TMI Blog2024 (2) TMI 580X X X X Extracts X X X X X X X X Extracts X X X X ..... - ITAT DELHI] we decide Ground in favour of the assessee holding that the assessee is eligible to claim the impugned deduction under section 80IA of the Act. Addition on deduction of expenses u/s. 40(a)(ia) - AO has started the computational process from the total income disclosed by the assessee in the revised computation of total income filed during the course of assessment - as argued Excess deduction was suo moto disallowed by the assessee in the revised computation of total income, hence, according to him, no such disallowance was again called for once starting point was the Revised Computation of total income - HELD THAT:- After hearing both the sides on the issue, we find the plea of the assessee s AR to be reasonable and accordingly, we direct the Assessing Officer to examine the assessee s plea and take remedial action, if any, as per law, after giving adequate opportunity of being heard to the assessee. Accordingly, the Ground No. 4 is allowed for statistical purposes. TP Adjustment under Chapter X - adjustment on account of alleged interest receivable on advance given - HELD THAT:- Following the aforesaid precedent [ 2023 (11) TMI 1223 - ITAT DELHI] , we se ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ring assessment proceedings on 01.09.2021. 2. That on the facts and in law in the final order of assessment, the AO has erred in not allowing brought forward loss of Rs. 13,65,60,299/- as declared by the appellant in the Revised Computation of Income (filed during assessment proceedings on 01.09.2021) on the ground that brought forward loss for the AY 2017-18 has got converted into profits after additions made for the said assessment year and has also erred in keeping the loss at Rs. 13,65,60,299/- instead of loss of Rs. 14,22,89,453/- for the AY 2017-18 as declared by the appellant in the Revised computation of income for the AY 2017-18 filed during assessment proceedings on 04.09.2021. 3. That on the facts and in law the AO / DRP have erred in disallowing deduction of Rs. 66,14,49,535/-u/s 80IA(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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... interest payable at Rs.5,85,15,593/-. 2. When the appellant s Application for Early hearing was called out, it was a common ground between the parties that the substantive issues involved in this appeal are squarely covered by the decisions of the Tribunal in the assessee s own case for assessment years 2016-17 and 2017-18 vide ITA No. 705/Del/2021 dated 30.11.2022 and ITA No. 2283/Del/2022 dated 3.11.2023 respectively. 3. In this view of the matter, with the consent of both the parties, the extant appeal is being disposed-off accordingly. 4. Briefly stated, the assessee firm is a joint venture (JV) between two infrastructure companies, namely BSCPL Infrastructure 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 2018-19, the assessee filed original return on 27.11.2018 declaring total Loss income at Rs. (-) 3,56,94,313/- and deemed total income of Rs. NIL u/s. 115JC of the Act. Its case was picked up for complete scrutiny through CASS. Hence, notice u/s. 143(2) of the Act was issued on 22.09.20 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Add: Addition as discussed in para 4.2 of draft assessment order 19,40,67,731/- Adjustment as per giving effect order of TPO, as discussed in para 2.5.2 34,10,057/- Claim of deduction of retention money retained by the Contractee, as discussed in para 2.5.3 13,14,55,586/- Disallowance u/s. 36(1)(va) r.w.s. 2(24)(x), as discussed in para 2.5.4 1,08,85,080/- Less Disallowance of deduction claimed u/s. 80IA as discussed in para 2.5.5 NIL Total assessed income Rs. 49,81,91,872/- 4.3 The claim of deduction under section 80IA(4) was denied and taken as NIL . Accordingly, the final assessment was completed on 29.07.2022 by the AO under section 143(3)/ 92CA/ 144C(13) of the Act. 5. Aggrieved thereby, the assessee is in appeal before the Tribunal. 6. Ground No. 1 is general in nature n ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... presentative further submitted that recently Tribunal, vide its order dated 03.11.2023 in assessee s own case for AY 2017-18 in ITA No. 2283/Del/2022 has again decided identical issue in favour of the assessee by following the order of the assessment year 2016- 17 in assessee s own case, as referred above. The relevant discussion of Tribunal s order dated 3.11.2023 for assessment year 2017-18 are reproduced as under:- 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 revised return furnished on 31.03.2018. The Ld. AO has discussed this issue in para 7 and after obtaining justification for the said claim from the assessee recorded his findings in para 7.2 to 7.7 of his order. The Ld. AO found that during the year the assessee has undertaken various projects including one in Afghanistan and has submitted auditor s report in Form 10CCB as required under section 801A(7) of the Act. In para 7.3 the Ld. AO gave details of 9 projects containing therein name of the project, employer, nature of project and the amount of deduction claimed under section 80IA of the Act. According to the Ld. AO two ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 pages 54-55. The Ld. AR pointed out that except Soanbarsa Project and SH-83 Project which are new projects, all contracts are same as those of the preceding year. According to him, the Ld. AO has not disputed that these two new projects have also been executed in a like manner and that there is parity of facts. 8.3 The Ld. AR contended that in para 4.5.3 of directions the Ld. DRP has accepted that the Ld. AO has gone through the details of the contract agreement for each of the 9 projects undertaken by the assessee in the year under consideration during the course of assessment proceedings. There is thus no dis ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ion 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 analysed the terms and conditions of the agreement between Chief Engineer PWD Meghalaya Shillong and the assessee (1st project) only and did not dispute the statement of the assessee that terms and conditions of all other contracts are akin to that of agreement in project case of Meghalaya Shillong. The Ld. AR contended that the Tribunal in its order for AY 2016-17 noted in para 21 that all the agreements are on record of the Ld. AO and that the grounds for denial of deduction under section 80IA are also same in AY 2016-17. The Tribunal considered all the grounds taken by the Ld. AO/DRP for denial of de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ation 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 assessee 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 of the Tribunal in assessee s own case in ITA No. 705/Del/2021 rendered on 30.11.2022 (copy placed at pages 361-423 of the Paper Book). Disagreement of Ld. CIT-DR is based on the only premise that during the year under consideration deduction under section 80IA has been claimed for two projects viz. Sonbarsa and SH-83 for the first time. This is not at all a valid reason. We have perused the reply filed by the assessee in response to Ld. AO s notice under section 142(1) of the Act (copy at pages 581-615 of Paper Book) during assessment proceedings. The assessee submitted that it is en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... il 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 unless the accounts of the undertaking for the previous year relevant to the assessment year for which the deduction is claimed have been audited by an accountant, as defined in the Explanation below sub- section (2) of section 288, and the assessee furnishes, along with his return of income, the report of such audit in the prescribed form duly signed and verified by such accountant. (8) --------------------------- (9) --------------------------- (10) ------------------------- (11) --- ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ,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 Digha Bridge, Ircon International Ltd. Casting RCC Road deck on erected steel truss of rail- cum-road bridge across river Ganga at Patna 9,96,421 6. Ganga Sonpur Bridge, Ircon International Ltd. Casting RCC Road deck on erected steel truss of rail- cum-road bridge across river Ganga at Patna 74.07.761 7. Muzzafarpur RO ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ings. 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 Mini Ratna and Schedule 'A' PSU, was incorporated on 28th April, 1976, mainly for the purpose of construction and development of Railway infrastructure in India and abroad with Indian Railways' expertise. The company diversified in other areas and considering its major share of bu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... y 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 projects through private participation and was a Government agency as defined in section 2(e) of the Act of 1999. Significant factors in the present case are that the road widening project was cleared by the Government, land for such purpose was alloted by the Gove ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ys 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-Operate-Transfer (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. 2. The Indian Railways have formulated a Build-Own- Lease-Transfer (BOLT) Scheme, whereunder a private enterprise will provide the necessary and crucial components of a Railway system, own them for a stipulated period but will no ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 infrastructure facility for the purpose of section 80-IA(4)(i) of the Income-tax Act, 1961. Section 80-IA(4)() provides for a deduction to an undertaking engaged in developing, or operating and maintaining, or develo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 work means labour or in other words physical and mental exertion to attain an end esp. as controlled by and for the benefit of the employer. Thus as per Blacks ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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-IA, 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 economic zones. The tax benefit was introduced for the reason that industrial modernization requires a passive expansion of, a ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 of development agreement the developer exercise complete realm over the land or the project. H ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 are those persons who merely execute part of these ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ustries (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. This has been narrated in d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r projects 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/ Br ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... es of the Contract Agreement would substantiate 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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) 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 sha ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... and hence, the applicant is a Developer. Hence, it is submitted that the assessee may kindly be allowed deduction u/s 80IA with respect 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 projec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... tten with desired LOGO safety slogans shall be provided continuous blocking for not intercepting the construction activities by flying traffic. Safety bands, Ribbons and 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 Engi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... n amendment/errata) of IRS (Indian Railways Standards) IRC (Indian Road Congress) and BIS (Beaureu of Indian Standard), RDSO other relevant international code, whatever/wherever applicable and as directed 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, complet ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the Engineer. Engineer shall not supply any materials nor shall assist for procurement of any materials required for execution; completion and maintenance of works. 6.2 CEMENT The Contractor shall procure cement from the reputed 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. RINL iii. TISCO The Contractor shall procure ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... own cost all necessary tools, plants, machineries and equipments necessary for successful and timely completion of work. 7.4 If in the opinion of the Engineer, equipment / plant brought by the contractor are not suitable for the work concerned, the engineer shall have the 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 fo ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... i) The successful bidder shall submit a performance Guarantee in the form of irrevocable bank guarantee in the Performa annexed as Annexure-II from' any scheduled bank for an amount of 5% (Five percent) of the contract value. The value of PG to be submitted by the contractor will not be change for variation upto 25% (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 Engin ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ractor shall make his own arrangements for the engagement of all labour, except as provided otherwise in the contract. D FOURTH CONDITION: Above responsibilities and duties alongwith other Clauses of the Agreement duly substantiate that the assessee is not a simplicitor contractor rather the assessee is a developer of the project who has taken 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 80IA 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 guar ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of the case. We would like to avail the said opportunity of being heard virtually. However, we would request your goodself to kindly give us some time to submit the pending details of expenses and we would request for Virtual Hearing after filing all the details. 14. It may be seen that a detailed explanation to prove that the assessee fulfils all requisite conditions to claim deduction under section 80IA of the 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 cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... contention of the AO is that the assessee has entered into EPC agreement with Mokama-Munger Highway Ltd. which in turn had obtained a contract from NHAI and, therefore, the assessee is only an EPC contractor for carrying out work awarded by NHAI to Mokama-Munger Highway Ltd. and, therefore, the basic condition of sub-section (4) of Section 80IA is not fulfilled. 23. On perusal of the Letter of Authority (LOA) dated 19.05.2010 which 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... l parts of the Site to the Contractor. If possession of apart is not given by the date stated in the Contract Data the Employer is deemed to have delayed the start of the relevant activities and this will be Compensation Event. 27 Programme 27.1 Within the time stated in the Contract Data the Contractor shall submit to the Engineer for approval a Programme showing the general methods, arrangements, order, and timing for all the activities in the Works along with 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 Da ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... o carry out the same within 7 days from the date of receiving instruction etc. from the Executive Engineer in writing, the Executive Engineer will be done the work and the cost thereof will be recovered from the contractor s next bill for the works. The maintenance Road as required in the place of work is to be carried out as per the existing provisions of the road i.e. WBM/BUSG/PC/SC as may be applicable as per the director of the Engineer-in-charge. D FOURTH CONDITION; Above responsibilities and duties 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 st ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the Ground No. 4 relating to addition of Rs. 19,40,67,731/- on account of deduction of expenses u/s. 40(a)(ia) is concerned, it was the say of the Ld. Representative that on this issue there is a computational error in the impugned final assessment order. He submitted that from the facts noted from AO s draft assessment order and in the original return of income, the assessee had inadvertently claimed deduction u/s. 40(a)(i) of Rs. 38,52,22,400/-. However, the actual amount allowable as deduction to the assessee u/s. 40(a)(i) was Rs. 19,11,54,669/-. The difference of Rs. 19,40,67,731/- was thus suo moto disallowed in the revised computation of income filed by the assessee during the course of assessment. It was further canvassed that in the draft assessment order while finally computing the total income of the assessee, AO started the computational process from the income / loss reported in the original return of income and hence disallowance was made pursuant to the finding at para 4.2 of the draft assessment were correct and in accordance with law. However, in the final assessment order, while finally computing total income of the assessee, the AO has started the computational pr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... st 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 submissions of the assessee were not acceptable to the Ld. TPO who determined ALP of the interest given to BSC C C Nepal Pvt. Ltd. at Rs. 1,14,41,802/- and required the Ld. AO to make adjustment thereof. The assessee objected the said adjustment before the Ld. DRP who followed the directions given by it in AY 2016- 17 the issue being identical. Paras 4.2.2 4.2.3 of Ld. DRP s directions dated 31.05.2022 under section 144C(5) of the Act refer. 22. Before us the Ld. AR submitted that similar issue came up for consideration before the Tribunal in AY 2016-17 wherein the issue has been set aside and matter has been restored back to Ld. TPO for fresh adjudication. The Ld. CIT-DR conceded. 23. We have perused the order of the Tribunal in ITA No. 705/Del/2021 dated 30.11.2022. In para 30-35 thereof, the Tribunal recorded its observations and findings which we reproduce hereunder:- 30. Heard rival submissions, perused the orders of the authorities below. The TPO observed that as per ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 transferred to the construction sites in Bihar. We are enclosing herewith copies of ledger accounts of our construction sites in Bihar, where the assets/LCs issued by JV Partners were transferred. This is an additional evidence for which separate request has been made for its admission as these documents could not be submitted before AO due to paucity of time. Your Honours would observe from the above said ledger accounts that earlier there was a credit balance. After transfer of LCs issued by JV Partners, the amount due to Nepal Unit was converted to a debit balance. This debit balance was shown as receivable in the books of the applicant company. e) Your goodself would observe that the applicant company has not given any advance to its foreign AE. This is only the transfer of LCs issued by JV Partners on account of closure of business activities in Nepal which has turned credit balance to a debit balance. We are also enclosing year-wise detail of C ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 payment is to be made as soon as it becomes due. Many factors, including terms of payment and normal business practices, influence the fact of payment in respect of a commercial I transaction. Unlike a loan or borrowing, it is not an independent transaction which can be viewed on standalone basis. What can be examined on the touchstone of arm's length principles is the commercial transaction itself, as a result of which the debit balance has come into existence, and the terms and conditions, including terms of payment, on which the said commercial transaction has been entered into. The payment terms are an integral part of any commercial transaction, and the transaction value takes into account the terms of payment, such as permissible credit period, as well. The residuary clause in the definition of 'international transaction', i.e., any other transaction having a bearing on the proof its, incomes, losses or assets of such e ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 account of transfer of LCs issued by JV Partners which ultimately is to be debited to the Partners of the applicant since they have incorporated the Nepal Company in equal ratio and hence, no adjustment on account of interest on the debit balance of Nepal Company should be made to the returned income of the applicant. 32. As could be seen from the above, the assessee contended before the DRP that the ledger accounts in earlier years showed credit balance and after transfer of LCs issued by JV Partners the amount due to Nepal Unit was converted to a debit balance and this was shown as receivable in the books of the assessee company. It was contended that the assessee company has not given any advance to its foreign AE and this is only transfer of LCs issued by JV Partners on account of closure of business activities in Nepal which has turned into credit balance to a debit balance and the assessee furnished year wise details of c ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lies 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, we observed from the order of the DRP none of the submissions or additional evidences were considered nor is there any finding by the DRP though the assessee has produced additional evidences before the DRP and made its submissions which were not made before the Assessing Officer. 24. Since the parties agree that the issue is covered by the decision (supra) of the Tribunal, respectfully following the same 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. 398 ITR 66 (Del.) and as per law. This ground is treated as allowed for statistical purpose. 11.1 Following the aforesaid precedent, we send the matter back to the AO for deciding the issue afresh keeping in view the evidence submitted by the assessee as also the observations of the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pletion of the DLP. In support, numbers of decisions were cited. The explanation was not acceptable to the Ld. AO who recorded the finding that the moment the payment becomes due to the assessee it has to be accounted for as income whether it has been received or not and disallowed the assessee s claim of deduction resulting in the impugned addition to its income. 26. Before us the Ld. AR submitted that for the year under consideration the assessee had claimed that a sum of Rs. 18,84,08,295/- on 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X
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