TMI Blog2022 (5) TMI 773X X X X Extracts X X X X X X X X Extracts X X X X ..... designing of the project specifications and getting approval from the competent authority, safety and security of project and human resources, compliances of various statutory rules and laws. Therefore, merely because in the agreement for development of infrastructure facility, assessee is referred to as contractor or because if some basic specifications are laid down, it does not detract the assessee from the position of being a developer, nor will deprive the assessee from claiming deduction u/s.80IA(4) of the Act. As such, looking to the overall aspects of work undertaken by the assessee we can safely come to the conclusion that the assessee is engaged in development of the infrastructure facility and therefore, a developer, which entails the assessee to claim benefits under section 80IA(4) of the Act. Thus, the issue of claim of deduction under section 80IA(4) of the Act is allowed in favour of the assessee . Denial of claim of deduction u/s 80IA of the Act on interest and other income - HELD THAT:- We find that before the lower authorities the assessee has explained regarding interest income earned by it from the fixed deposits, security deposits, margin-money and from th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... roved that the assessee has diverted the funds for non-business purpose so as to deny interest expenditure. The impugned disallowance is merely on some assumption that it is diversion of interest bearing funds without any basis or justification. The Hon ble Apex Court in the case of CIT v. Reliance Industries Ltd., [ 2019 (1) TMI 757 - SUPREME COURT] held that where interest free funds available with the assessee were sufficient to meet its investment and it could be presumed that the investments were made from the interest free funds available with assessee, therefore, there is no reason to deny the claim of the assessee. Hence, we delete the impugned disallowance of interest expenditure and this ground of appeal of the assessee is, thus, allowed. Disallowing the assessee s claim of bad debts - HELD THAT:- Upon consideration of the same the loss is found to be incurred during the course of conducting business by the assessee and therefore, the same can be allowed as business/trading loss under section 28 of the Act. With this observation we allow this ground of appeal raised by the assessee in both the appeals with the direction upon the Ld. AO to grant relief accordingly. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the ground that the assesses s claim is a bona fide one, all the particulars were fully disclosed in the return itself, supported by audit reports under Section 80 IA(7) in Form No. 10 CCB and none of the particulars or figures are found to be untrue or wrong. The disallowance is made only due to a bona fide difference of opinion between the assessee and the Department as to whether the assessee is a developer or contractor . It further appears that relying on the decision passed in the matter of Reliance Petro Products Pvt. Ltd., [ 2010 (3) TMI 80 - SUPREME COURT] the penalty was deleted by the Ld. CIT(A) which according to us is without any ambiguity so as to warrant interference. We, thus, find all the appeals preferred by the revenue as above as devoid of any merit and therefore, dismissed. - ITA No(s). 118/Ahd/2009, 441/Ahd/2011, 442/Ahd/2011, 3254/Ahd/2011, 1385/Ahd/2012, 3126/Ahd/2013, 2917/Ahd/2016, 2334/Ahd/2014, 1499/Ahd/2018, 1281/Ahd/2016, 2916/Ahd/2016, 2201/Ahd/2018 - - - Dated:- 13-5-2022 - ITA No(s). 2202/Ahd/2018, CO No.195/Ahd/2015 IN ITA No.2765/Ahd/2015 And ITA No(s). 2489/Ahd/2009, 722/Ahd/2010, 1966/Ahd/2012, 2765/Ahd/2015, 199 and 2706/Ahd/2016, 595/ ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s raised in this appeal read as under: 1. That on facts and in law the learned Commissioner of Incometax (Appeals) has grievously erred in upholding the assessment order and rejecting the claim of deduction under section 80IA(4) of the Act of Rs.1,95,62,210/-. 2. That on facts and evidence on record it ought to have been held that the appellant has satisfied all the conditions prescribed under section 80IA(4) of the Act and it ought to have been held that the appellant is a developer of infrastructure facilities and entitled to the deductions as claimed for. 3. That on facts and in law the learned CIT (Appeals) has grievously erred in holding that the interest income and other income of Rs.65,58,550/- is not eligible for deduction under section 80IA(4) of the Act. 4. That on facts and evidence on record it ought to have been held that the entire income is derived from business of industrial undertaking and as such entitled for deduction as claimed for. 5. That in the alternate and without prejudice to the above grounds, it ought to have been held that only the net income i.e. gross income less expenditure incurred ought to have been excluded for t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r deposits. It had adjusted/netted interest expenses against the said income. The deduction under section 80IA had then been claimed against the said net interest income; iii) Expenses incurred against earning of exempt income had to be identified and disallowed u/s.14A. 6. Pursuant to the 263-order, after hearing the assessee the ld.AO completed assessment under section 143(3) r.w.s. 263 whereby the claim of the assessee among other, under section 80IA/80IB was disallowed, since according to the AO, the assessee merely executed work awarded by the local authorities, AUDA and other state government undertakings, assessee fall under the category of work contractor and not as developer . This finding was confirmed by the First Appellate Authority. Hence, the instant appeal before us. 7. The Ld. Counsel for the assessee reiterated submissions as were made before the Revenue authorities. He further submitted that the assessee has executed construction and development of infrastructure facilities by entering into agreement with State or Central Government, local authority, statutory body etc. These activities include sewage treatment plant, siphon work, toll road, o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t authority only after successful completion of the project, project certification etc. and that too after deduction of the retention money. The construction and development of infrastructure projects is highly technical and required special skill, adherence to quality etc. which lasts for two to five years depending on the type and size of the project. Moreso, the assessee is not compensated for increase in prices of materials, cost of labourers, overhead expenses etc. and as a result whereof many times, the assessee has to incur heavy loss too in various projects. These facts clearly demonstrate that the financial and other risk, responsibility, obligations is undertaken by the assessee in construction and development of the various infrastructure projects. Hence, as per the ratio of the jurisdictional High Court in the case of Radhe Developers (supra), the assessee is not merely a works contractor, but is engaged in development of project as a whole, and therefore, entitled for claim of deduction under section 80IA(4) of the Act. The Ld. Counsel for the assessee further relied on the following decisions to support his case: 1. Patel Infrastructure (Rajkot ITAT) ITA No.627 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ) came to a finding that the judgment passed in the case of B.T. Patel Sons (supra) was not applicable to the case of the assessee. Further that, decision of Rajkot Bench relied upon by the assessee was decided on different set of facts. We find the following was submitted by the assessee before the Ld. CIT(A): EXPLANATION REGARDING DEDUCTION U/S. 801A AFTER CONSIDERING EXPLANATION INCORPORATED BY FINANCE BILL 2009 W.R.F. A. 01 Sir, the Provisions relating to deduction for developing, maintaining and operating a new infrastructure facilities were introduced w.e.f. A.Y. 1996- 97 by introducing Sub-section (4A) in Section 80-IA. At that time one of the statutory conditions was that the enterprise must have entered an agreement with Government authority for developing, maintaining and operating the new infrastructure facilities which shall be transferred to Government authority after a stipulated period as mentioned in the agreement. In the explanatory statement of Budget of 1995-96, it is specifically mentioned that infrastructure projects on BOOT(Built Own Operate Transfer) OR BOT (Built Operate Transfer) are eligible for deduction U/s. 80IA. Copy of relevant pag ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... opy of relevant pages of finance bill 2007 is enclosed (ANNEXURE-3). The said explanation is again modified by Finance Bill 2009 w.r.e.f.A.Y.2000-01 so that the person who carries out works contract is not eligible for deduction U/s. 80IA. Copy of explanatory statement is enclosed herewith (ANNEXURE-4). Hence as per the modified provisions, enterprise carrying out works contract is not eligible for deduction U/s. 80IA (4). However the term works contract is no defined in the Act. Works contract may be defined as work executed by contractor for which whole or major materials is supplied by the contractee. The works contract has a specified connotation in the tax law. The Hon'ble Patan High Court in case of Ramesh Chandra Chaturvedi vs. CIT (PATNA) 121 IT 116 (1980) has defined the term works contract as under: Works contract in which contractor undertakes to supply only the labour. The contractor is not at all concerned with the materials used in the contract. He just puts the materials in form in which he is asked to do and charges only for labour' Copy of judgment is enclosed (ANNEXURE-5). Since the appellant has developed the infrastructure fa ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee in previous years has been allowed deduction U/s. 80IA after examining the nature of business; b) the assessee has entered into agreement for development of infrastructure facility with the Govt. authorities and has developed infrastructure facilities; c) the explanation clearly refers to the business in the nature of works contract and the explanation is limited in the scope the deduction U/s. 80IA cannot be denied; d) any provision granting rebate or benefit to the assessee should be liberally construed generally in favour of assessee; e) the appellant in this case has directly entered agreements with the Govt. authorities and it employed various resources of its own by way of machineries, technical knowledge, technical and other manpower, materials, finance etc.; From the above it is clear that the appellant is entitled for deduction U/s. 80IA. Copy of order of the Rajkot Tribunal is enclosed herewith. In the light of the facts and above legal position, it is prayed that the disallowance of Rs. 1,30,03,660/- U/s. 80IA and disallowance of Rs. 65,58,550/- may kindly be deleted. 11. After considering the above submissions an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ng deduction u/s.80IA(4) is upheld. These grounds of appeal are dismissed. 12. At this juncture, therefore, deliberation is required on the main issue as to whether the assessee is entitled to the deduction claimed under section 80IA(4) of the Act even after the Explanation inserted after sub-section 13 of section 80IA of the Act by the Finance (No.2) Act 2009 w.e.f. 1-4-2000. The Explanation reads as follows: Explanation.-For the removal of doubts, it is hereby declared that nothing contained in this section shall apply in relation to a business referred to in sub-section (4) which is in the nature of a works contract awarded by any person (including the Central or State Government) and executed by the undertaking or enterprise referred to in subsection (1). 13. The above explanation has denied the benefit of deduction under section 80IA(4) of the Act to a person who executes a project which is in the nature of works contract. In that view of the matter, the first and foremost condition imposed upon an assessee is to establish that he worked not as work contractor , but as a developer . 14. On the other hand, a 'contractor' is a person who underta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n. 17. It is an admitted fact that the assessee-company is registered as category AA contractor with Government of Gujarat for construction and development of infrastructure projects. The assessee has submitted tender documents bearing contract No.483/AMC/NRCP in respect of Sabarmati River Action Plan under the National River Conservation Directorate, Ministry of Environment Forests, which was awarded to the assessee by the AMC. It can be seen from pages 28 to 33 of the said Tender brochure filed before us that in order to participate in the contract bid, there are certain criterion to be fulfilled. According to which, the bidding-party can only be eligible if they have necessary experience, facilities, ability, financial resources, specified turnover, specific experience in construction and maintenance of sewage treatment plant, necessary personnel and plant machinery etc. to perform the said work assigned and prescribed in the Tender Notice. 18. Clause-1 at page no.29 of the said Tender notice clearly speaks about general specification to be given by the respective authorities. However, the specific drawings designs are recommended by the Contractor which shal ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in Clause (iv)(v) of the Tender notice appearing at page No.42. Apart from that, if at the completion of 50% time limit, progress is not maintained proportionally, the contractor shall have to produce additional security deposit of the same amount i.e. another 5% of the total tender amount to assure the completion of the work- in-balance time limit. As per clause (v) provided at page No.43 of the tender documents, the retention money has been specified to be deducted at 10% from the current bills and shall be released over a period of three to five years in the following stages: At the end of First year of proper Operation Maintenance period which starts after completion of Construction, Trial Runs, Commissioning, Start-up period i.e. (18+6+12 months from the award of work). 20% of total Retention Money. At the end of Second year of proper Operation Maintenance period which starts after completion of Construction, Trial Runs, Commissioning, Start-up period i.e. (18+6+12 months from the award of work). 30% of total Retention Money. At the end of Third year of proper ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a colony on a temporary basis to be set up by the assessee and to provide other facilities as mentioned hereinabove as per the terms conditions stipulated in the contract. In the event of default, the contract will be cancelled by forfeiture of security deposits and penalty to be imposed thereon. Apart from that, the assessee shall have to provide and ensure the safety of site equipments, meaning thereby, construction of shed for storing material at work site having double locking arrangement. Further, the contractor has also to provide suitable scaffolds and working platforms, gangways, stair-ways and shall comply with all types of safety measures as envisaged in Clauses 21 and 21A of page No.52 of TD. In terms of Clause-22 of the TD, the contractor shall not set fire to any standing general trees, bush, wood or grass without written permission and shall have to take necessary measure to prevent fire spreading or otherwise damaging surrounding property. The Contractor will be liable for any damage done in or outside work area. This stipulation contained in Clause-23 Page No.55 of the TD. 24. The contractor is to provide, erect and maintain barricade including signs and comma ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... w.e.f. 1-4-2000 provides that provisions of section 80IA(4) shall not apply to a business which is in the nature of works contract awarded by any person including Central or state Government and executed by the undertaking or enterprise referred to in sub-section(l). It is pertinent to note that the said explanation which was originally introduced by Finance Act, 2007 read as for the removal of doubts, it is hereby declared that noting contained in this section shall apply to a person who executes a work contract entered into with the undertaking or enterprise as the case may be.... By the Finance Act, 2009 the said explanation was amended conveying that for the removal of doubts, it is hereby declared that noting contained in this section shall apply in relation to a business referred to in sub sec (4) which is in the nature of a works contract awarded by any person including Central or State Government and executed by the undertaking or enterprise referred in sub section (!).... . Thus, as far as legal stipulations are concerned, it is crystal clear that the deduction u/s. 80IA(4) is not available to a person who executes a contract which has been awarded by a Central o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... re submitting the tender. Further, para B of clause 2.20 clearly mentioned that the contractor shall furnish to the City Engineer, every week during the progress of the work classified weekly returns of the machinery deployed on the site of work during the week. The report of the machinery deployed shall be given in the prescribed forms, failing to which no claim shall be entertained in future regarding the machinery deployed at side. The clause 2.21 of the instruction also binds the assessee (contractor) to submit a weekly medical report of contractor's labour and increase or decrease of labour. The rate of the project was pre decided by the AMC and under no circumstances assessee / contractor be entitled to claim enhanced rate for any item of the contract. In this regard, clause 12, clause 12A, clause 13, clause 14, clause 15 and clause 18 of terms and conditions of contract may kindly be referred which clearly stipulates that, Clause 12; Stores supplied by Municipal Corporation, clause 13; works to be executed in accordance with specifications, drawings, order etc., clause 14; Alterations in specifications and designs not to invalidate contracts, which gives power to Enginee ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ndependent nature carried out utilizing its own technical skills. The argument again is flawed since contract was awarded by AMC to appellant only after being satisfied of the technical skills of the appellant. The issue is that the contract was awarded to the appellant only after understanding estimating and appreciating capabilities of the appellant to perform these tasks satisfactorily. Merely because appellant has performed these tasks does not means that the appellant looses the basic character of being just a contractor. The arguments that the appellant is a developer since it was required to arrange for its insurance to protect its risks etc, has liaison with local bodies for getting certain approvals, has provided specialized supervised manpower, prepared drawings and executed them, provided for testing and measuring equipments, prepared CPM / PERT charts, engaged merchandised system of construction etc. etc. have been found to be irrelevant and best a ploy to deviate from the main issue since all these activities were either part of the terms / conditions of the contract, which appellant had agreed with AMC at their time of accepting their tender invitation or were underta ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... was widening of railway over-bridge on Palanpur-Deesa road. The assessee has not furnished any further details. The assessee has claimed deduction u/s. 80-IA of Rs.4,97,988/-. The description of the work clearly shows the fact that the contract work was meant for widening of over-bridge of the existing railway over-bridge. Thus, it was not a new infrastructure facility, but the work was of the expansion nature to existing facility, and therefore, the same is not covered under the purview of new infrastructure facility. (iii) Sabarmati River Bridge Work at Kamod: This work was taken from Ahmedabad Urban Development Authority for construction of bridge across Sabarmati River at Kamod at section between Sanathal - Aslali of Ring Road around Ahmedabad in AUDA for Rs.8,25,00,000/-. The time-limit for completion of work was 15 months. The assessee has furnished a copy of work order dated 18.2.2003. The assessee has merely acted as a contractor to carry out construction work of the bridge as per the specification, estimation and project of the Ahmedabad Urban Development Authority and the same cannot be considered as to have developed assessee's project as a developer. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ructure facility by the assessee company. (vi) VatamanPipali Road The assessee has furnished copy of work order dated 22.3.2004 for construction of major bridges in connection with strengthening of SH- 6, Vataman-Pipali (km. 69/600 to Km.694) and paving of shoulders. The estimated contract price was of Rs. 15.29 crores. For carrying out this work, the owner has issued a Letter of Intend , enabling the assessee company to start the work. The work order was issued with detailed scope of work, terms and conditions, technical specifications and procedure etc. The assessee was just engaged for execution of work of the honour as per their terms / conditions / times etc. In addition to the above, the work carried out was for strengthening and paving of shoulders on State Highway No.6, already in existence. (vii) Vasna Sewerage Treatment Plant: The assessee has furnished copy of work order dated 13.2.2002 for construction, commissioning and trial run of 126 MLD capacity Sewerage Treatment Plant including operation and maintenance at Vasna, Ahmedabad. This work was assigned by the Ahmedabad Municipal Corporation for contract cost of Rs.28.36 crores to Aquafill P ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Government of Gujarat, cannot be said to be contract with Government. In absence of any evidence and satisfaction of the above conditions, the assessee cannot, strictly speaking, fulfilling the requirements of section 80IA (4) / 80IB (10) of the Act. Also, construction of college complex is not covered under the definition of development of infrastructure facility within the meaning of Section 80-IA of the Act. Therefore, the assessee is not entitled for deduction under section 80-IA/80IB of the I. T. Act, 1961 in respect of this work and accordingly disallowed. 12. Thus, from the evidences available on records conclusively indicate that as far as factual matrix of the cases are concerned, the appellant is a mere contractor w r t work assigned by AMC and other authorities as discussed in above paras and cannot be treated as a developer by any stretch of imagination. Now since the provisions of section80IA supra, clearly prohibit that the deduction would not be available to a contractor, no benefit claimed u/s.80IA by the appellant would be legally admissible 27. We now propose to deal with the submissions made by the Revenue before us. 28. In paragraph-4 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssee can be termed as developer or a contractor as submitted in para-5 of the written submissions. In fact, it only attempts to give a general meaning of the term contractor and developer . In the cases in hand, we find that in terms of tender documents, audited accounts and facts on record suggest that the assessee has fully undertaken the work of development of various infrastructure projects as a whole by undertaking the risk responsibility, arranged own finances, materials, personnel, labour, machinery, other equipments etc. and thereby fulfilled the test of being a developer as per the principles laid down by Hon ble Gujarat High Court in the case of Radhe Developers, 341 ITR 403 (Guj). It is imperative upon us to take note of the relevant portion of the above judgments for better understanding of the issue on hand. 34. We have reproduced relevant terms of development agreements in both the sets of cases. It can be seen from the terms and conditions that the assessee had taken full responsibilities for execution of the development projects. Under the agreements, the assessee had full authority to develop the land as per his discretion. The assessee could enga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en power of attorney to facilitate the work of the developer. In short, the assessee had undertaken the entire task of development, construction and sale of the housing units to be located on the land belonging to the original land owners. It was also agreed between the parties that the assessee would be entitled to use the full FSI as per the existing rules and regulations. However, in future, rules be amended and additional FSI be available, the assessee would have the full right to use the same also. The sale proceeds of the units allotted by the assessee in favour of the members enrolled would be appropriated towards the land price. Eventually after paying off the land owner and the erstwhile proposed purchasers, the surplus amount would remain with the assessee. Such terms and conditions under which the assessee undertook the development project and took over the possession of the land from the original owner, leaves little doubt in our mind that the assessee had total and complete control over the land in question. The assessee could put the land to use as agreed between the parties. The assessee had full authority and also responsibility to develop the housing project by not ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sessee has arranged the necessary requirement of water, electricity connection, cement and other required qualitative materials at its own cost as per pages 95 96 of the tender. It is further supported by the audited accounts profit loss account reflected at page No.16 of the PB filed before the Tribunal showing total materials consumed during the year is of Rs.14,82,47,213/- and creditors for goods are of Rs.2,10,12,846/- as per the Balance Sheet at page No.15 of the PB. It is relevant to mention that nowhere in the documents filed before us suggests that the assessee has procured any project material from the government authorities; neither Revenue has been able to point out any such document in support of their stand. 32. On the contrary, it has been admitted by the Revenue that the rate of project is fixed and under no circumstances, the assessee is entitled to claim enhanced rate for any item of contract, which rather proves that under no circumstances the assessee will be compensated for price escalation in respect of material, labour, which may be caused due to inflation and for these precise reason the assessee has suffered huge loss in the development of main proj ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . 34. So far as the contentions of the Revenue in respect of contract works of various projects performed by the assessee for the F.Y. 2005-06 no supporting documents have been furnished, nor the work undertaken by the assessee falls within benevolent provision of Section 80IA(4) of the Act are concerned, we find that in most of the cases, it was alleged that the assessee has not supplied any documents which could justify its work done as a developer qua claimed by the assessee for deduction under Section 80IA(4) of the Act. In fact, we find that the assessee has filed relevant materials/documents in order to prove that the assessee was engaged in developing infrastructure projects, and therefore, being a developer it is entitled for the impugned deduction under section 80IA(4) of the Act. The case-wise following tender documents/materials alongwith work orders were furnished by the assessee before the authorities below: Asst.Year Particulars of Tender documents and title of projects 2002-03 1. Construction of Canal Earth Work and Canal Syphon across River Umai from Sardar Sarovar Narmada Niga ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ready dealt with by us hereinabove) and the contents whereof would definitely suggest that the assessee has been entrusted with the work of development infrastructure facilities, and therefore being a developer , the assessee would be entitled for deduction under section 80IA(4) of the Act. Relevant to mention that perusal of all tender documents mentioned hereinabove reveals that the terms and conditions mentioned therein are almost same except the figures and name of the project. 36. In para-11 of the written submissions, the Revenue has disputed that various work undertaken and executed by the assessee as a contractor and not as a developer. The assessee-company is merely acting as an agency and executing the work awarded to it with specific conditions. The project-wise contentions was raised by the Ld. DR in his written submissions, which we have already extracted hereinabove. In response thereto, we would like to analyse different projects undertaken by the assessee for the Asst.Year 2005- 06 which is summarized in tabular form as under: Sr. No. Particulars of Projects Documents available Type of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... build, operate and transfer. The DR s view is not correct in law in view of the amendment made by Finance Act, 2001 to 80IA(4) by which the deduction is available to any enterprise carring on the bsiness of i) developing, or ii) operating and maintaining or iii) developing, operating and maintaining any infrastructure facility. Therefore, deduction is available to either of the three businesses as the conditions are mutually exclusive and not cumulative in nature. For this proposition, the decision of the Hon ble High Court of Bombay in the case of CIT Vs. ABG Heavy Industries Ld. (2010) 189 Taxman 54 (bom). In other words, this project undertaken by the assessee viz. construction, commissioning and trial run of 126 MLD capacity sewage treatment plant including operation and maintenance for 36 months at Vasna, Ahmedabad. 8. Ambaji Mata Site Development Page No.91 of PB The contention of the Revenue that agreement was entered into with the Trust and not with the Government. It is not true, because this Trust is 100% governed by the Govt. of Gujarat, and it is a local authority/ statutory as envisaged in s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s a developer or contractor. (i) The assessee does not have to develop the entire infrastructure facility to qualify for deduction u/s.80-IA(4) and if only a part of the infrastructure facility is developed, the assessee would be eligible for deduction. (ii) The three requirements of section 80-IA(4) viz. development, operation and maintenance are not cumulative. Thus, an enterprise which only develops facility would also be entitled to the benefit of section 80-IA(4). (iii) Merely because the assessee is referred to as a contractor in the agreement, it would not debar it from claiming deduction. (iv) Direct agreement between the transferee-assessee and the specified authority is not a mandatory requirement u/s.80-IA(4) of the I.T. Act. Needless to mention that the assessee qualified all the criterion fixed by the Amritsar Bench 40. We have already dealt with relevant clauses of the tender documents stipulating various conditions viz. financial involvements, risks, obligations and responsibilities of the assessee in developing, operating and maintaining of infrastructure facilities, which clearly make the case of the assessee within the scope and ambit ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sertion of explanation as mentioned hereinabove and decided the same in favour of the revenue to this effect that such explanation brought with retrospective effect from 01.04.2000 by the Finance Act No. 2 of 2009 was very well within the competence of Parliament. As such there was no issue whether the assessee is acting as a developer or contractor was raised before the Hon ble Jurisdictional High Court neither the said has been decided in the said judgement. 43. In the light of the above discussion and perusal of various clauses of Tender documents and case laws relied upon by both the parties, it reveals that the tender work under consideration are not for a specific work, rather they are for development facility as a whole. The responsibility is fully assigned to the developer for execution and completion of the work. Various stipulations contained in the Tender documents demonstrate various risks undertaken by the assessee for execution of the project work awarded by the competent authority in terms of financial resources, manpower deployment, both technical and administrative expertise, drawing and designing of the project specifications and getting approval from the com ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ned that since the assessee has claimed deduction under section 80IA(4) of the Act of Rs.1,95,62,210/- on several projects, this amount included interest income also. In response to the show cause notice, it was explained by the assessee that the assessee has made different fixed deposits with different bank as security deposits with the Government Authorities in respect of the project contract, and for giving bank guarantees. For getting bank guarantee the assessee has to keep certain amount fixed deposits as margin money. These fixed deposits were made out of borrowed funds for giving security deposits to the Government. Therefore, claim of deduction under section 80IA was fully allowable. However, the AO did not accept this explanation of the assessee. He was of the view that since the assessee has huge surplus funds, the same was parked with the bank and earned interest income, which was not part of the income earned from any industrial activities but receipts from the investment of surplus fund with bank. The AO accordingly disallowed interest income and other income to the tune of Rs.65,58,550/-. In appeal preferred by the assessee, the CIT(A) confirmed the action of the AO. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... loys Ltd. (supra) has held that interest received on margin money placed for business purpose cannot be treated as income from other sources and is, therefore, eligible for deduction under section 80IA of the Act. Further, various higher judicial authorities have held that profits of the business of the undertaking include other incidental incomes derived from the business of the undertaking. This being the position of law, we have no hesitation in accepting the claim of the assessee that the income earned from the deposits is business income is eligible for deduction under section 80IA of the Act. Accordingly, this common ground raised in the appeals under consideration is allowed in favour of the assessee and against the Revenue. 49. As aforesaid, since the above issue is also identical to the assessee s appeals for Asst.Year 2004-05, 2005-06, 2007-08to 2010-11 and 2012-13to 2016-17, in the absence of any changed circumstances, our finding and decision in the Asst.Year 2004-05 will apply mutatis mutandis in the instant appeals also. 50. Now we deal with third common issue viz. the Revenue authorities are erred in setting off loss of four infrastructure facilities from ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... as if the eligible business is the only source of income and therefore, the deduction is to be computed unit wise without considering or set off of loss of other eligible units. On this aspect the Ld. AR relied upon the judgement passed by the jurisdictional High Court in the case of PCIT versus Nirma Ltd, passed in ITA No. 360 of 2016. 54. We have carefully considered the said judgement passed by the Hon ble jurisdictional High Court. While dealing with this particular aspect of the matter the Hon ble Court was pleased to observed as follows: 5. In the case of Commissioner of Income tax(Central) Madras vs. Canara Workshops P.Ltd. Reported in 161 ITR 320, in the context of deductions provided under section 80E of the Act, the Supreme Court held that the merit earned by one industry not to be lost or diminished for loss by some other industry when assessee was carrying on two priority industries. It was held that loss in one industry is not to be set off against profits from the other and the deduction would be on the whole profits from the profit making industry. It was held that in the application of section 80E, profits and gains earned by one priority industry canno ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e manner provided under the Act which pre- supposes that the gross total income shall be arrived at after adjusting the losses of the other division against the profits derived from an industrial undertaking. The apex court further held that under section 80-I(6) of the Act for the purposes of calculating the deduction, the loss sustained in one of the units, cannot be taken into account because sub-section (6) of the Act contemplates that only the profits shall be taken into account as if it was the only source of income. Therefore, from the decision of the apex court, two principles of law emerge one for the purposes of computation of gross total income the losses of other units are to be taken into account but for the purposes of calculating the deduction of industrial undertaking, the loss sustained in another unit cannot be taken into account and only the profit shall be taken into account as if it was the only source of income of that unit. In this view of the matter, we are of the view that there is no error in the order of the Tribunal. 7. We respectfully agree with the view expressed by Allahabad High Court. This view is not in conflict with the decision of the Sup ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e profits and gains of a single industry . In the present case, under section 80I(6), profit of Badi unit are required to be treated as if that was the only source of income. That the losses from the Daman unit are required to be ignored. Therefore, while calculating quantum of deduction, profit of the Badi unit alone are required to be taken. To that there is no difficulty. However, after calculating the deduction on the basis that the profits from the Baddi unit was the only source of income, one has to give effect to the computed deduction in order to arrive at the total income of the company and while giving effect, one has to consider the provisions of section 80IA and 80IB of the Act. In other words, while considering the gross total income of the assessee, deduction under section 80IA and 80IB of the Act are required to be allowed after adjusting loss worked out in other units. 9. We therefore, do not find any error in the view expressed by the Tribunal following the decision of the Allahabad High Court. Tax Appeal is therefore, dismissed. 55. We have further considered the judgement passed by the Mumbai Bench in the case of Punit construction company, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... . Hence, the instant appeal before the Tribunal. 61. Upon perusal of the profit loss account for the year under consideration appearing at page 29 of the paper book filed before us, where balance sheet of the assessee company has been annexed it appears that the assessee company is having total reserves and surplus fund to the tune of Rs.19,97,60,729/-. 62. However, we are of the view that Revenue has not established any nexus between the interest bearing funds and free advances so allegedly made by the assessee nor it has been proved that the assessee has diverted the funds for non-business purpose so as to deny interest expenditure. The impugned disallowance is merely on some assumption that it is diversion of interest bearing funds without any basis or justification. The Hon ble Apex Court in the case of CIT v. Reliance Industries Ltd., 410 ITR 466 held that where interest free funds available with the assessee were sufficient to meet its investment and it could be presumed that the investments were made from the interest free funds available with assessee, therefore, there is no reason to deny the claim of the assessee. Hence, we delete the impugned disallowance of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ing the assessment year 2010-11 the assessee has advanced an amount of Rs.25,00,000/- to M/s Ruturaj traders for purchase of goods. However, the goods were not supplied and assessee could recover only Rs.8,50,000/-and the balance amount remaining outstanding of Rs.16,50,000/- is written off under Section 28 of the Act. During the Assessment Year 2011- 12 the assessee advanced a staff loan of Rs.1,85,490/-to one Jayash B Patel who was the site supervisor. However, as he left the job the amount could not be recovered and was written off as business loss under Section 28 of the Act. 68. On this aspect apart from considering the judgment passed by the Hon ble Jurisdictional High Court we have carefully considered the records produced before us by the assessee. Upon consideration of the same the loss is found to be incurred during the course of conducting business by the assessee and therefore, the same can be allowed as business/trading loss under section 28 of the Act. With this observation we allow this ground of appeal raised by the assessee in both the appeals with the direction upon the Ld. AO to grant relief accordingly. 69. Deduction under section 80 GGB of the Act has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dismiss this ground of appeal preferred by the assessee. 73. Now we take penalty appeals filed by the assessee and the Revenue against imposition of penalty under section 271(1)(c) of the Income Tax Act, 1961. i) ITA No. 1966/A/2012 for AY 2007-08 ii) ITA No. 2765 /A/2015 for AY 2008-09 iii) ITA No. 199/A/2016 for AY 2009-10 iv) ITA No. 2706/A/2016 for AY 2010-11 74. In all the above appeals preferred by the Revenue penalty was levied under Section 271(1)(c) of the Act in respect of disallowance of claim of deduction under Section 80IA (4) of the Act which was in turn deleted by the Ld. CIT(A). Hence, the instant appeal before us. 75. We have heard the rival submissions made by the respective parties; we have also perused the relevant materials available on record. 76. Since we have already decided the quantum appeals preferred by the assessee granting relief of the claim of deduction under 80IA(4) of the Act, the penalty arising out of the said quantum proceeding automatically become infructuous. 77. However, we would like to note that the Ld. CITA has deleted the penalty on the ground that the assesses s claim is a bona fide one, all ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ht to have been deleted relying on the ratio laid down in the decision taken by the Hon ble Court in the case of Reliance Petro products private Ltd, supra. 85. We, therefore, with the above observation delete the penalty imposed by the authorities below. In the result this ground of appeal preferred by the assessee is allowed. 86. In view of our adjudication of the appeals as above, summary of our decision is as follows: Assessee s appeals: i) ITA No.118/Ahd/2009 is dismissed as not pressed; ii) ITA No.441/Ahd/2011 is allowed; iii) ITA No.442/Ahd/2011 is allowed; iv) ITA No.3254/Ahd/2011 is allowed; v) ITA No.1385/Ahd/2012 is allowed; vi) ITA No.3126/Ahd/2013 is allowed; i) ITA No.2917/Ahd/2016 is allowed; ii) ITA No.2334/Ahd/2014 is allowed; iii) ITA No.1499/Ahd/2018 is allowed; iv) ITA No.2916/Ahd/2016 is allowed; v) ITA No.1281/Ahd/2016 is partly allowed; vi) ITA No.2201/Ahd/2018 is partly allowed; vii) ITA No.2202/Ahd/2018 is partly allowed; viii) CO No.195/Ahd/2015 in ITA No.2765/Ahd/2015 is dismissed as not pressed; Revenue s appeals: i) ITA No.2489/Ahd/2009 is dismissed; ii) ITA N ..... X X X X Extracts X X X X X X X X Extracts X X X X
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