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TMI Blog2024 (1) TMI 383X X X X Extracts X X X X X X X X Extracts X X X X ..... developer of infrastructure facilities and is eligible for deduction u/s. 80IA(4) of the Income Tax Act, 1961?" 3. The brief facts of the case are as under: 3.1. The respondent assessee which is a Private Limited Company was engaged in business of construction activity and development of infrastructure and other projects i.e. irrigation canals, road construction. 3.2. The assessee filed its return of income on 20.08.2008 declaring total income of Rs. 25,15,950/- after claiming the deduction under Section 80IA(4) of the Act for an amount of Rs. 6,20,01,678/- only for the year under consideration. 3.3. The assessing officer however, disallowed the deduction under Section 80IA (4) of the Act on the ground that the assessee is not a developer but as works contractor relying upon the explanation after Subsection 13 of Section 80IA of the Act. 3.4. Being aggrieved the assessee preferred appeal before the CIT (Appeal). The CIT (Appeal) allowed the appeal by observing as under: "40. Considering the above discussion wherein it is amplified by quoting various clauses of agreements entered between the appellant and the respective State Government bodies, it becomes clear that the appel ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sallowance made by the AO of the appellant's claim for deduction u/s 80IA(4) amounting to Rs. 6,20,01,678/- is therefore not sustainable. The same is hereby ordered to be deleted and the claim of deduction by the Appellant is hereby allowed. 42. The appeal is thus allowed." 3.5. The Revenue being aggrieved by the order of the CIT (Appeal) preferred the appeal before the Tribunal contending that the income derived from the use of infrastructure facility developed by the assessee is only eligible for reduction under Section 80IA (4) of the Act but in the facts of the case, the contract work was awarded to the assessee through the biding process where the lowest contract value was quoted by the assessee after considering the element of profit. It was therefore contended that the assessee was acting as a works contractor and income was derived by way of developing the infrastructure facility and not from the use of development facility. 3.6. It was further contended before the Tribunal that the purpose of the deduction under Section 80IA (4) of the Act was that the private players of the parties will bring the investment for the development of the infrastructure facility and la ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... machinery, labour etc.) in the construction work clearly exhibits the risks undertaken by the assessee. Further, the tender document as discussed above has clearly demonstrated the various risks undertaken by it. The assessee was to furnish a security deposit to the employer and indemnify at the same time for any losses/damage caused to any property/life in course of execution of works. Further, the assessee was responsible for the correction of defects arising in the works at its own cost. For that purpose, the MPRDCL retained the money payable to the assessee as a measure to ensure the quality of the work and to make liable the assessee in the event of a defect, if any. Thus, it cannot be said that the assessee had not taken any risk in the given facts and circumstances especially when the assessee has undertaken the project as a whole for the development of the road right from the beginning till the end. Thus, on perusal of the terms and conditions in the tender documents furnished by the assessee, it is clear that the assessee was not a works contractor simply but a developer and hence, the explanation to section 80- IA(13) does not apply to the assessee." 3.8. The Tribunal a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he 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)."" 3.10. Thus there are concurrent findings of fact arrived at by the CIT (Appeal) as well as the Tribunal that the assessee has undertaken the development of infrastructure facility and is eligible to claim the deduction under Section 80IA(4) of the Act. 3.11. Section 80IA of the Act provides for deduction from the gross total income of the assessee which includes any profit and gains derived by an undertaking or an enterprise from any business referred to in Subsection 4 of the Act as eligible business by providing deduction of an amount equal to the 100% of the profit and gains derived from such business for 10 consecutive assessment years. Subsection 4 of Section 80IA of the Act reads as under:- "(4) This section applies to- (i) any enterprise carrying on the business of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility which fulfils all the following conditions, namely :- (a) it is owned by a company registered in India or by a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ken a work of development of infrastructure facilities by execution of the contract awarded to it as per the terms of the contract as enumerated by the CIT (Appeal) as under:- "To examine whether the project assigned to this Appellant was in the capacity of a "Contractor" or the Appellant has executed the work as a "Developer" with respect to the ROAD PROJECTS, I have perused the terms of some of the agreements. My attention has been drawn on agreements with "Madhya Pradesh Road Development Corporation Limited", from which the Appellant have been awarded two Road Projects, wherein the scope of the work has been defined as follows:- Sr. No. Name of Road Approx. Length in Km. Scope of Bid/Development Work 1 Package-1: Chindwara- Amarwara-Narsingpur" Road Project: SH 47 103.3 Rehabilitation, Widening, Upgradation & 2 Package-14: "Lakhnadon- Strengthening Mandla-Dindori" Road Project: SH 11 & 40 149.8 18 The Appellant has drawn my attention to the relevant clauses of the Tender Documents in support of its contention of being "Developer of the Infrastructure Facilities" 3.14. The CIT (Appeal) has further examined as to whether the project assigned to the assessee was in ..... X X X X Extracts X X X X X X X X Extracts X X X X
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