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ACIT, Circle-33, Kolkata Versus M/s Simplex Somdatt Builders

2017 (12) TMI 659 - ITAT KOLKATA

Deduction u/s. 80IA - assessee is doing a works contract - whether assessee is a works contractor or a a developer? - Held that:- The assessee is doing contract work but that work is according to the requirement and specification of the customer and the same has been done by using materials purchase from third parties other than the customers. Thus, though the assessee is doing a works contract the same would not fall within the meaning of the word ‘works contract’ for the purpose of the Act due .....

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ng roads and rail systems and bridges by participating in the tenders. Under these circumstances, we are of the view that the AO was right in law in granting the assessee the benefit of deduction u/s. 801A(4) of the Act. See ARSS Infrastructure Projects Ltd. Versus ACIT [2014 (1) TMI 847 - ITAT CUTTACK ] - Also this Tribunal in assessee’s own case for A.Ys 2008-09, 2009-10, 2010- 11 and 2007-08 [2017 (6) TMI 776 - ITAT KOLKATA] held that assessee is a developer vide order dt. 07-10-2016. Als .....

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. Assessment was framed by DCIT, Circle-33 Kolkata u/s 143(3) of the Income Tax Act, 1961 (hereinafter referred to as the Act ) vide his order dated 23.12.2014 for assessment year 2012-13. The grounds raised by the Revenue per its appeal are as under:- 1) In the fact and circumstance of the case the Ld. CIT(A)-9, Kolkata has erred in allowing the deduction of ₹ 82,56,250/- u/s 80IA 2) In the facts and circumstances of the case the Ld. CIT(A)-9, Kolkata has erred in treating the assessee as .....

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erred in allowing deduction u/s. 80IA of the Act for ₹82,56,250/-. 3. Briefly stated facts are that assessee is an AOP which is representing by its Members namely, M/s Simplex Infrastructure Ltd. and M/s Somdatt Builders Pvt. Ltd.. The assessee engaged in the business of contractual work and claiming deduction u/s. 80IA of the Act. The assessee was awarded a contract for the construction of road by Public Works Department, National Highway Project in the state of Assam. The assessee in res .....

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s eligible for deduction. It was also submitted that assessee is not acting as a works contractor but actually developing the infrastructure project as envisaged under the provision of Section 80IA of the Act. The assessee in respect of the aforesaid project has carried out various functions as detailed hereunder:- … .. (i) Design: The assessee was required to investigate, study, design, construct the Project Highway and Project Facilities in accordance with the Specifications and Standar .....

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vironmental requirements under environmental laws and regulations. (page 34) • provide fencing lighting and guarding (page 36, para 13.S) (v) Risk: The assessee was responsible for the care of the Works and materials, goods and equipment etc., which were at its risk. (page 36, para 14.1) vi) Licenses, permissions etc.: The assessee was to procure and maintain as necessary, appropriate proprietary rights, licenses, agreements and permissions for materials, processes and systems used in the P .....

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in accordance with the Applicable Laws and Applicable Permits (page 43, para 23.1) (x) Defect Liability period: Page 50, para 30.1 (xi) Equipment: The assessee was also required to provide Equipments required for the execution of the \Narks. 3.26 The above conditions clearly exhibit that it is not a case where the assessee was provided with the establishment and materials required to execute the work, which happens in case of works contract where the contractor gets the material and other requis .....

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perusal of the terms and conditions in the agreement, it is clear that the assessee was not a works contractor and was a developer and hence Explanation to section 80-I(13) does not apply to the assessee. It is seen that a similar issue based on identical facts has been decided in favour of the appellant in his own case by the Hon'ble Tribunal, Kolkata for the AY 2007-08 and CIT(A)-XIX for the AY 2008-09, 2009-10 and 2010-11. The Hon'ble Tribunal and CIT(A) after examining the legal pos .....

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rs Simplex JV in ITA 470/Kol/2015 for the Assessment Year 2011-12 vide order dated 05.07.2017. The relevant operative portion of the said order is reproduced below:- 8. Heard rival submissions and perused the material available on record. We find that 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 claimed TDS credit of the amounts deducted by the project autho .....

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29.02.2012, wherein in paras 26-29, it has been held as under:- 26. 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 provisions of Section 801A (4) of the Act when introduced afresh by the Finance Act, 1999, the provisions under section 801A (4A) of the Act were deleted from the Act. The deduction available for any enterprise earlier un .....

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and executes the development work i.e., carries out the civil construction work, he 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 another person including Government or an undertaking or enterprise referred to in Section 80 IA of the Act, for executing works contract, will not be eligible for the tax benefit under section 80 IA of the Act. We find that the word owned in sub-clause (a) of clause (1) of sub sectio .....

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an that only companies are eligible for deduction under section 801A (4) and not any other person like individual, HUF, Firm etc. 27. We also find that according to sub-clause (a), clause (i) of sub section (4) of 80-IA the word it denotes the enterprise carrying on the business. The word it cannot be related to the infrastructure facility, particularly in view of the fact that infrastructure facility includes Rail system, Highway project, Water treatment system, Irrigation project, a Port, an A .....

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and he is not eligible for deduction under section 801A (4) of the Act. 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 conclusion has to be drawn about the nature of the work undertaken by the assessee. The agreement entered into with the Government or the Government body may be a mere works contract or for development of infrastructure. It is to be seen from the .....

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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 process, all the works are to be executed by the assessee. It may be laying of a drainage system; may be construction of a project; provision of way for the cattle and bullock carts in the village; provision for traffic without any hindrance, .....

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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 people in the process of such development would be that of the assessee. The assessee hands over the developed infrastructure facility to the Government on completion of the development. Thereafter, the assessee has to undertake maintenance o .....

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eligible for deduction under section 801A (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 the Revenue. The circular issued by the Board, relied on by learned counsel for the assessee, clearly indicate that the assessee is eligible for deduction under section 801A (4) of the Act. The department is not correct in holding that the .....

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astructure facility. Every agreement entered into is a contract. The word contractor is used to denote the person who enters into such contract. Even a person who enters into a contract for development of infrastructure facility is a contractor. Therefore, the contractor and the developer cannot be viewed differently. Every contractor may not be a developer but every developer developing infrastructure facility on behalf of the Government is a contractor. 9. The Co-ordinate Bench of this Tribuna .....

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ntract the same would not fall within the meaning of the word works contract for the purpose of the Act due to the exclusion provided in the meaning of work in section 194C of the Act. Relevant findings are reproduced herein below for better understanding:- 11. We have considered the rival submissions. Admittedly, a perusal of the agreement entered into between the assessee and the Govt of Andhra Pradesh Irrigation & CAD Department shows that the assessee has taken EPC/Turnkey contract of th .....

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planation to section 80IA, which has been substituted by the Finance (No.2) Act, 2009 with retrospective effect from 1-4-2-2000. This Explanation is found after sub-section (13) of section 80IA. The said Explanation attempts to control the provisions of sub-section 4. More so, it says that nothing contained in section 80IA would apply in relation to the business referred to sub-section (4), which is in the nature of works contract. A works contract is not defined in section 80IA. Now, what would .....

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any work in the Explanation thereto as explained the term work to be an inclusive definition, but has provided an exclusion to be does not include manufacturing or supplying of a product. according to requirement or specification of the customer by using materials purchased from a person, other than such customer . Thus, with this in mind, a perusal of the turnkey contract agreement entered into by the assessee with the Irrigation Department, Govt of A.P clearly shows that the construction of a .....

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of the agreement. Thus, admittedly the work done by the assessee falls in the exclusion provided to the meaning of the work given in the Explanation to section 194C of the Act. Once it falls outside the meaning of term work for the purpose of section 194C, the question that arises is can it be said that the assessee is doing the work contract as provided in the substituted Explanation in section 80IA after sub clause (13)?, The answer would be emphatic no. 12. This is because the assessee is doi .....

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as to deny, the benefit of deduction u/s. 80IA(4) in respect of works contract, but to provide the deduction to such undertakings, which is doing the business of building, operating and Transfer (BOT) and building owning, operating and transfer BOOT as also PPP contracts does not hold water in so far as an irrigation project can never function under BOT or BOOT or PPP . In the circumstances, we are of the view that the assessee s claim is not hit by the substituted Explanation as provided after .....

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/CTK/2011 dated 13-06-2013, wherein one of us was a party and in which case it has been held as under :- 10. Now coming to the merits of the deduction u/s. 801A(4) of the Act. A perusal of the provisions of section 801A(4) of the Act shows that in the explanation infrastructure facility has been specified to mean a road including a toll road, a bridge or a rail system. Admittedly, the assessee is doing the business of development of railway tracks and bridges thereof as also roads. If, we are to .....

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xist. Further, a perusal of the provisions of section 801A of the Act shows that the term works contract is not defined in the said section. However, the terms works and contract is defined in the provisions of section 194C of the Act. If a particular word or term is not defined in the specific section then, one could go to other sections in the said Act where the definition would be available to draw a meaning to the said terms. In the provisions of section 194C of the Act, work has been given .....

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