreement with IOC to examine whether assessee acted as a developer or not. Notably, two contracts were awarded by IOC to the assessee for ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... developer. In this context, CIT(A) in para 5.3.3 of his order has also referred to certain clauses agreement/contract with IOC to show that assessee was only executing a specified work contract. One of the points, raised by the CIT(A) is with regard to the scope of work and supply of DAF unit. The CIT(A) referred to clause 3.1.1.9 to say that the responsibility of construction of the foundation work for installation of the DFA unit was that of the IOC and not the assessee. In this context, we have examined the relevant clause, which is placed at page 330 of the Paper Book and note that the CIT(A) has not read it in its entirety. No doubt, it was the obligation of the IOC to carry out necessary foundation work for installation of the DAF Unit but such work was to be undertaken by IOC on the basis of the drawings supplied by the vendor i.e. assessee. Similar aspects have been noted by the CIT(A) in respect of electrical equipments, etc. to point out that the same was outside the scope of work of the assessee. In our considered opinion, the relevant clauses clearly bring out that even the scope of work to be undertaken by IOC were to be undertaken as per drawing/specifications prov ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e for deduction under section 80 IA(4) of the Act. Thus, on this aspect assessee succeeds. 8. The other issue in this appeal relates to a disallowance of ₹ 4,43,121/- being interest for delay in making payment due for the credit card facility. The Assessing Officer disallowed the expenditure on the ground that the interest for late payment was penal in nature and, therefore, Explanation to section 37(1) of the Act was attracted. The CIT(A) noted that the delay related to a prior period and, therefore, the same was disallowable. Against the action of the CIT(A) in sustaining the addition, assessee is in further appeal before us. 8.1 After hearing the rival stands, it is quite clear that so far as the use of the credit card is concerned, there is no dispute that the same has been done in the course of assessee s business. At the time of hearing, the Ld. Representative for the assessee pointed out that interest liability was raised on the assessee by the credit card company which was settled by the assessee in the instant year and, therefore, the interest liability in question crystallized during the year itself. The Ld. Representative for the assessee has also referred to ..... X X X X Extracts X X X X X X X X Extracts X X X X
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