TMI Blog2019 (3) TMI 477X X X X Extracts X X X X X X X X Extracts X X X X ..... ble to claim the deduction u/s 80IA(4)(i) of the Act. From the perusal of the terms and conditions in the agreement, it is abundantly clear that the assessee is not a works contractor. The assessee company is a developer. Thus, clearly the assessee is eligible for deduction under section 801A(4)(i) of the Act. No reason to interfere in the order of ld. CIT(A). Hence this ground of appeal of the Revenue is dismissed. - ITA No.1354/Kol /2015, ITA No.2402/Kol /2016 And ITA No.2441/Kol /2017 - - - Dated:- 6-3-2019 - Shri A.T. Varkey, JM And Dr. A.L.Saini, AM For the Assessee : Shri Sanjay Bhattacharya, AR For the Respondent : Shri Sanjit Kumar Das, Addl.CIT Sr. DR ORDER PER DR. A. L. SAINI: The captioned two appeals filed by the assessee pertaining to assessment years 2011-12 and 2012-13 and an appeal filed by the revenue for assessment year 2013-14, are directed against the separate orders passed by the Commissioner of Income Tax (appeals)-5, Kolkata, which in turn arise out of separate assessment orders passed by the Assessing Officer u/s 143(3) of the Income Tax Act, 1961 [in short the Act ]. 2. Since the issues involved in all the appeals are com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated 29.06.2001, in column No. 14(c ) regarding whether the operation and maintenance of the infrastructure facility has been received on transfer from its developer in accordance with central/state government/ local authority/ any other statutory body. It is stated No . After going through the above remark in the audit report, the Assessing Officer was of the view that there is no element of operating and maintaining, or developing infrastructure facility involved. The Assessing Officer noted that in fact the details submitted by the assessee explained that the assessee is engaged in the works contract and Assessing Officer further noted that it was quite evident that the assessee company has been awarded job of execution of work contract by the state government for design, construction commencing, surface water treatment plant and underground reservoir-cum-pumping station and other allied works as per specification mentioned in such work contract and under the supervision control and guidance of the party which has awarded such contract to the assessee. Therefore, the Assessing Officer noted that as such the assessee has not done any development work of any ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s not eligible to claim deduction u/s 80IA(4) (i) of the Act and therefore the Assessing Officer denied the deduction claimed by the assessee u/s 80IA(4) (i) to the tune of ₹ 70,19,787/-. 7. Aggrieved by the stand so taken by the Assessing Officer, the assessee carried the matter in appeal before the Ld. CIT(A) with success. Aggrieved, the Revenue as well as assessee are in appeal before us. 8. We have heard both the parties and perused the material available on record. The ld counsel for the assessee reiterated before us the submissions made before the ld CIT(A) and explained the Bench with help of various case law that assessee company is a Developer and fulfilled all the conditions to claim deduction under section 80IA(4) (i) of the Act. Whereas, the ld DR for the Revenue relied on the stand taken by the assessing officer and argued that assessee is engaged in works contract , therefore not eligible to claim deduction under section 80IA (4) (i) of the Act. In these circumstances and considering the facts of the case, we note that the moot point which is to be adjudicated by us, is whether the assessee company is a developer or work contractor? Before we ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or (iii) developing, operating and maintaining any infrastructure facility and not to a person who is carrying on the business of the nature of a works contract awarded by any person (including the Central or State Government). The issue in question is as to whether the assesseeis a 'Developer' or a mere ' Works Contractor'. The assessee's claim is that it is a Developer . Let us examine the assessee`s claim. 9. We note that as regards the contention that the assessee is not into a business of the nature of works contract. The DR for the Revenue draws reference from the definition of 'Work' as per the Explanation below section l94C of the Act, which reads as follows: (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 transport other than by railways; (d) catering; (e) manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from such customer, but does not include manufacturing or supplying a product accor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o the requirement or specification of a customer by using material purchased from such customer is also included, within the definition of work . It is further provided that in such a case TDS shall be deducted on the invoice value excluding the value of material purchased from such customer if such value is mentioned separately in the invoice. Where the material component has not been separately mentioned in the invoice, TDS shall be deducted on the whole of the invoice value. From the above clarification provided in the Memorandum leaves no element of doubt and the definition of work as occurring in Explanation below to section 194Cof the Act, does not apply to the assessee under consideration so far his claim of deduction under section 80IA (4) (i) of the Act is concerned. The deduction under section 80IA(4) (i) of the Act can be availed by the assessee provided the assessee fulfilled certain conditions mentioned in that section and thus cannot be correlated with the provisions of section 194C of the Act. Thus, we are of the view that deduction of tax at source under section 194C of the Income Tax Act, on amount paid to the assessee cannot be the ground to deny deduction ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... to discuss below: (i). The assessee is a company registered in India. (ii). The assesseehas entered into an agreement with the Govt. of West Bengal for development of an infrastructure facility. In explanation (c) to Section 80-IA(4) infrastructure facility includes a water supply project, water solid waste management system . (iii). The assessee company has started operations after 1st day of July, 1995. (iv). The A.O. in the assessment order has highlighted that none of the four projects is owned by the assessee. All the four projects in which the assessee is engaged, are owned by the Govt. of West Bengal and the assessee has merely executed the works contract of construction of these projects awarded to it by the Govt. of West Bengal. We note that ownership of the development project is not sine quo non for availing deduction u/s. 80-IA(4)(i) of the Act, as held by the Coordinate Bench in the case of ACITs vs. M/s. Simplex Somdatta Builders, ITA No. 690/Kol/2016, wherein it was held as follows: We find that the word 'owned' in sub-clause (a) of clause (i) of sub section (4) of Section 80IA of the Act refer to the enterprise. By reading of the section, i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the spirit of section 80IA(4) of the Act,as held by the Hon`ble Bombay High Court in ABG Heavy Industries Limited (322 ITR 323) (Bom), wherein it was held that the person who, only develops the infrastructure does not always have the occasion to operate and maintain the infrastructure. It is further evident that the harmonious reading is necessary and mandatory in the case of an enterprise carrying on business or developing which is the case of the assessee. All the conditions referred to clause (i) of section 80IA (4) should refer to the conditions as applicable to the developer. In other words, the developer who is only developing the infrastructure facilities since he does not operate and maintain Infrastructural facilities, cannot be expected to fulfill the condition at sub clause (c) which is an impossibility and the requirements to fulfill the said condition shall amount to absurdity and therefore uncalled for. (vi) We note that what is required is a harmonious reading of sub-clause (c) vis-avis of clause (i) of section 80IA (4) of the Act. Thus, in a case where the enterprise has entered into an agreement with the State Government only for the development of new infrastru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w infrastructure facility/project of public interest meant for Drinking Water Supply Project to improve health sanitation and to provide civic amenities for local people. 15. Our views are fortified by the judgment of the co-ordinate bench of this Tribunal in the case of SPML Infra Ltd., in I.T.A. Nos. 1291 to 1292/Kol/2013 assessment year 2009-10, order dated 24.08.2016, wherein, on similar and identical facts, it was held as follows: 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 4 of section 80-IA mandates the existence of an agreement with the Government. Moreover, if section 80-IA grants deduction on profits from the activity of development carried out in pursuance of an agreement with the Government it presupposes that assessee will earn some profits from mere development (without operating and maintaining) of the infrastructure facility. Now the relevant question that arises here is that how would an assessee engaged in mere developmental activity (and no operation) pursuant to ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... f s. 80-IA is not applicable. The interpretation of Revenue is absurd also in view of the rationale of the provisions of s. 80-IA(4)(i). From the asst. yr. 2000-01, deduction is available if the assessee carries on the business of any one of the three types of activities. 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 person who develops the infrastructure facility project, realise its cost ? If the infrastructure facility, just after its development, 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. 80-IA(4), which is not the intention of the law. If a person who only develops the infrastruc ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 operating and maintaining the said facility is entitled to the benefit of deduction under s. 80-IA(4); merely because assessee is referred to as contractor in the agreement for development of infrastructure facility or some basic specifications are laid down, would not debar the assessee from claiming deduction under s. 80-IA(4). If a person who only develops the infrastructure facility was not paid by the Government, the entire cost of development would be a loss in the hands of the developer as he was 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 Chenn ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is the Government who will make payment to assessee in respect of infrastructure facility developed by it in terms of agreement so entered with Government. Thus, we do not find any infringement of conditions {or claim of deduction 8.6 Thus from the above, it is clear that the fact that the assessee had received payments from the Government in progress of its work has no bearing on eligibility of deduction 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 responsible for overall development of the infrastructure facility. It was merely provided with the site which it had to develop into an infrastructural facility by deploying his resources i.e. material, plant machinery, labour, supervisors etc. It was responsible for any damage/loss caused t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ial 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 explanatory memorandum to Finance Act 2007 states that the purpose of the tax benefit has all long been to encourage investment in development of infrastructure sector and not for the persons who merely execute the civil construction work. It categorically states that the deduction under section 80IA of the Act is available to developers who undertakes entrepreneurial and investment risk and not for the contractors, who undertakes only business risk. Without any doubt, the learned counsel for the assessee 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 ag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d project u/s 80-IA cannot be denied by invoking the explanation to section 80-1A. 16. Further the Co-ordinate Bench of this Tribunal in I.T.A. No. 1277/Kol/2013 in the case of M/s Symplex Infrastructure Ltd. order dated 10.03.207 held on the similar facts that the assessee is not a work contractor but he is a developer therefore eligible to claim the deduction u/s 80IA(4)(i) of the Act. 17. From the perusal of the terms and conditions in the agreement, it is abundantly clear that the assesseeis not a works contractor . The assessee company is a developer . Thus, clearly the assessee is eligible for deduction under section 801A(4)(i) of the Act. In our considered view, we do not find any reason to interfere in the order of ld. CIT(A). Hence this ground of appeal of the Revenue is dismissed. 18. In the result, the appeal filed by the assessee in I.T.A. No. 2402/Kol/2016, for assessment year 2011-12 and appeal filed by the assessee in I.T.A. No. 1354/Kol/2015, for assessment year 2012-13 are allowed whereas the appeal filed by the Revenue in I.T.A. No. 2441/Kol/2017, for assessment year 2013-14 is dismissed. Order is pronounced in the open court on 06.03.2019. - - ..... X X X X Extracts X X X X X X X X Extracts X X X X
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