TMI Blog2018 (11) TMI 1794X X X X Extracts X X X X X X X X Extracts X X X X ..... s kind of activity to fall with the ambit of Section 80IA, it will not be in consonance with the aims and objects for which this section has been introduced. There is a distinction between the widening of the existing road by constructing additional lanes as part of the highways project vis-a-vis, improving, maintaining, refurbishing the existing road. Circular No.4 of 2010 of the CBDT only provides the scope of section 80IA to include within its ambit the widening of the existing road, but the road which exists or the infrastructure which is existing cannot form part of the development of the infrastructure because the infrastructure which is already developed is incapable of being developed again. Hence the assessee is not entitled to any relief pertain to disallowance relating to existing four lanes 28 km to 67kms. CIT (A) has granted adhoc benefit of 25% to the assessee - We re not able to comprehend the basis of arriving at the figure of 50% or 25% . There is no rational for the lower authorities to estimate the revenue in respect to the infrastructure already in place, specially under the circumstances when the records are available with the NHAI, which had granted th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ligible in terms of provisions Of section 80-IA Of the Act to the extent of claim Of ₹ 10,56,77,828/-. It further be held that the claim is allowable to the appellant in full. It further be held that rejection of the claim by the AO and that part confirmation by the first appellate authority is contrary to provisions of law and facts prevailing in the case. The claim be allowed in full. The appellant be granted just and proper relief as per provisions of law and facts prevailing in the case. 2. That the Ld. Commissioner Of Income Tax (Appeals) has failed to appreciate that developing, operating and maintenance are distinct and if the Assessee is doing business in any Of these areas, is entitled for the deduction under section 80-IA. 3. That on the facts and in the circumstances of the case, the CIT(A) has erred in facts and also in law in confirming disallowance to the extent of ₹ 2,64,19,457/- legitimately claimed deduction u/s. 80-IA(4) of the Act. 4. That on the facts and in the circumstance of the case the CIT(Appeals) has erred in disregarding the fact that the appellant has been consistently allowed deduction under section 80-IA on the income derived from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Grant of Concession set forth .the 'scope of work to be undertaken by the assessee was as under under: `Subject to and in accordance with the terms and condition set forth in this Agreement, NHAI hereby grants aid authorises the Concessionaire to investigate, study, design, engineer, procure, finance, construct, operate and maintain the project / project facilities and to exercise and /or enjoy the rights, powers, benefits, privileges, authorisations and entitlements as set forth in this Agreement (`the Concession')' 2.5. Further, the Concession agreement define the term Project , Project Site , Project facilities Concession Period and Schedule D as under: Project means design, financing, construction, operations and maintenance of the project facilities in accordance with the provisions of this agreement. Project Site commences from Tambaram south of existing ROB at km 28.00, traverses generally in south west direction and ends at km 121.0 near Tindivanam an NH-45. The width of the existing Right of Way (ROW) comprised in the project site is given in Table B-1 to the Concession Agreement. Further the NHAI has acquired additional land to have ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... wide pavement with a raised footpath of width 1.5 m over lined drain on the outside through he urban areas. Service roads shall be provided one or both sides as shown in Table D-1 below: TABLE 0-1 (Service Road Locations) Section Km 28 - Km 67 i) Km. 30/050 to Km. 31/200 - Left side ii) Km. 31,775 to Km. 32/325 - Left side Km. 31/500 to Km. 33/400 - Right side iii) Km. 33/800 to Km..34,700 - Left side Km. 33.850 to Km. 34T700 - Right side iv) Km. 35/775 to Km. 36/175 - Left side Km. 35/800 to Km. 36/175 - Right side v) Km. 37/250 to Km. 37750 - Both sides vi) Km. 41/700 to Km ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... onstruction of project and during the concession period which was for a period of 17 years and 6 months. These are broadly summarised as under: (i) Performance Security (ii) Financial Arrangement (iii) Drawings (iv) Project Implementation and Construction Works (v) Operation and Maintenance (vi) Insurance (vii) Shareholding, and, (viii) General Obligations 2.7 The Concession granted to the appellant company is for a period of 17 years and 6 months commencing from the commencement date (i.e. May 9th 2002) and ending on November 8th 2019 during which the appellant company is required to implement the Project and to operate and maintain the Project Facilities in accordance with the provisions of Concession agreement. 2.8 Ld AR had submitted that the assessee had incurred an amount of ₹ 361.95 Crores for the implementation of the project / project facilities in terms of the Concession agreement with NHAI. The aforesaid cost of the project was financed as per details below :- Source of Fund Amount (Rs. in Equity Capital 1.00 Crore) Preference Capital ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Claim u/s 801A allowed By the assessing officer ₹ 5,28,38,914 ₹ 5,64,51,384 3 The ld AR submitted that the assessee entered into a Concession Agreement with National Highways Authority of India in October, 2001. For the purposes of Article 2, 2.1 of the agreement, the assessee drawn our attention to the definition of a. Annuity b. Concession period c. Concession d. Consortium The assessee also drew our attention to the letter dt.16.08.2001 where the details of the work awarded to the assessee are mentioned in Schedule B, to the following effect : SCHEDULE - B PROJECT SITE The project site commences from Tambaram South of existing ROB at Km. 28.00. travarses generally in South west direction and ends at km 121.0 near Tindivanam on NH-45, as illustrated in the Map attached (Fig B-1). The Width of the existing right of way/ (ROW) comprised in the project Site is given in Table B-1 below: Table B-1 Right- of Way details Km Land Width (m) Km Land Width (m) 29 40.4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 39 57 60 91 39 58 60 92 39 59 60 93 39 60 60 94 39 61 38 95 39.5 62 38 96 39.5 Km Land Width (m) Km Land Width (m) 96 39.5 109 47.2 97 39.5 110 47.6 98 39.5 111 47.6 99 39.5 112 47.6 100 38 113 47.6 101 38 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18th 2010 wherein it has clarified as under: The issue has been examined by the Board. It has been decided that widening of an existing road by constructing additional lanes as a part of a highway project by an undertaking would be regarded as a new infrastructure facility for the purpose of Section 80IA (4)(i). However, simply relaying of an existing road would not be classifiable as a new infrastructure facility for this purpose . The above clearly shows that simply relaying of an existing road would not be classifiable as a new infrastructure facility for the purpose of section 80-The strengthening of existing road is nothing but relaying of existing road and hence in view of same, the assessee would not be eligible for deduction under section 80-IA with respect to strengthening of existing road which is nothing but a works contract. The income derived from works contract is not eligible for deduction u/s. 80-IA as held in the following decisions: (i) Chennai ITAT in the case of ACIT v Indwell Lianings Pvt. Ltd. Appeal No. : ITA Nos. 1631 1632 (Mds.)/2007. (ii) Delhi ITAT in the case of Shristi Infrastructure Development Corporation Ltd. (33 SOT 407).. (iii) H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ngthening and widening of the existing two lane to four from 67 kms to 121 kms to be an infrastructure within the meaning of infrastructure u/s.80IA and had hence allowed the claim of the assessee. However as the assessee has not given the details of the income which arose to it in respect of strengthening , repair and improvement of existing lane from 28 to 67 kms, the CIT (A) had pro-rata reduced 50% disallowance made by AO to 25% of the income. The particulars of claim allowed and disallowed by the CIT(A) are under: SI No Particulars AY 2013-14 AY 2014-15 1 Claim u/s 80IA allowed by the CIT(A) ₹ 2,64,19,457 ₹ 2,82,25,692 2 Claim u/s 80IA disallowed by the CIT(A) ₹ 2,64,19,457 ₹ 2,82,25,692 06 Now the assessee is in appeal with regard to the disallowance of deduction u/s.80IA pertaining to the income arising to the activity of strengthening of the existing four-lane and also for reduction of deduction from 50%to 25% of 80IA claim , wher ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on partially as detailed above has been disallowed only for these two Assessment Years i.e. AY 2013-14 and AY 201415. 19. Further, The Hon'ble Bangalore ITAT has examined the aforesaid issue in the case of group company, namely M/s GMR Tuni-Anakapalli Expressways Limited in ITA No -1132 1133/Bang/2018 for AY 2013-14 and AY 2014-15 wherein on identical facts, the Hon'ble ITAT in para 5 of the order has held as under: We have considered the riva; submissions. We find that the learned CIT (A) has followed two tribunal orders and no difference in facts could be pointed out by the learned DR of the revenue. As per Para 48 of this tribunal order, in that case also, deduction u/s 801A was in dispute for the work undertaken by the assessee for Widening to four lanes and strengthening of existing two lane carriageway in km. 27.80 to km. 61.00 Jagatpur-Chandikhol Section of National Highway No.5 in the State of Orissa. In the present case also, the facts are similar and the AO allowed the claim of the assessee to the extent of 50% by holding that work undertaken by the assessee for Widening to four lanes is eligible for deduction but he held that the work undertaken by the a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r extension of an existing unit, would not disentitle assessee to claim deduction under section 80-IA/80-1B where it develops, operate and maintain an infrastructure facility, 8. It will be deemed to be new infrastructure facility if the life of the existing infrastructure facility is increased for sufficiently long period by incurring huge expenditure, 9. A provision in a taxing statute granting incentives for promoting growth and development should be construed liberally, 10. Deduction u/s 801A is to be allowed during current year if, allowed in earlier assessment years. In other words, principle of consistency needs to be followed. Reliance is placed on Bangalore ITAT decision in ITA No 1132 1133/Bang/2018. 11. The strengthening of the existing four lanes is required to be treated as a development of infrastructure activity in terms of various terms and conditions of the contract ; 12. The assessee under the agreement in respect of four-lane is not only required to strengthen the lanes so as to make it compatible to combat the heavy flow of traffic but also to build-up the service lane for the discharging of obligation under the agreement. The Ld. AR relied ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 18 CIT vs ABG Heavy Industries Ltd (322 ITR 323) (Bombay High Court) 19 Bajaj Tempo Limited vs CIT (196 ITR 188) (Supreme Court) 20 Radhasoami Satsang Vs CIT (60 taxmann.com 248) (Supreme Court) 09 On the basis of the above it was submitted that in all the above judgments it was the consistent view taken by the Hon ble High Courts and the Tribunals that the strengthening and widening of existing road would come within the purview of the laying down of infrastructure and hence the assessee is entitled to the benefit u/s.80IA of the Act. It was unanimously held by the courts in the above judicial precedents that if the assessee is maintaining and operating the existing infrastructure then deduction u/s.80IA is available. It was further contended by the ld. AR was that if the assessee is required to maintain the work of cementing, strengthening and laying down the road, then also the assessee is entitled to the deduction u/s.80IA. Our attention was also drawn to the order passed by the AO in the previous year, wherein the AO has held that the assessee is entitled to t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s.80IA of the Act. The infrastructure facilities is defined in Explanation to Section 80IA(4), as under : Explanation For the purposes of this clause, infrastructure facility means- (a) a road including toll road, a bridge or a rail system ; (b) a highway project including housing or other activities being an integral part of the highway project ; (c) a water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management system ; (d) a port, airport, inland waterway, inland port or navigational channel in the sea ; 12. From a conjoint reading of Section 80IA(4)(b) and the Explanation to 80IA , it is clear that if an assessee is (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any new infrastructure facility etc., in that eventuality the assessee is entitled to benefit u/s.80IA of the Act. In the present case what the assessee is operating and maintaining an already existing four-lane road by strengthening it. Therefore, in our understanding no new infrastructure come into existence and merely assessee had made improvement and strengthen the existing infrastructure, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Facilities the facilities shall be maintained in traffic-worthy condition as per the intervention lovels 1 2 as provided in the Table 1 - 2 through the various maintenance activities set out later. worst surface characteristics, which include the rut areas and depressions etc. The Concessionaire shall ensure that at no point during the Operations Period the roughness in the road surface shall fall below than the prescribed acceptable roughness values given in Table I - 2. c. The structural condition of the flexible pavement Of the Project Highway shall be assessed every year by taking Benkelman Beam Deflections and working out characteristic deflections of homogeneous sections of the Project Highway as per IRC-8I-1997. In the case of cement concrete pavement, joints shall be thoroughly inspected every year and the loss of sealing compounds made good. d. Bridges and Other Structures: The Concessionaire shall maintain and carry out required repairs of the various elernents of the structures in accordance with IRC-SP-35: 1990. 14. From perusal of the above it is clear that the assessee is operating and maintaining the already existing road for which the assessee is entitled ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of roads and maintenance of roads would fall within the four corners of Section 80IA. The findings of the Hon ble jurisdictional High Court in para 18 and 19 have been reproduced elsewhere in this order. If we look into the facts which are mentioned in para 7 of the judgment, wherein it is stated as under : It is further stated by the Executive Engineer PWD, Bidar that out of the total work of ₹ 1,94,93,022/- work to the extent of ₹ 4,88,236/- pertains to repairs and the work relating to the construction of road is ₹ 1,90,04,786/-. If the above facts are read along with the finding recorded by the Hon ble High Court in para 18 and 19, it is clear that the work of improvement of road, relaying, repair of roads etc., have been excluded while computing the deduction u/s.80IA(4) of the Act. In the present case, the first claim as discussed herein above was in respect of repair of road, relaying of road and improvement of road and therefore the action of the lower authorities is in conformity with the law laid down by the Hon ble jurisdictional High Court. In our understanding, the judgment relied upon by the assessee is in fact against the assessee. 16. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of this tribunal order, it comes out that if the contracts involves design, development, operating maintenance, financial involvement and defect correction and liability period, then such contracts cannot be called as simple works contract to deny the deduction under s. 80IA and profit from the contracts which involves design, development, operating maintenance, financial involvement, and defect correction and liability period is to be accepted as development and cannot be said to be contract simplicitor to apply the explanation. In the present case, categorical finding has been given by CIT (A) that the assessee was engaged in development of road and is not a mere contractor as he had deployed his own capital, used his own management and expertise in maintenance and had to bear the risk and defect correction. These findings of CIT (A) could not be controverted by learned DR of the revenue and therefore, this tribunal order rendered in the case of Koya Co. (Supra) is squarely applicable because the facts are similar. In the order of CIT (A), he has followed this tribunal order and various other judicial pronouncements as noted by him in his order, as reproduced above. Consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned herein above, the Hon ble jurisdictional High Court in the matter of Kotarki Constructions (P.) Ltd.(supra) in paras 18 and 19 held as under : 18. The said Explanation as explained in the Memorandum of Finance Bill 2007 as quoted above, clearly lays down the guidelines when it says, in contrast to this, a person, who enters into a contract with another person (including Government or an undertaking or enterprise referred to in section 80-IA) for executing works contract, will not be eligible for the tax benefit under section 80-IA , intended to deny the benefit of such deduction only to the sub-contractors, who were executing such works contracts on behalf of the principal contractors and pure and simple they being the subcontractors, naturally, the double deduction in the hands of principal contractors and sub- contractors could not have been allowed by the Legislature u/S.80-IA(4) of the Act and that is why the said Explanation restricting the deduction of Section 80-IA(4) of the Act only to the principal works contractor of development of infrastructure facility which included laying of additional lanes by road widening as clarified by CBDT, could not have been denied s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ting in the field and applicable to the facts of the case, there is no purpose of perpetuating the error committed by the AO / CIT (A) in earlier years. Accordingly we do not agree with the contention of the assessee that following the principle of consistency the claim of the assessee is required to be allowed. In the result ground no 1 2 of assessee appeal are dismissed. 17. In the present case, as mentioned herein above, the facts are entirely different. There was no expansion of two lane into four lane by the assessee for 28 kms to 67 kms and as such the benefit of the decision of the coordinate bench cannot be extended. Moreover, the assessee has not pointed out any facts before us which entitle the assessee to the benefit of Section 80IA for strengthening, repairing and maintaining the existing infrastructure from 28 to 67 kms. 18. The CIT (A) has granted adhoc benefit of 25% to the assessee and for that the assessee is in appeal before us. As we have held that the assessee is not entitled to the benefit u/s.80IA of the Act in respect of the first activity, viz., strengthening of existing road,. We may like to point out that National Highways Authority of India (NHAI) a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... led for any deduction Needless to say that the above said exercise shall be done by the CIT (A) after giving the notice and after examining the objection of the assessee. In the result ground no 3-4 of assessee are allowed for statistical purposes. 22. The In the result the appeal of the assessee is allowed for statistical purposes Ground no.2 of Revenue appeal in 1130 1131/Bang/2018 is as under : 2. The ld. CIT (A) erred in allowing the claim u/s.80IA when the contract work performed does not fall within the definition of new infrastructure facility u/s.80IA and is in contravention to not fall within the definition of new infrastructure facility u/s.80IA and is in contravention to CGDT circular No.4/2010 dated 18.05.2010. 23. In this regard, the CIT (A) in para 4.7 has allowed the claim of the assessee by reversing the order of the AO holding that the strengthening of the existing two lanes from 67/0 to 121/0 kms and widening thereof to four lanes carriage-way is eligible for deduction u/s.80IA of the Act. 24. The Ld. DR submitted that the contract entered into between the assessee and NHAI was a composite contract and therefore even the strengthening and widen ..... X X X X Extracts X X X X X X X X Extracts X X X X
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