TMI Blog2023 (11) TMI 1223X X X X Extracts X X X X X X X X Extracts X X X X ..... luding Sonbarsa Project and SH-83 Project. It was clarified that Mokama-Munger Project and Sonbarsa Project were awarded by NHAI to the assessee company. Neither the Ld. AO nor the Ld. DRP required the assessee to demonstrate as to how the necessary conditions for claiming deduction under section 80IA were fulfilled for Sonbarsa Project and SH-83 Project even though the assessee had offered to do so. None-the-less the fact remains that copy of agreement for these two projects were submitted before the Ld. AO. If he wanted, he could have gone into further details but the Ld. AO chose not to do so. Therefore, we do not find any substance in the argument of the Ld. CIT-DR that because claim of deduction under section 80IA has been made first time during the year for these two projects, the decision (supra) of the Tribunal does not cover the issue. Tax benefit under section 80IA was introduced for encouraging private sector participation by way of investment in development of the infrastructure sector and not for the person who merely execute the civil construction work or any other works contract. Assessee is not a developer but contractor - Assessee is liable for all risks ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... on receivables We send the matter back to the Ld. AO/TPO for deciding the issue afresh keeping in view the evidence submitted by the assessee as also the observations of the Hon ble Delhi High Court in PCIT vs. Kusum Health Care (P) Ltd [ 2017 (4) TMI 1254 - DELHI HIGH COURT] and as per law. Addition of retention money retained by the employer - application of provisions of section 43CB(2) - HELD THAT:- It is not in dispute and the parties agree that the Finance Act, 2018 has inserted section 43CB with retrospective effect from 01.04.2017 and thus apply to AY 2017-18 and subsequent years. It is also not in dispute that in the case of the assessee the amended law has to be applied. We, therefore, consider it fit and in the interest of justice to restore the matter back to the file of the Ld. AO with a direction to him to apply the provisions of section 43CB(2) and decide the issue afresh after allowing reasonable opportunity of hearing to the assessee. We order accordingly and treat these grounds as allowed for statistical purpose. Late deposit of EPF contribution of employees though deposited before due date of filing ITR - HELD THAT:- , we deem it fit to restore th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of Rs.14,22,89,453/- and Hon'ble DRP has also confirmed the same. 3. That on the facts and in law the AO / DRP have erred in disallowing deduction of Rs. 226,31,98,158/-u/s 801A(4)(i) claimed by the appellant in the return of income. 3.1. That on the facts and in law the AO/DRP have erred in holding that: (a) Contractees, who have allotted work of infrastructural facility to the appellant, are not recognised u/s 80IA(4)(1)(b), and (b) Appellant is merely a contractor and not a developer . 4. That on the facts and in law the AO has erred in making a disallowance of Rs.38,34,16,688/- on account of deduction of expenses u/s 40(a)(ia) disallowed in earlier years on the ground that the assessee has not submitted supporting evidences in this regard without appreciating the fact that complete documents and explanations were submitted by the appellant during faceless assessment of the case and also before Hon'ble DRP, Delhi-1. 5. That on the facts and in law the AO has erred in making a disallowance of Rs.57,29,154/on account of deduction of Education Cess paid by the assessee. 6. That on the facts and in law the TPO / DRP have erred in making / upholding Tran ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rastructure Ltd. and C C Construction Ltd. It is engaged in construction of roads, toll roads, highways and urban infrastructure including water, sanitation and sewage, power/ telecom transmission towers, commercial buildings, etc. For AY 2017-18, the assessee filed original return on 30.11.2017 declaring total income at Rs. NIL and deemed total income of Rs. 33,32,44,673/- under section 115JC of the Act. Its case was picked up for complete scrutiny through CASS. The assessee filed a revised return on 31.03.2018 declaring total income at Rs. NIL and deemed total income of Rs. 24,68,56,389/- under section 115JC of the Act. Statutory notice(s) along with questionnaire were issued/ served upon the assessee through ITBA. The Ld. AO found that during the year the assessee entered into specified domestic transactions as defined under section 92BA of the Act. He, therefore, made reference under section 92CA of the Act to the Transfer Pricing Officer ( TPO ) who vide his order dated 29.01.2021 proposed adjustment of Rs. 1,14,41,802/- on account of interest on advance given to BSC C C JV Nepal Ltd. The Ld. Assessing Officer, National Faceless Assessment Centre, Delhi ( FAO ) proceeded to fr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o. 5. Ground No. 1 is general in nature not requiring adjudication. Ground No. 5 relating to disallowance of Rs. 57,29,154/- on account of deduction of education cess has not been pressed. It is, therefore dismissed as not pressed. 6. Now, we proceed to adjudicate the remaining grounds. We have heard the Ld. Representative of the parties, considered their respective arguments and perused the records. 7. Ground No. 2 relates to non-consideration by the Ld. AO of the revised computation of income filed during assessment proceedings on 04.09.2021 declaring loss of Rs. 14,22,89,453/-. The Ld. AR submitted that before Ld. DRP a specific grievance was raised in this regard on which the Ld. DRP directed the Ld. AO to make necessary verification and pass a speaking order. This has not been done. The Ld. CIT-DR concedes to this factual position. We, therefore direct the Ld. AO to look into the assessee s grievance and take remedial action as per law after due verification and allowing the reasonable opportunity of hearing to the assessee. 8. Ground No.3 relates to disallowance of deduction of Rs. 2,26,31,98,158/- under section 80IA(4)(i) of the Act claimed by the assessee in its ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sed by the Ld. AO to negate the assessee s claim which are identical in the year under consideration. He pointed out that in the preceding year also the contractee companies were formed under various Ministries of Govt. of India. The Ld. AR submitted that the allegation of the Ld. AO that the assessee is only an EPC contractor for carrying out work awarded by NHAI to Mokama-Munger Highway Ltd. has also been refuted by the Tribunal in para 23 of its decision (supra). The last allegation levelled by the Ld. AO is that the assesee is not a developer but only a contractor. The Ld. AR stated that it has also not been accepted by the Tribunal by recording a finding in para 25 of its decision (supra) that the assessee is not a simplicitor contractor, rather the assessee is a developer of the project and that the contention of the Ld. AO in this regard is misconceived. 8.2 The Ld. AR further submitted that the details of contracts on which benefit of section 80IA is claimed by the assessee in AY 2017-18 appear at pages 66-67 of the Ld. DRP s directions and similar details of the preceding year 2016-17 may be seen at pages 449-450 of the Paper Book forming part of Ld. DRP s directions at ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o Rs. 226,31,98,158/-. It is also submitted that the original return was filed within the due date prescribed under section 139(1) and even the revised return has been filed within time allowed under section 139(5) of the Act. Both the returns are valid in the eye of law. The Ld. AR drew our attention to para 7 of Ld. AO s order at page 20 wherein the Ld. AO made incorrect observation to the effect that a perusal of the original return of income dated 30.11.2017 shows that the assessee had not claimed deduction under section 80IA of the Act. The Ld. CIT-DR s argument of not claiming deduction under section 80IA in the original return is the result of the above incorrect observation of the Ld. AO. 10.1 The Ld. AR took us to the Ld. AO s order for AY 2016-17 wherein at para 9.2 the Ld. AO states that during the year under consideration the assessee has undertaken 16 projects including one in Afghanistan. However, the assessee has submitted auditor s report in Form 10CCB as required under section 80IA(7) of the Act only in respect of 15 projects. However, out of 15 projects, deduction under section 80IA was claimed in respect of 8 projects only. Out of the 8 projects the Ld. AO ana ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... under section 80IA of the Act in the original return of income filed on 30.11.2017 which claim was revised to Rs. 226,31,98,158/- in the revised return filed on 31.03.2018. There is no inkling in the order of the Ld. AO and / or of the Ld. DRP that the original or revised return so filed by the assessee was not within the prescribed time limit or in any way vitiated. The argument advanced by the Ld. CIT-DR that the assessee did not put in its claim of deduction under section 80IA in the original return with its attendant legal consequences seems to have stemmed from the incorrect appreciation of facts available in the records. Even the Ld. AO in para 7 of his assessment order at page 20 incorrectly observed that perusal of original return dated 30.11.2017 showed that no claim of deduction under section 80IA of the Act was made by the assesee which is contrary to the facts on record. We therefore reject this argument of the Ld. CIT-DR which will have no legal consequences in determining the admissibility of the assessee s claim of deduction under section 80IA of the Act. 13. We have no iota of doubt in our mind that the issue is covered in favour of the assessee by the decision ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ered 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: Provided that------------ 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; (ii) any undertaking- (iii) any undertaking (iv) an undertaking which,- (vi) any undertaking carrying (5) Notwithstanding anything contained (6) Notwithstanding anything (7) The deduction under sub-section (1) from profits and gains derived from an undertaking shall not be admissible ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ongstoin Shillong section of NH-44 and Nongstoin- Rongjeng-Tura Road, in the state of Meghalaya under Phase 'A' of SARDP-NE-Job No. SARDP-NE- NI-44 SRMG-PWD-2010-11- 172 142,99,02,902 2. Mokama- Munger NHAI (Through Project Company Mokama- Munger Highway Ltd. Two laining with paved shoulder of Mokama Munger Section of NH-Bo 2.43.46,365 3. Danapur ROB Ircon International Ltd. Construction of Road over Bridge both railway span and adjacent approaches including Reinforced Earth Wall/Retaining Wall between section Phulwarishrif- Danapur on EC Railway, Bihar 72,30,449 4. Subansari Power Grid Corporation of India Ltd. Piling foundation package for lower Subansari Chariyal, Balipara, Bongaigaon, Biswanath Chariyal, Tanla-Kokrajhar, Bararbisa Assam Border 32,44,863 5. Ganga Bridge, Digha Ircon International Ltd. Casting RCC Road deck on erected steel tru ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings. A State-owned corporation in India is declared as public sector undertaking (PSU) or a public sector enterprise. These corporations are controlled by the union government of India, or one of the several state or regional governments, or both. Public Sector Enterprise is a part of Public Sector Undertakings. The assessee is eligible for deduction u/s 80IA on the contracts awarded by these Corporations. IRCON is under the Ministry of Railways and Bihar State Road Development Corporation Limited is under Bihar State Government. Organisational Structure of Ministry of Railways: We are submitting herewith relevant pages of the Annual Report for the FY 2015-16 of Indian Railways. It explains complete Organisation Structure of Ministry of Railways. Your Honour would observe that Ministry of Railways has four major parts - Zonal Railways (Open Lines), Production Units, Other Units and CPSE/CORP. CPSE/CORP includes IRCON. Your Honour would further observe the purpose of incorporating the above said two companies as detailed below: Ircon International Limited (IRCON) Ircon International Limited (formally known as Indian Railway Construction Company Limited), a Mi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... / Enterprises. These separate Units/ Enterprises have total control over specific activity and work for the maximum output and benefit. Hence, these cannot be treated as separate entity from Centre/ State Governments as these are the special purpose entity incorporated by Centre/State Government. Moreover, it is submitted the provisions of section 80IA incentivise rapid development of infrastructural projects in India. A liberal interpretation has to be accorded to the condition stipulated in section 80-IA(4)(i). Higher courts have repeatedly held that a strict construction of requirements stipulated in section 80-IA(4)(i) will yield manifestly absurd results. In this regard, kind reference of your goodself is invited to the decision of Hon'ble Gujrat High Court in case of CIT vs Ranjit Projects (P) Ltd reported in (2018) 94 taxmann.com 320 (Guj). In this case it has been held by Hon'ble High Court as under: 13. The above statutory provisions and the relevant facts arising in the present case and noted above would leave little doubt in one's mind that GSRDC was a nodal agency constituted by the State Government for the purpose of executing road development pro ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act: Text of the said Circular is as follows: Whether Build-Own-Lease-Transfer (BOLT) Scheme of Indian Railways shall be eligible for benefit under section 80-IA, since it is not legally possible for any enterprise other than Indian Railways to maintain and operate Railway System 1. The Finance Act, 1995 has introduced sub-section (4A) in section 80- IA of the Income-tax Act, 1961 providing for a five-year tax holiday and a deduction of 30 per cent in the subsequent five years within a period of twelve assessment years beginning with the assessment year in which an enterprise (which may be owned by a company or a Consortium of companies) begins operating and maintaining an infrastructure facility on Build-OperateTransfer (BOT) or on Build- Own-Operate-Transfer (BOOT) basis, subject to certain conditions specified in that sub-section. One of the conditions to be fulfilled by the enterprise is that it should develop, maintain and operate a new infrastructure facility which shall be transferred to the Central Government, etc., within the period stipulated in the agreement. The definition of infrastructure as per sub-section (12) of section 80-IA includes a rail system also. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s PGCIL, DFCC IRCON and may kindly be regarded as the contracts awarded by Central Government, State Government etc. B NEW INFRASTRUCTURE FACILITY: The assessee is developing a new infrastructure facility. Your goodself would observe from all the agreements that the assessee has either been engaged for construction of a new infrastructure facility such as Rail Over- Bridge, widening of existing carriageway, improvement/upgradation of roads etc. In this regard, we need to point out that the Central Board of Direct Taxes in its Circular No.4/2010 issued on 18.05.2010 has clarified that the work of widening of an existing road by constructing additional lanes as a part of Highway project would be recorded as a new infrastructure facility for the purpose of Section 80-IA(4)(i) of the Act. The said Circular is reproduced below for the sake of convenience: CIRCULAR NO.4 OF 2010 DT, 18TH MAY, 2010 Widening of existing road-Definition of a new infrastructure facility- Clarification regarding 18/05/2010 DEDUCTIONS SECTION 80-IA(4) References have been received by the Board as to whether widening of existing roads constitutes creation of new infrastructur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... carry out the whole of the project. Ratio propounded and upheld by Apex Court in case of Ranjit Project's case (supra) is squarely applicable to the present situation. In view of above, it is submitted that since NHAI had awarded the contract to the applicant, it may kindly be held that the above said agreements were not entered into with Indian Companies rather the agreements may kindly be considered as entered into with NHAI and the deduction u/s 80IA of the Act may kindly be allowed to the applicant. D ASSESSEE IS A DEVELOPER OF AN INFRASTRUCTURE FACILY AND NOT A WORK CONTRACTOR: ASSESSEE IS NOT A WORK CONTRACTOR: From a plain reading of the section, it is clear that deduction u/s 80-IA does not apply to a works contract. It is submitted that Section 80-IA nowhere defines the term works contract , hence the natural meaning of the word shall apply. As per the Oxford dictionary the term work means application of effort to a purpose or use of energy. Thus going by the dictionary meaning we may say that a works contract is a contract which involves effort or in other words labour of the contractor. Further as per the Black's Law Dictionary, the term ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or. It is a clear indication of the Legislature that the work in the sub-section is not intended to be confined to or restricted to works contract . The Hon'ble Apex Court laid out that the term work used in section 194C need not be restricted to works contracts (i.e. labour contracts) because the subsection expressly includes supply of labour to carry out work. In other words, it is implied that works contract means supply of labour to carry out work: Thus from the above, it is stated that a works contract constitutes a contract under which the contractor is merely employing his efforts or labour. Under such a contract, the contractee provides the material and other requisites (a complete infrastructure) needed to carry out the desired work to the contractor who by applying his labour to the said material turns the material into a desired product. The memorandum explaining the provisions in the Finance Bill, 2007, reported in (2007) 289 ITR (St.) 292 at page 312 reads as under: Section 80-LA, inter alia, provides for a ten-year tax benefit to an enterprise or an undertaking engaged in development of infrastructure facilities, industrial parks and special ec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... PER OF INFRASTRUCTURE FACILITY: The issue of difference between a developer and a contractor was examined by a number of Hon'ble Courts as under: Rajkot ITAT in case of Katira Constructions Limited reported in 185 ITD 173 (Rajkot) has examined the scope of terms developer , contractor and work contract vis a vis section 80IA(4) as under: .......For this purpose, first of all it is imperative to appreciate the difference between a 'developer' and a 'contractor'. Generally in common parlance a person is referred as 'developer' who undertakes the project to develop and construct on its own responsibility and takes all the risks of the development. These responsibilities and risk can be categorized as under: (a) That in a development contract responsibility is fully assigned to the developer to do all acts for execution and completion of work right from designing the project till handing over the project to the Government. As such, the agreement is not for a specific work, it is for development of facility as a whole. Indeed the ownership of the site or the ownership over the land remains with the Government/owner but during the period o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l undertake to maintain safety, security and protection of the environment. (l) That a developer shall provide and maintain at his own cost all lights, guards, fencing, warning signs and watching, when or where necessary. These are few broad sample qualities/parameters of a developer through which the character of a developer can be defined. 13.2 On the other hand, a 'contractor' is a person who undertakes work on a contract basis. He does not assume risks and responsibilities like that of a developer. He merely carries out the work as has been instructed to him by the contractee. Moreover, in case of such work the contractor gets fixed amount of revenue for executing such work and is not entitled to any share of profit from revenue generated by the developer/land owner. 13.3 To summarize, the developer acts as a principal whereas the contractor acts as an agent in performing the functions as required by the developer. The developers, in true sense, are the persons who are carrying out the business of developing or operating and maintaining or developing, operating and maintaining the infrastructure facility the infrastructure facility whereas the contractors a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rt in the case of ABG Heavy Industries (supra) and the order of the Division Bench of ITAT giving effect to the larger bench (third member) decision in the case of B.T. Patil Sons (supra). According to these decisions what is to be seen is as to whether the assessee has shouldered out Investment technical risk in respect of the work executed and it is liable for liquidated damages if it failed to fulfill the obligation laid down in the agreement. The liability that was assumed by the assessee under terms of the contract would be obligations involving the development of an infrastructure facility. The assessee has also in its employment technically and administratively qualified team of persons. If the above conditions are satisfied then it would not be correct to say that assessee is merely a contractor and not a developer. Without giving adverse finding on the above tests, the CIT could not conclude that the order of the AO was erroneous and prejudicial to the interest of the revenue. It will therefore be relevant to see whether the applicant has acted as an entrepreneur who has employed his material, plant, machinery, labour etc in a project and has undertaken risk. Th ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cts below: Sr. No. 1: MEGHALAYA PROJECT: FIRST CONDITION - The Project has been awarded by State Government: It is submitted that the project in this case was awarded by The Chief Engineer, P.W.D., Highway, Meghalaya. State Government has awarded the Project. Hence, the applicant has fulfilled first condition that the project was awarded by Central/ State Government/ local authority/ Statutory Body. SECOND CONDITION The Project should be for development of a new infrastructure facility and infrastructure facility includes road, bridge, railway system etc. Your Honours would observe from the following clauses that the assessee was engaged in the development of a new infrastructure facility which includes road, bridges etc: Project: 2 laining of Nongstoin-Shillong section of NH-44 and Nongstoin-Rongjeng-Tura Road, in the state of Meghalaya under Phase-'A' of SARDP-NE- Job No. SARDP-NE-NH-44 SR-MG-PWD- 2010-11-172. Detailed Project Description: Clause 9 of the Contract Data contains detailed project description as follows. 9. Work consists of Earthwork, GSB, WMM, DBM, BC, Bridges, Culverts, Retaining/ Breast Wall, Road Sign etc. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... that the applicant is Developer of a New Infrastructure facility and not a mere contractor as the applicant has undertaken both managerial as well as financial responsibility; it is under an obligation to design the project; it is fully responsible for development or completion of the project; it has undertaken complete risk of the project; it has employed manpower, machinery and has also arranged finances. Responsibilities of the Contractor include following: GENERAL CONDITIONS OF THE CONTRACT Materials: Materials are all supplies, including consumables, used by the contractor for incorporation in the work. Plant: Plant is any integral part of the Works which is to have a mechanical, electrical, electronic or chemical or biological function. 9 Personnel 9.1 Contractor shall employ the key personnel named in the Schedule Key Personnel as referred to in the Contract Data to carry out the functions stated in the Schedule or other personnel approved by the Engineer. The Engineer will approve any proposed replacement of key personnel only if their qualifications abilities and relevant experience are substantially equal to or better than those of the per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ated damages from payments due to the Contractor. Payment of liquidated damages does not affect the Contractor's liabilities. 52 Securities 52.1 The Performance Security (including additional security for unbalanced bids) shall be provided to the Employer no later than the date specified in the Letter of Acceptance and shall be issued in an amount and form and by a bank or surety acceptable to the Employer and denominated in Indian Rupees. The Performance Security shall be valid until a date 28 days from the date of expiry of Defect Liability Period and the additional security for unbalanced bids shall be valid until a dote 28 days from the date of issue of the certificate of completion. 54 Cost of Repairs 54.1 Loss or damage to the Works or Materials to be incorporated in the Works between the Start Date and the end of the Defects Correction period shall be remedied by the Contractor at the Contractor's cost if the loss or damage arises from the Contractor's acts or omissions. SPECIAL CONDITIONS OF CONTRACT 1. LABOUR The Contractor shall, unless otherwise provided in the Contract, make his own arrangements for the engagement of all staf ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ect to the above said Project Sr. No. 3: Danapur ROB: A FIRST CONDITION - The Project has been awarded by the Central Government: It is submitted that the project in this case was awarded by IRCON International Limited (A Government of India Enterprise owned by Ministry of Railways). Kindly see underlined of the Letter of Acceptance and of Tender Documents. Ministry of Railways through IRCON International Limited has awarded this Project. Hence, the applicant has fulfilled first condition that the project was awarded by Central/ State Government/ local authority/ Statutory Body. B SECOND CONDITION - The Project should be for development of a new infrastructure facility and infrastructure facility includes road, bridge, railway system etc. Your Honours would observe from the following clauses that th assessee was engaged in the development of a new infrastructur facility which includes road, bridges railway system etc. Kindly see underlined portion of Letter of Acceptance which provides details of the project to be executed: Construction of Road over Bridge both railway span and adjacent approaches span including Reinforced Earth Wall /Retaining wall i ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... other gadgets for Construction site Workmen shall be maintained as per scheme approved by the engineer. (iv) Based on the approved GAD, design, the contractor will organize surveys and shall prepare detailed layout plans showing approach roads, piers, abutments RE wall approaches of ROB etc. and execute based on detailed engineering drawings for all items of works. The working drawings shall be prepared on computer in standard CAD format. (v) The contractor shall submit Quantities with calculations for any item mandatory for execution, but not covered in subject contract by any means, along with its justification, analysis of rates and detailed specifications for any/all such items for finalizing rates obtain instructions from the Engineer for its execution. Awaiting approval of Rates for any such item, the work will not be stopped at site. The AOR is to be prepared based on RCD SOR (latest) and/or MOSRTH standard codes of practice, MOSRTH Standard Data Book and/or as per instruction of the Engineer. (vi) The contract shall submit a detailed construction delivery program for completion of proposed ROB alongwith schedule of matching resources deployment proposed with ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... cted by the Employer/Client. (xiv) Vertical Horizontal Clearance shall be maintained for corresponding construction/components of subject ROB, within/outside Railway / Construction limits for maintaining desired safety/construction requirements. (xv) The girder may be of Precast pre-stressed contract (Pre/ Post tensioned), steel or composite or R.C.C/PSC Beams/ Slabs etc. depending upon the designs approved. (xvi) Launching / Erection of Girders with approved methodology and equipments. (xvii) The approaches of the bridges will be Reinforced earth work and viaduct depending upon the site conditions and requirements of the design Drawings. The decision of the engineer-in-charge shall be final in this regard. (xviii) Construction of road side Drain, Drainage scheme spouts, Footpath, smooth transition to and from ROB approaches, removal clearing of all left over material clearing of all left over material Debris within / from ROB limits, completion of approaches adjoining service road with Concrete pavement / bituminous wearing surfaces, etc. all activities essential for completion of ROB. The above said detailed project description duly includes constr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ted cement manufacturer: only and in accordance with the specifications of the contract with the prior approval of the Engine.er. The Contractor shall submit the proof of procurement of cement from the agency approved by the Engineer. The Contractor shall also submit the test certificates regarding the quality of the materials. Instead of Ordinary Portland Cement Grade-53 (OPC Grade Cement, Ordinary Portland Cement Grade 43 (OPC 43 grade Cement) and/or Portland Pozzolana Cement (PPC), from reputed cement manufacturer, may be permitted by the Engineer in specific case and as per the conditions mentioned elsewhere in the tender document. In any case use of Portland Slag Cement (PSC) is prohibited and cannot be used in any component of the Contract 6.3 STEEL FOR REIUFORCEMENT Reinforcement steel shall be procured by contractor from either of following: i. SAIL, ii. ii. RINL iii. iii. TISCO The Contractor shall procure reinforcement steel from the any of the above manufacturer in accordance with the specification of the contract. The Contractor shall submit the proof of procurement of reinforcement steel from one of the above agencies. The Contractor shall be s ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... right to order the contractor to replace them by the suitable plant/ equipments. In the interest of public convenience, the engineer may interest on the specific way of execution of the work. 8.0 LABORATORY 8.1 Contractor shall have to provide a field laboratory at his own cost for carrying out all tests required, as per Specifications or as stated elsewhere in the contract, including supply of laboratory equipment and also provision of adequate number of qualified personnel, erection, maintenance and running of laboratory including all consumable during execution of works. The design of job mix, well in advance, shall be done by the contractor and got approved by IRCON/Consultants. IRCON/Consultants reserve the right to suggest changes in the job mix submitted by the contract, or and no claim on account of these changes shall be entertained from the contractor. The approved job mix would be followed strictly by the contractor. The contractor shall also be responsible for carrying out all tests at site and getting approval from the client for the same. For site testing all the materials, equipment, consumables, Stationary samples etc. including manpower will be a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... (either increase or decrease). In case during the course of execution, value of contract increases by More than 25% of the original contract value, an additional performance Guarantee amounting to 5% (Pive percent) fir the excess value over the original contract value should be deposited by the contractor. 15.0 PROGRAMME OF WORK The Contractor shall submit the programme for completion of work to the Engineer for his approval within 15 days from the date of receipt of letter of acceptance. Unless otherwise directed the programme shall be in the form of Bar-Chart showing proposed execution of quantities of principal items of work. The programme shall be related to the capability of equipment proposed to be deployed and site conditions. The Contractor shall also provide in writing methodology for execution of major items of work as desired by the Engineer. The submission and approval of such programme shell not relieve the Contractor of any of his duties or responsibilities or obligations under the contract. The Engineer shall have full power and authority during the progress of work to issue such instructions as may be necessary for the proper and adequate execution of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... complete responsibility and risk for the said ROB Danapur Project. Your Honours would observe from the above said details that the ROB Danapur Project duly complies with the conditions laid down for claiming deduction u/s 80LA as follows: i The Project has been awarded by the IRCON International Ltd. (A Government of India Enterprise); ii The Project is for development of New Infrastructure facility as the Government is constructing a new Road over Bridge at Danapur, Bihar; iii The Project was awarded after 01.04.1995; iv The applicant has to execute the given project wholly and exclusively. v The above said terms and conditions duly establish that total risk of the project is on the applicant; and is responsible for both managerial and financial responsibility; has duly given performance guarantee to the Employer; has bigger role than a Contractor, the applicant has to amend errors which may arise therein; it has to make own arrangement for plant, labour and material and hence, the applicant is a Developer. Hence, it is prayed that deduction u/s 8o1A may kindly be allowed for Danapur ROB Project. We have made our submissions for two of our Projects. ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Act was given. For ease of ready reference as to how the conditions were complied with, two projects namely Meghalaya Project and Danapur ROB were taken up. At page 614 (internal page 34) of Paper Book it was submitted that submissions have been made for above two projects. It is however clarified that all other projects have also been executed in a like manner and there is parity of facts. The assessee was prepared to make submission for all the projects, if required. However, the assessee submitted agreements of all other projects including Sonbarsa Project and SH-83 Project. It was clarified that Mokama-Munger Project and Sonbarsa Project were awarded by NHAI to the assessee company. 14.1 We observe that a comprehensive note in support of the assessee s claim that it is a developer of an infrastructure facility and not a work contractor was given (pages 592-597) of Paper Book- Internal pages 12-17). 15. Neither the Ld. AO nor the Ld. DRP required the assessee to demonstrate as to how the necessary conditions for claiming deduction under section 80IA were fulfilled for Sonbarsa Project and SH-83 Project even though the assessee had offered to do so. None-the-less the fact r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is placed at page 733 of the PB it is observed that the NHAI accepted the assessee JV as a successful builder for developing two Layning with paved shoulders of Mokama-Munger section of NH80 in the State of Bihar on BOT basis under NHDP-III. The LOA clearly specifies that assessee JV shall promote and incorporate the concessionary as a Limited Liability Company under the Companies Act as the NTT which shall undertake and perform the obligations and exercise the rights of the builder under LOA including the obligation to enter into the concession agreement pursuant to the LOA for executing the project. This clearly shows that MokamaMunger Highway Ltd. was incorporated as a pre condition for execution of the project as per the terms of LOA issued by NHAI to the assessee JV. Therefore, since NHAI through LOA has put a condition for incorporation of Limited Liability Company under the Companies Act for the purpose of undertaking and performing the obligation and exercise the rights of the builder under LOA and also to enter concession agreement pursuant to LOA for executing the project we are of the view that the assessee fulfills the basic condition under sub-section (4) of Section 80 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... th monthly cash flow forecast. 32 Early Warning 32.1 The Contractor is to warn the Engineer at the earliest opportunity of specific likely future events or circumstances that may adversely affect the quality of the work, increase the Contract Price or delay the execution of works. The Engineer may require the Contractor to provide an estimate of the expected effect of the future event or circumstance on the Contract Price and Completion Date. The estimate is to be provided by the Contractor as soon as reasonable possible. 49 Liquidated Damages 49.1 The Contractor shall pay liquidated damages to the Employer at the r rate per day stated in the Contract Data for each day that the Completion Date is later than the Intended Completion Date (for the whole of the works or the milestone as stated in the contract data). The total amount of liquidated damages shall not exceed the amount defined in the Contract Data. The Employer may deduct liquidated damages from payments due to the Contractor. Payment of liquidated damages does not affect the Contractor s liabilities. 52 Securities 52.1 The Performance Security (including additional security for unbalanced bids) ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... duly substantiate that the assessee is not a simplicitor contractor rather the assessee is developer of the project. 25. The above clauses of the agreement clearly shows that the assessee is liable for all risks for loss, damage to physical property, personal death insurance in consequence of performance of contract liable for liquidated damages to the employer due to delay in execution of contract, liable for cost of repairs for the loss or damages to the works or materials. Assessee is responsible for whole work from the date of takeover of the site till completion responsibility for maintenance of the road portion including the portions where the work is not started. All these clauses goes to show that the assessee is not a simplicitor contractor rather the assessee is a developer of the project. Therefore, the contention of the AO that the assessee is not a developer but only a contractor is misconceived. 17. We are conscious that the tax benefit under section 80IA was introduced for encouraging private sector participation by way of investment in development of the infrastructure sector and not for the person who merely execute the civil construction work or any other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... hat the matter be sent to the Ld. AO for examining the details and decide the issue afresh. 19.2 The Ld. CIT-DR had no objection thereto. 20. On consideration of the submission of the parties, we deem it fit to remit the matter to the file of the Ld. AO to examine the details and supporting documentary evidence and decide the issue afresh in accordance with law after affording reasonable opportunity of hearing to the assessee. We order accordingly. This ground is treated as allowed for statistical purposes. 21. Ground No. 6 relates to transfer pricing adjustment of Rs. 41,22,712/- on account of interest receivable on advance given to M/s. BSC C C JV Nepal Pvt. Ltd. The Ld. TPO discussed this issue in para 4.1 of his order dated 29.01.2021 passed under section 92CA(3) of the Act. The Ld. TPO found from balance sheet that the assessee had advance receivable of Rs. 8,15,79,744/- to BSC C C JV Nepal Ltd. which is an Associated Enterprise (AE). He show caused the assessee why ALP of interest on advance given to the said AE be not determined at SBI PLR rates applicable to FY 2016-17. The assessee filed detailed explanation reproduced by the Ld. TPO in para 4.2 of his order. The ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... determined at 12.51% (9.51% + 300 basis points) and accordingly made adjustment of Rs.1,01,87,884/-. 31. Before the DRP the assessee made the following submissions along with additional evidences: 9. Factual and Legal arguments against the addition proposed by the Assessing Officer. a) At the outset it is stated that sum of Rs 8,14,37,921/- is NOT AN AMOUNT ADVANCED by the applicant. In this regard it is submitted that M/s BSC C C Joint Venture (JV) {hereinafter referred to as assessee or applicant } is a joint venture between two companies - BSCPL Infrastructure Ltd. and C C Construction Ltd. Both the JV Partners are having 50% share in the assessee JV. b) Both the JV partners had established a company in Nepal during the year 2007 - BSC C C JV Nepal Pvt. Ltd. having equal share of 50% in the capital of the company. c) The Nepal company was established to supply Aggregate to the applicant for its Bihar Projects as it was very cost effective to make aggregate and Nepal and transport it to the construction units in Bihar. d) Due to terrorism in Nepal, production activities in Nepal was closed down and its all the assets consisting mainly of Crusher Unit were tr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ransfer of LCs was on account of the JV Partners as JV Partners own/liable for the said LCs. LCs were issued by the JV Partners and not by the applicant. The balance shown as a debit to the Nepal Company is actually to be transferred to JV Partners who have Capital Balance in the applicant JV. The applicant JV is not liable for the liabilities and also cannot release the receivables of Nepal Company. It is only the JV Partners, who are equal shareholders in the Nepal Company, are liable for all the liabilities including LCs and are authorised to realise the assets of the Nepal Company. g) Hence, charging any interest from its own pocket does not have any commercial expediency. In support kind reference of your goodself is invited to the decision of Hon ble ITAT in case of Nimbus Communications Ltd reported in 16 ITR (Trib) 477 (Mum) wherein it was held as under: 5. A continuing debit balance, in our humble understanding, is not an international transaction per se, but is a result of the international transaction. In plain words, a continuing debit balance only reflects that the payment, even though due, has not been made by the debtor. It is not, however, necessary that a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e case of noncharging of interest on overdue balances, would have been by comparing this not charging of interest with other cases in which the assessee has charged interest on over dues with independent enterprises (internal CUP) or with the cases in which other enterprises have charged interest, in respect of over dues in respect of similar business transactions, with independent enterprises (external CUP). No such exercise has been carried out in this case, nor is it shown,, as is- the condition precedent for bringing. this continuing debit balance in the ambit of 'international transaction', that as a result of not realizing the debts from associated enterprises, there has been any impact on profits, incomes, losses or assets of the assessee. h) Further, without prejudice to the above, it is submitted that interest, if any, chargeable on the advance given, should be at LIBOR since it is an international transaction. The foreign AE, if it has to pay, would pay at the applicable LIBOR rate. In view of above submissions, it is submitted that the debit balance of Nepal company in the books of the applicant is not an advanced given rather it is a net-off balance on ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ly, the impact this would have on the working capital of the assessee will have to be studied. In other words, there has to be a proper inquiry by the Transfer Pricing Officer by analysing the statistics over a period of time to discern a pattern which would indicate that vis-a-vis the receivables for the supplies made to an associated enterprise, the arrangement reflects an international transaction intended to benefit the associated enterprise in some way. 34. As could be seen from the above observations of the Hon ble Delhi High Court that every item of receivables appearing in accounts of entity which may have dealings with foreign AE would not automatically be characterized as an International Transaction. It is also observed that there has to be a proper enquiry by the TPO by analyzing the statistics for a period of time to discern a pattern which would indicate that vis- -vis the receivables for the supplies made to an AE, the arrangement reflects an International Transaction intended to benefit the AE in some way. 35. On perusal of the TPO s order, we find that no such exercise has been carried out by the TPO in benchmarking the interest on receivables . Further ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n account of retention money retained by the employer is not chargeable to tax. However, the assessee had offered for tax a sum of Rs. 7,23,59,198/- released by the employer of the assessee for which project completion certificate was received by the assessee during the year. He referred to certain decisions in support of the proposition that retention money is not liable to tax as the same accrues only when project completion certificate is received. However, the Ld. AR submitted that in view of amended law by way of insertion of section 43CB, the issue be restored back to the file of the Ld. AO for fresh decision. 27. The Ld. CIT-DR objected to remanding back of the issue to the Ld. AO for adjudication afresh. 28. We have given careful thought to the rival submission. It is not in dispute and the parties agree that the Finance Act, 2018 has inserted section 43CB with retrospective effect from 01.04.2017 and thus apply to AY 2017-18 and subsequent years. It is also not in dispute that in the case of the assessee the amended law has to be applied. We, therefore, consider it fit and in the interest of justice to restore the matter back to the file of the Ld. AO with a directio ..... X X X X Extracts X X X X X X X X Extracts X X X X
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