TMI Blog2018 (12) TMI 1964X X X X Extracts X X X X X X X X Extracts X X X X ..... t inclined to uphold the reassessment proceedings under section 147 of the Act. Thus we hold that the order framed under section 147 of the Act is not sustainable in the given facts and circumstances. The assessee succeeds on the technical ground raised by it in the application filed under rule 27 of ITAT rules. Thus we are not inclined to decide the issue on the grounds raised by the Revenue on merit. Hence the ground of appeal of the Revenue is dismissed. Eligible for deduction u/s 80IA(4) - As there is no ambiguity that the issue whether the assessee is acting as developer or works contractor has already been decided by the Tribunal in the own case of the assessee for the assessment year 2007-08 after considering explanation added in subsection 13 to section 80IA(4) of the Act which has already been discussed in the preceding paragraph. Therefore we are of the view that the impugned issue stands decided in favor of the assessee. There was no change in the facts and circumstances in the case of the assessee in the year under consideration. Therefore in our considered view, the principle of consistency will be applied in the case on hand as held by the Hon ble Supreme C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s originally allowed in order passed u/s 143(3) of the Act, was diseilowed by way of order u/s 147 of the Act. Before the first appellate authority also the ground relating to challenge to issue of notice u/s 148 has been discussed by the said authority. However, in view of the decision given on merits of the case, the first appellate authority has dismissed the said ground without assigning reasons for dismissal except stating that the said ground became academic. As the said ground relating to reopening has been dismissed and held against the respondent, the respondent begs to resort to the remedy granted to it under Rule 27 of the I.T.A.T. Rules wherein it is provided that the respondent can defend the order of the first appellate authority in respect of grounds decided against it. In view of above, the respondent abovenamed hereby prays that the orders of both the lower authorities suffer from infirmities in as much as in view of the nature of reasons recorded prior to issue of notice u/s 148, the action u/s 148 amounts to change of opinion, which is not permissible in law and therefore the first appellate authority also erred in deciding the same against the responde ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... consideration and on the basis of which you have claimed deduction, reads as under: [Deduction in respect of profits and gain from industrial undertaking or enterprises engaged in infrastructure development etc. 80-IA (4) This section applies to Any enterprise carrying on the business of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining and infrastructure facility which fulfils all the following conditions .. (a) It is owned by a company registered in India or by a consortium of such companies or by an authority or a board or a corporation or any other body established or constituted under any Central or State Act. (b) It has entered into an agreement with the Central Government or a State, Government or a local authority or any other statutory body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility. (c) It has started or starts operating and maintaining the infrastructure facility on or after the 1st day of April, 1995; The said amendment has been further amended by way of an explanation after sub-section (13) of sec. 80IA(4), with retr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 27 of ITAT rules which are reproduced as under : Respondent may support the order on any grounds Rule 27:- The respondent, though he may not have appealed, may support the conclusion on an issue arrived at in the impugned order on any of the grounds on that issue, including the grounds decided against him. 8.3. On perusal of the above rules, we are of the view that the assessee is entitled to raise the objections before ITAT by way of an application under rule 27 of ITAT rules. In holding so, we find support and guidance from the judgment of Hon ble Gujarat High Court in the case of Sun Pharmaceuticals Industries Ltd. Vs. PCIT reported in 86 taxmann.com 148 wherein it was held as under:- 8. Rule 27 of the Rules reads as under: Respondent may support order on grounds decided against him. 27. The respondent, though he may not have appealed, may support the order appealed against on any of the grounds decided against him. 9. This Rule thus provides that the respondent, though he may not have appealed, may support the order appealed against on any of the grounds decided against him. This rule embodies the fundamental principle that the person, who may not hav ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... presented, it would be disposed of by the Tribunal in the manner an appeal would be decided. In other words, such cross-objection would have independent existence even if for some reason, the appeal of the opponent does not survive. The cross-objection could be filed only against any part of the order of the Appellate Commissioner and necessarily therefore, that part of the order of the Commissioner (Appeals) has to be adverse to the person raising the crossobjection. Rejection of a ground, an argument or a contention would not come within the expression any part of the order of the Commissioner in context of which, the said phrase has been used in sub-section (4) of section 253. 11. To put the controversy beyond doubt, Rule 27 of the Rules makes it clear that the respondent in appeal before the Tribunal even without filing an appeal can support the order appealed against on any of the grounds decided against him. It can be easily appreciated that all prayers in the appeal may be allowed by the Commissioner (Appeals), however, some of the contentions of the appellant may not have appealed to the Commissioner. When such an order of the Commissioner is at large before the Tribu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he may not have appealed, may support the order appealed against on any of the grounds decided against him. Thus, the assessee was entitled to support the order of the AAC for not clubbing the said two incomes on the said ground of lack of jurisdiction. Therefore, the Tribunal was not justified in not allowing the objections as to the jurisdiction of the ITO to initiate the notice and as to the validity of the proceedings taken in pursuance thereof, to be raised. It is well settled law that the objection regarding lack of jurisdiction is decided first. Only after its decision holding that the Court or the Tribunal has jurisdiction, other questions relating to the merits of the case arise for decision, otherwise not. Accordingly, the case was sent back to the Tribunal to decide the point regarding lack of jurisdiction. 8.5. In view of the above, we admit the application filed by the assessee under rule 27 and accordingly proceed to adjudicate the technical ground of appeal raised by it. Thus the application made by the assessee under rule 27 of ITAT rules is admitted for the purpose of adjudication. 8.6. The issue raised by the assessee in its application under rule 27 of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on having held to be clarificatory in nature, the ratio laid down in the case of Asstt. CIT v. Parikshit Industries (P.) Ltd. [2012] 25 taxmann.com 301 (SC) would apply. The Assessing Officer initiated such proceedings of reopening solely on such ground of insertion of Explanation and, therefore, it needs to be held as mere change of opinion. Hence, the assumption of jurisdiction on the Assessing Officer shall need to be interfered by way of writ jurisdiction. Resultantly, all the three petitions deserve to be allowed quashing the impugned notice issued under section 148 of the Act and all consequential proceedings emanating therefrom. Rule is made absolute. There shall be, however, no order as to costs. 9. 2. The principles laid down by the Hon ble Gujarat High Court as discussed above are squarely applicable to the facts of the present case on hand. Therefore respectfully following the same we are not inclined to uphold the reassessment proceedings under section 147 of the Act. Thus we hold that the order framed under section 147 of the Act is not sustainable in the given facts and circumstances. 9.3. The assessee succeeds on the technical ground raised by it in the app ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ction 13 of the section 80IA(4) of the Act. Thus the AO disallowed the deduction of Rs. 34,33,399/- and added back to the total income of the assessee. 17. Aggrieved assessee preferred an appeal before the Ld. CIT(A) who has deleted the addition made by the AO by observing as under : 5. I have carefully considered the issue. It is to be pointed out that, in the appellant s other group cases, entire issue of claim u/s.80IA(4) was examined, and it was found that assessee was actually a developer of infrastructure facilities, as it had made huge investment of its own as well as out of borrowed funds, and had invested the same in all kinds of resources for its business viz. plant machinery, structures at site, technical expertise etc. The appellant also possesses its own technical knowledge of development of these projects. In many cases, even the design of the project is prepared by the appellant and submitted to the Government for approval. Even sub-letting of the work is not permitted, therefore entire planning of its business as also the work has been done by the appellant and not by the Government. However, it is noticed that many similar cases were decided by the Ld: CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he issue concerning deduction u/s 80-IA(4) and other connected issues, we have already upheld the claims for deduction u/s 80-IA(4) of the Act after duly examining the nature of businesses. Besides, in I.T.A. No. 168/R/08 for A.Y. 2004-05 and in I.T.A. No. 145/R/08 for A.Y. 2003- 04, we find that assessments were completed u/s 143(3) of the Act under which the impugned deduction was granted but thereafter the C.I.T. passed orders u/s 263 of the Act on the ground that the assessees were contractors and not developers. Against the said orders, appeals were filed wherein after duly examining the nature of business of those assessees, we have given a finding that although the assessees had entered into agreements with Govt. for infrastructure facilities, the same were in the nature of development by the assessees within the ambit of infrastructure facility, which aspect was also noted from the accounts of the assessees and thereafter it was held by us that the assessees being developers, they were entitled to deduction u/s 80-1A(4) of the Act. In the case of Gujarat Industrial Development Corporation and Others 227 ITR 414 has considered the meaning of Developer and has held that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... proposition that any provision granting rebate or benefit to the assessee should be liberally construed generally in favour of the assessee. If the present case is viewed in the light of the aforesaid perspectives and judicial propositions laid down by the highest Court of land, we find that the intention behind granting such deductions is for creation of infrastructure facilities in the country as a special benefit or rebate to eligible persons and therefore even if there could be more than one view regarding the particular nature of business of the assessee, the view favourable to the assessee can be taken. 8. The C.I.T. D.R. relied upon the decision of the Hon'ble Mumbai Bench in the case cited supra. We have carefully perused the said judgement and from the facts narrated therein, we find that in that case the assessee namely B. T. Patil sons therein is stated to have been employed as a sub-contractor by M/s. Patel Engineering Co. to carry out civil work and that a portion of the contract was assigned to that assessee who carried out the assigned work in the capacity of a subcontractor. In this context, we find that in the present case before us, it is nobody's case t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idering the totality of the facts on record as also the development of law concerning the granting of deductions from gross total income, we are of the considered view that the appellant is entitled to deduction u/s.80-IA(4) of the Act as it has been found to have fulfilled all conditions of eligibility................................. The Hon'ble ITAT, Rajkot Bench, therefore, held that the assessee is entitled to deduction u/s.80IA(4) of the Act. 7. The case of the appellant is identical. In the present case also, though the appellant entered into a contract with Government, or Semi- Government Authorities, but such a contract is a part of the primary condition mentioned in Section 80IA(4), and further, the nature of work carried out by the appellant shows that the appellant not only directly carried out work 'as per the allotted job, but it also employed various resources of its own by way of machineries, technical knowledge, manpower, material etc. and also funded the same out of it own capital and borrowings. The appellant was required to furnish guarantees, including free maintenance of infrastructure facilities. All these factors combined clearly show that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he nature of businesses. Besides, in I.T.A.No. 168/R/08 for A.Y. 2004-05 and in I.T.A. No. 145/R/08 for A.Y. 2003-04, we find that the assessments were completed u/s 143(3) of the Act under which the impugned deduction was granted but thereafter the C.I.T. passed orders u/s 263 of the Act on the ground that the assessees were contractors and not developers. Against the said orders,, appeals were filed wherein after duly examining the nature of business of those assessees, we have given a finding that although the assessees had entered into agreements with Govt. for infrastructure facilities, the same were in the nature of development by the assessees within the ambit of infrastructure facility, which aspect was also noted from the accounts of the assessees and thereafter it was held by us that the assessees being developers, they were entitled to deduction u/s 80-LA(4) of the Act. In the case of Gujarat Industrial Development Corporation and Others 227 ITR 414 has considered the meaning of Developer and has held that the word Development should be understood in its wider sense and that development means the realisation of potentiality of land or territory by building or mining. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the light of the aforesaid perspectives and judicial propositions laid down by the highest Court of land, we find that the intention behind granting such deductions is for creation of infrastructure facilities in the country as a special benefit or rebate to eligible persons and therefore even if there could be more than one view regarding the particular nature of business of the assessee, the view favourable to the assessee can be taken. 8. The C.I.T. D.R. relied upon the decision of the Hon'ble Mumbai Bench in the case cited supra. We have carefully perused the said judgement and from the facts narrated therein, we find that in that case the assessee namely B. T. Patil Sons therein is stated to have been employed as a sub-contractor by M/s. Patel Engineering Co. to carry out civil work and that a portion of the contract was assigned to that assessee who carried out the assigned work in the capacity of a sub-contractor. In this context, we find that in the present case before us, it is nobody's case that the appellant is a sub-contractor. The appellant is stated to be the person who entered into the contract with the Govt. in respect of infrastructure facility and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ellant is entitled to deduction u/s.80IA(4) of the Act as it has been found to have fulfilled all conditions of eligibility. Accordingly, we direct that the deduction as claimed be allowed. In the result, both the grounds of appeal are allowed. 20. From the above order of the ITAT, we note that the issue has already been decided by the ITAT in the own case of the assessee as discussed above. Therefore we do not find to deviate from the view taken by the ITAT in the own case of the assessee. Therefore respectfully following the same we do not find any merit in the grounds of appeal raised by the Revenue. Hence the appeal filed by the Revenue is dismissed. 21. In the result, the appeal of the Revenue is dismissed. Now coming to the ITA No. 485/RJT/2014 for AY 2009-10 appeal filed by the assessee 22. The assessee has raised the following grounds of appeal: 1. The learned Commissioner of Income Tax (Appeals)-I, Rajkot has erred in dismissing the appeal whereby upholding the disallowance of claim of deduction u/s.80IA of Rs.13,14,246/- made by the Assessing Officer is unwarranted, unjustified and bad in law. 2. The learned Commissioner of Income Tax (Appeals)-I, ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... a business in the nature of works contract. We may recall that sub-section (4) of section 801 A even after amendment of 2002, envisaged deduction in case of any enterprise carrying on the business of developing or operating and maintaining or developing, operating and maintaining any infrastructure facility. Thus, the Legislature by way of the impugned amendment distinguished between the cases of developing/operating and maintaining/developing, operating and maintaining any infrastructure facility from the works contract awarded by any person, be it the Central or the State Government, executed by the undertaking or enterprise seeking such an exemption. That there is an intrinsic difference between developing an infrastructure facility and executing a works contract, in our opinion, can hardly be disputed............................................... In our, opinion, what the explanation aims to achieve is to clarify that deduction under section 801 A(4) of the Act would not be available in case of execution of works contract. The fact that such interpretation of the existing provisions of sub-section (4) of section 801 A of the Act, even without the aid of the explanation was ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... levy. 5.4 In this landmark decision, the Hon'ble Gujarat High Court has laid down the following principles :- 1. What the newly inserted explanation below sub-section 13 to s.8OIA aims to achieve is to clarify that deduction u/s.80IA(4) of the Act would not be available in case of execution of works contract. 2. There would certainly be a demarcation between the developing the facility and execution of works contract awarded by an agency e developing such facility. 3. The explanation must be seen as one being in the nature of plain and simple explanation and not either adding or subtracting anything to the 'ting statutory provision. 4. The legislature by way of impugned amendment has distinguished between the cases of developing/operating and maintaining/developing, operating and maintaining any infrastructure facility from the works contract awarded by any person, be it the central or state government, executed by the undertaking or enterprise seeking such an exemption. There is an intrinsic difference between developing and infrastructure facility and executing a works contract. In the present case, it is an undisputed fact that the appellant has been ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n Ltd. Vs. Union of India reported in 352 ITR 513 wherein the head note reads as under: Section 80-IA of the Income-tax Act, 1961 - Deductions - Profits and gains from infrastructure undertakings [Constitutional validity] - Whether no deduction was ever envisaged under section 80-IA for mere execution of works contract and Explanation inserted in section 80- IA(4) by Finance (No. 2) Act of 2009 with retrospective effect from 1-4- 2000, by which it was declared that deduction under section 80-IA will not be available in respect of mere execution of works contract, only supplied clarity where, at best, confusion was possible in unamended provision - Held, yes - Whether, therefore, it cannot be seen as a retrospective levy and is constitutionally valid - Held, yes [In favour of revenue] 29.3. On the perusal of the above judgment, we note that the issue was before the Hon ble Gujarat High Court was with regard to the validity of the explanation added after sub-section13 to section 80IA(4) of the Act. There was no principle laid down by the order of the Hon ble Gujarat High Court about the assessee whether he was acting as a works contractor or developer. Therefore in our consid ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nt or the State Government or an authority prescribed under section 80-IA(4)(i)(b) and has provided the infrastructure facility in terms of Explanation to section 80-IA(4)(i)(c), the details of which are set out in the chart. The Assessing Officer has tried to read more into the provision by describing what is the nature of work that will qualify for the benefit of deduction under section 80-IA(4). The authority is bound to consider the claim as is contained in the provisions. If certain works are accepted as infrastructure facility and other works denied at the whim of one or other authority it will lead to an incongruous result whereby different the Assessing Officer will take different yardsticks. The proceedings will thereby become arbitrary and capricious. This position will be clear from the stand of one Assessing Officer who held stand that the benefit of section 80-IA(4) will be available to the assessee in the case of construction of railway bridges for the assessment year 2004-05. The Assessing Officer has taken a different stand insofar as assessment year 2006-07 and denied deduction. The department is not entitled to take inconsistent stand in respect of each assessm ..... X X X X Extracts X X X X X X X X Extracts X X X X
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