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TMI Blog2024 (5) TMI 213X X X X Extracts X X X X X X X X Extracts X X X X ..... ring Infrastructure Private Limited , which appeal has arisen from the appellate order dated 16.05.2013 passed by the learned Commissioner of Income-tax (Appeals), Ahmedabad (hereinafter called "the CIT(A)") in Appeal No. CIT(A)/GNR/ 318/2011-12 for the assessment year 2009-10 , which in turn has arisen from the assessment order dated 30.12.2011 passed by learned Assessing Officer(hereinafter called "the AO") u/s 143(3) of the Income-tax Act,1961(hereinafter called "the Act"). 3. The Revenue has raised following grounds of appeal in Memo of Appeal filed with Income Tax Appellate Tribunal, Ahmedabad Bench, Ahmedabad in ITA No. 2118/Ahd/2013 for assessment year 2009-10 , which reads as under:- "1. The learned CIT(Appeals) has erred in law and on facts in deleting the disallowance of deduction made by the AO of Rs. 1,76,30,304/- u/s. 80IA(4)(i) of the Act. 2. On the facts and circumstances of the case the ld. CIT(A) ought to have upheld the order of the Assessing Officer. It is therefore prayed that the order of the learned CIT(Appeals) may be set aside and that of the A.O. be restored to the above extent. " 4. The brief facts of the case are that the assessee is engaged in ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... estrict the main provision 80IA(4) of the Act. The assessee also submitted before the AO that it has filed the audit report in Form No. 10CCB giving various details in respect of infrastructure activities carried out by the assessee during the year under consideration , for making claim of deduction of Rs. 1,87,70,901/- u/s 80IA(4) of the 1961 Act. The assessee prayed before the AO that the assessee be allowed deduction under section 80IA(4) of the 1961 Act. 4.3 The AO referred to the Explanation inserted below sub-section 13 of Section 80IA , which was substituted by Finance Act, 2009 wef 01.04.2000, which reads as under:- " Explanation-For the removal of doubts, it is hereby declared that nothing contained in this section shall apply in relation to a business referred to in sub-section (4) which is in the nature of a works contract awarded by any person (including the Central of State Government) and executed by the undertaking or enterprise referred to in sub-section (1)." 4.4 The AO rejected the contentions of the assessee by holding that deduction under section 80IA(4) is not available to a business which is in the nature of work contract. The assessee works as Contractor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... by a Company. The AO also observed that the letters awarding works shows that work were assigned to M/s Ajay Engineers , a partnership firm in six cases. The assessee company came into existence only on 27.02.2008 on conversion of said partnership firm into company. The AO also observed that the assessee company has no right to operate or maintain the infrastructure facilities and assessee is merely a contractor and not a developer. The AO observed that the risk assumed by the assessee is only to the extent of business contract risk . The AO observed that the assessee company has taken risk of investment only to the extent of contract risk, while benefit of deduction u/s 80IA(4) is available only to developers who undertake entrepreneurial and investment risks. The AO also observed that the assessee company has not furnished separate project-wise report in Form No. 10CCB in support of eligibility for claiming deduction under section 80IA(4). The AO observed that separate project-wise report is required as per sub-clause 2 of Rule 18BBB of the Income-tax Rules, 1962, which reads as under:- "A separate report is to be furnished by each undertaking or enterprise of the assessee cla ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t. 5.2.1 One of the objection of the AO raised in earlier year while denying the benefit of section 80IA(4) to the appellant was that the agreements for many of the projects were entered into when the appellant was doing business in the status of a firm. The appellant is a Company, came into existence on conversion of partnership firm into Limited Company under chapter IX of the Companies Act, 1956 with effect from 27-02-2008. Prior to that, the partnership firm in the name and style of 'Ajay Engineers' was carrying on the business of developer/construction etc. The said partnership firm was converted into a Public Limited Company under Chapter IX of the Companies Act under the name and style as 'Ajay Engi. Infrastructure Ltd.' along with its all existing business, assets and liabilities as per the provisions of Companies Act. There is no doubt or dispute that the profits on which the deduction has been claimed during the year have been earned in the previous year itself and in the impugned year the business was carried entirely in the status of the company. The following facts are material in the case: i) the company had converted from a firm into a company ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rson executing the work contract who undertakes a work contract with the undertaking or enterprise is not eligible for the deduction. Before I proceed with individual projects and their terms; I would like to quote the criteria and guidelines as decided by various courts. The Hon'ble jurisdictional ITAT, Ahmedabad in the case of Sugam Construction Pvt. Ltd. vs. ITO (30 taxmann.com 331) in its recent judgment, after discussing the provisions of law and various judgements, has discussed the various aspects like what is contract/contractor; concept of developer, requirement of ownership etc., after discussing the law and the various decisions. I would like to reproduce some of the very relevant observations made by the Hon'ble Tribunal. "12. With this factual background, we have examined few case laws to ascertain whether the assessee's nature of work had fallen under the definition of a "contractor" or a "developer". In this regard, we have perused an order of Tribunal pronounced in the case of B.T. Patil & Sons Belgaum Construction (P.) Ltd. (supra). Vide paragraph No.39, the Respected Bench has clarified that the words "developer" and "contractor" have not been de ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ers Dictionary of Current English, Fourth Indian Edition, gives meaning of the term 'developer' as persons or company that develops land. C. Random House Dictionary of the English Language, the following can be found Develop a. To bring out the capabilities or possibilities of; bring to a more advanced or effective state. b. To cause to grow or expand. Developer a. The act or process of developing; progress. b. Synonym: Expansion, elaboration, growth, evolution, unfolding, maturing, maturation. d. Webster Dictionary, the following definitions emerge: a. To realize the potential of; b. To aid in the growth of strength, develop the biceps, c. To bring into being: make active (develop a business) d. To convert (a tract of land) for specific purpose, as by building extensively. e. Law lexicon Dictionary: The following definitions could be seen. Development a. To act, process or result of development or growing or causing to grow; the state of being developed. b. Happening." 12.2 There is an another decision which has been cited before us pronounced by ITAT Hyderabad Bench in the case of GVPR Engineers Ltd. (supra), wherein the assess ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... nment. 12.4 An another reason for not granting the deduction u/s.80IA(4) by the Revenue Department was generally because of the reason of Insertion of Explanation by Finance Act (No.2), 2009 with retrospective effect from 1.4.2000 which says that for the removal of doubts, it is hereby declared that nothing contained in this section shall apply in relation to a business referred to in sub-section(4) which is in the nature of a work contract awarded by Central or State Government and executed by an Undertaking or an Enterprise. Due to this Explanation, Revenue has taken a stand that the eligibility is to be granted only to a "developer" and If the nature of activity is a "works contract", then the deduction is not be granted. However, In the case of Koya & Co. Construction (P.) Ltd. (supra), this issue was dealt with elaborately, wherein it was held that pure development is eligible for claim of deduction. It was clarified that to avoid misuse of the provisions, the said Explanation was inserted in section 80IA, so that mere "works contract" would not be eligible for deduction u/s.80IA. Certainly the said Explanation has been inserted to deny the tax holiday to an entity who does ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... rrangement is eligible for the claim of deduction. Few Circulars have been issued by CBDT through which it has also been clarified, as discussed in the foregoing case-laws, that the benefit of the impugned deduction is available to an enterprise which either develops or maintains or operated or executed the combination of these three, inter alia as a Build, Operate and Transfer (BOT), or, Build, Own, Operate and Transfer (BOOT), or, Build, Own, Lease and Transfer (BOLT) basis or similar other basis where ultimately the infrastructure facility so constructed is ultimately transferred to Government or Public Authority, then such an enterprise is within the ambits of qualification of deduction. The explanatory memorandum to the Finance Act, 2007, as quoted before us, states that the purpose of the tax benefit has all along been to encourage investment in development of infrastructure sector and not for the persons who merely execute the civil construction work. 13.1 In the light of the above discussion and the view expressed by the Hon'ble Courts, a conclusion can be drawn that there is a distinction between "developer" and a "contractor". (i) That in a case of civil contractor ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ponsibility is fully assigned to the developer for execution and completion of work. (i) That although the ownership of the site or the ownership over the land remains with the owner but during the period of development agreement the developer exercise complete domain over the land or the project. (j) That a developer is not expected to raise bills at every step of construction but he is expected to charge the cost of construction plus mark-up of his profit from the assignee of the contract. (k) That a developer is therefore expected to arrange finances and also to undertake risk. (l) That in contrast to the rights of a "contactor" a "developer" is authorized to raise funds either by private placement or by financial Institutions on the basis of the project. These are few broad qualities of a developer through which the character of a developer can be defined." The judgment of Hon'ble Mumbai High Court in the case of ABG Heavy Industries Ltd. 322 ITR 323, where the SLP of the Revenue has also been dismissed gives important parameters/guidelines in this regard and the gist is as under:- 'Profits and gains from infrastructure undertakings - Deduction under section 80-IA is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... itself not claimed deduction under section 80IA(4) as it has not entered into the agreement with the government agency directly etc. As per the list of projects claimed eligible for deduction, as per submissions reproduced earlier in the order; there were 10 projects in total undertaken by the appellant during the year. Out of these, only 9 have been claimed to have yielded profits. The other project according to the claim of the appellant have yielded loss. The loss has been reduced from the eligible profits claimed. Therefore, I would not go into the merits of loss case as the appellant has not disputed it and there is no loss to revenue as far as these projects are concerned. The appellant also submitted brief details of all the projects undertaken including nature and scope of work and also the name of authority with which the agreement was reached, period for which it was to bear liability of maintenance and also produced the tendered documents. The definition of infrastructure facility as per the explanation 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Maintenance of the said infrastructure for a period of 61 month (during the period of development 49 months and defect liability period of 12 months) was also the responsibility of the appellant. Some other projects are also in the nature of bridges including flyovers and ROB in lieu of level crossing etc. For e.g. one is Construction of approach bridges for ROB in Lieu of level crossing no. 2 on Ahmedabad - Delhi B.G Railway Line at Gota in Ahmedabad (Item 3 of appellant's letter reproduced earlier) for which agreement was entered into with Ahmedabad Municipal Corporation. As per agreement, the appellant was required to provide his own equipment (vide Page No. 70 of bid document); including 1 Pilling Equipment 2. Slurry Preparation and Testing Equipment 3. Concreting Equipment 4. Lifting Devices 5. Choice of rotary, percussion, grabbing equipment, and equipment for direct or reverse mud circulation, etc, shall be made to suit the soil conditions, vibrating and noise produced during construction should not have any damaging effect on the people and existing structure. Besides, Standard Pucca RCC bench marks of required numbers were to be established by contractor on both the en ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... .) and Asstt. CIT v. Bharat Udyog Ltd. [2009] 118 ITD 336 (Mum.) thus support the stand taken by the assessee. The assessee has executed the construction of infrastructure facility in respect of the government projects, as is evident from the list of the agreements placed on record. Therefore, it is held that the assessee is eligible for the deduction under section 80-IA on the 9 projects less loss of 10th project (with qualification of not considering merits of loss project; as discussed earlier in the order). The grounds are decided accordingly." 6. Aggrieved by the appellate order passed by ld. CIT(A), the Revenue has filed an appeal with the Tribunal. At the outset, ld. Senior Advocate, Sh. S.N. Soparkar, submitted that that the issue is directly covered by the judgment and order of Hon'ble Gujarat High Court in the case of The PCIT v. MonteCarlo Construction Ltd. in R/Tax No. 786 of 2023, dated 19.12.2023. The ld. Senior Advocate submitted that all the work done by the assessee was as a developer and not as work contractor. The ld. Sr. Advocate drew our attention to the order dated 28.06.2023 of ITAT, Ahmedabad in ACIT v. MonteCarlo Construction Limited in ITA No. 1892/Ahd/2 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment order at page no. 7-10. The AO observed that the assessee is merely a Contractor who executes work orders as a Contractor awarded to it by approval of its tender. The AO also referred to provisions of Section 80IA(4)(i) to hold that the deduction under section 80IA(4) is allowable on the profit and gains derived from the enterprises which should be (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility. The assessee has entered into contract agreements as a 'Contractor' and earned income as 'Contract receipts' which income is not entitled for deduction under section 80IA(4)(i) of the Act. The assessee has not entered into any agreement as an owner of the project but has entered into an agreement as work contractor in all the work done by the assessee. The tax has been deducted at source under section 194C w.r.t. all the receipts for the assessee for executing the work contract order contract receipts, which proves that the assessee is a 'Contractor' and not an owner of the Project and enterprise. The AO also referred to the fact that letters awarding work contracts shows time limit for completion of work assi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... structure (viz., express ways, highways, airports, ports and rapid urban rail transport system) which was lacking in our country. The purpose of the benefit has all along been for encouraging private sector participation by way of investment in development of the infrastructure sector and not for person who merely execute the civil construction work or any other works contract." 7.3 The AO observed that in the present case, assessee is a contractor and has stated its business as 'Civil Construction' in the audit report. Thus, the AO held that the assessee is only a 'Work Contractor' and entered into agreement by way of tender to complete the well planned and designed work which should be completed within the stipulated time. The AO observed that the assessee has not entered in BOT, BOOT & BOLT system . The AO held that the assessee company is not entitled for deduction under section 80IA(4)(i) of the Act. The AO further observed that the assessee has failed to fulfill the other conditions for claiming deduction u/s 80IA of the 1961 Act. The AO disallowed the claim of the assessee for deduction u/s 80IA of Rs. 1,87,58,401/-. .The ld. CIT(A) granted relief to the assessee w ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... their status and none of them have objected to it and legally all the terms were binding on both the parties as per law itself. In fact, TDS certificates have been issued in the name of company only during the year. (iv) As held by the Rajasthan High Court, in the case of Chetak Enterprises (P.) Ltd reported at 271 ITR 444, the conversion of the firm into company legally with all the liabilities and assets and business as a going concern before commencement of the previous year, would make it eligible for 80IA(4) as also the fact that proviso to section 80IA(4)(c) would also be applicable even if it is considered as a transferee enterprise which has undertaken the work of development or maintenance and operation. Following the spirit and ratio of the judgment of the Hon'ble Rajasthan High Court in the case of Chetak Enterprises (P.) Ltd (supra), it is decided on the facts of the case that the company which has earned the profits during the year could not be denied the benefit of deduction u/s 801A(4) on this basis. The other objections would be dealt separately, in subsequent paragraphs. 5.2.2 The major objection of the AO is that the company has merely entered into co ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... reates new product. Whereas as per the dictionary meaning, the word "contractor" is a person or a company that has a contract to do work or provide services or goods to another. As per new shorter Oxford dictionary, the word "contractor" means a person who enters into a contract or agreement. As per the Bench, a developer is a person who conceives the project. He may execute the entire project himself or assign some part of it to others. As per Respected Bench, on the contrary, a contractor is the one who is assigned a particular job to be accomplished on behalf of the developer. The duty of a contractor is to translate such design into reality. The role of a developer is much larger than that of the contractor. As per Bench, It is no doubt that in certain circumstances a developer may also do the work of a contractor but a mere contractor per se can never be called as a developer, who undertakes to do work according to the pre-decided plan. These findings have Indeed helped us in deciding the Issue in hand. 12.1 This technical term, i.e. "developer" was also under question in the case of Radhe Developers (supra), wherein vide an order dated 13.12.2011, the Hon'ble Court has ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment infrastructural assets in addition to Government spending and not simply feed on Government expenditure. As per the Tribunal, the deduction u/s.80IA is available to the former and not to the latter. The term "developer" has to be seen de hors the contract. The Bench has also opined that word "ownership" is attributable only to the enterprise carrying on the business which would mean that only companies are eligible for deduction u/s. 80IA(4). 12.3 An another controversy in such type of cases is in respect of the term "ownership" prescribed as per the language of the Section. The Section 80IA(4) prescribes that it applies to any enterprise carrying on the business of developing, operating and maintaining any infrastructure facility which fulfills the conditions, namely, It is owned by company registered in India or by a consortium of such companies and that it has entered into an agreement with the Central Government or State Government and that it has started operating and maintaining the infrastructure facility on or after 1995. The term "it is owned" has been defined by the Revenue Department as if the infrastructure facility is to be owned by the enterprise claiming 80IA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d. (supra), wherein Patel Engg. Ltd. (supra) was followed and it was opined that the term "contractor" is not essentially in contradiction to the term "developer". By entering into a lawful agreement and thereby becoming a "contractor" in no way bar an enterprise to execute the work as a "developer". It was opined that merely because in the agreement for development of Infrastructure facility an enterprise is referred to as a contractor do not detract an enterprise from the position of being a "developer". In number of decisions, the Coordinate Benches have cited ITAT Pune Bench decision pronounced in the case of Laxmi Civil Engineering Pvt. Ltd. (supra), wherein it is mentioned as under:- "2. Tracing the background of the case, learned counsel for the assessee mentioned that in the first round, the appeals were decided relying on the decision of the Third Member In the case of B.T.Patil & Sons 126 TTJ 577 vide order dated 18.02.2010. Subsequently, the said order of the Tribunal was recalled in view of the binding jurisdictional high Court's judgment pronounced on 15.02.2010 in the case if ABG Heavy Engg. Ltd. reported in 37 DTR (Bom) 233." 13. In the background of the ab ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s no domain over the land or the site. (viii) That his access to the site is restricted and limited from commercial angle.(ix)That on the basis of the project he cannot raise the funds from the private financial Institutions. (x) That "a contractor" is not responsible for the development of the project but his responsibility is limited to the job- assigned to him. (xi) That a "contractor's" duties and responsibilities can only be examined on the basis of the terms and conditions of the contract agreement. 13.2. Now we shall examine about a "developer". From the above reading we have also gathered (a) That a developer is a person who undertakes the responsibility to develop a project. (b) That a developer is therefore not a civil contractor simplicitor. (c) That if we apply the commercial aspect, then a developer has to execute both managerial as well as financial responsibility. (d) That the role of a developer, according to us, is larger than that of a contractor. (e) That when a person is acting as a developer, then he is under obligation to design the project, It is an another aspect that such design has to be approved by the owner of the project, I.e. the Government in t ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ible for supplying, installation, testing, commissioning and maintenance of cranes - Contract envisaged two different options, first being one under which assessee would carry out operation and maintenance of equipment, while second consisted of an option to JNPT to carry out operations and only maintenance was to be carried out by assessee- Assessee assumed responsibility of making equipment available for operation for a minimum number of days as stipulated in contract and would become liable to pay liquidated damages for non-availability of equipment after commissioning. After expiry of lease period of ten years, assessee was liable to hand over equipment to JNPT free of cost - On facts, held that it could be said that assessee had carried on business of developing, maintaining and operating an infrastructural facility so as to entitle it to a deduction under section 80-IA' The court has agreed that an assessee did not have to develop the entire port in order to qualify for a deduction under section 80-IA. Parliament did not legislate a condition impossible of compliance. A part of a port was also held to qualify for the deduction. The decision was followed by the Pune ITA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for water works, projects for new roads would fall under the definition of infrastructure facility as defined under the Act. To examine and decide whether the appellant could be said to be a contractor or acted as a developer; the terms and conditions and scope of various projects undertaken were examined carefully and are being representatively and briefly discussed hereafter. One of the projects was undertaken in an agreement with the Western Railway, Government of India and was of Providing 2X6.00X3.30 M RCC box by pushing for Dharangadhra Canal Crossing.. The scope of work included: (a)Procurement/Fabrication of necessary plants and equipment, jacking, packs, jack pumps for execution of this work. (b)Earth work in excavation for thrust bed for Box pushing Including disposal of excavated earth in nearby Railway land within a maximum lead of 1 Km. (c) Casting of the thrust bed including, casting of foundation as per the design submitted by the tenderer and approved by the Railway. (d) Jacking of the precast boxes to form the opening below the track under running traffic conditions. The maximum allowable deviation at any time from the theoretical arrangements will be limite ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ce of the said infrastructure for a period of 62 month (during the period of development 50 months and defect liability of 12 months) was also the responsibility of the appellant. Some of the other works are of the nature of road and water supply projects and would be infrastructure facility covered the definition. As discussed hereinabove, it is concluded that an enterprise which is either developing or operating or maintaining the infrastructure facility is required to be owned by a company or a consortium of companies duly registered In India for purpose of section 80-IA and the Act do not prescribe that the infrastructure facility is to be owned by such an enterprise. The infrastructure facility is generally the property of the Government and an enterprise is bound by the agreement to transfer the same after developing It, after the settled period. The assessee's execution of work fall within first category, i.e. developing of infrastructure facility. Right from the planning, arranging /providing machinery to the work of construction has been done by this assessee and has borne the substantial financial risk and initially the cost also, itself. The assessee has made r ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... elops 35[***] a special economic zone referred to in clause (iii) of sub-section (4)] or generates power or commences transmission or distribution of power 36[or undertakes substantial renovation and modernisation of the existing transmission or distribution lines 37[37a[or lays and begins to operate a cross-country natural gas distribution network]]] : 38[Provided that where the assessee develops or operates and maintains or develops, operates and maintains any infrastructure facility referred to in clause (a) or clause (b) or clause (c) of the Explanation to clause (i) of sub-section (4), the provisions of this sub-section shall have effect as if for the words "fifteen years", the words "twenty years" had been substituted.] 39[(2A) Notwithstanding anything contained in sub-section (1) or sub-section (2), the deduction in computing the total income of an undertaking providing telecommunication services, specified in clause (ii) of sub-section (4), shall be hundred per cent of the profits and gains of the eligible business for the first five assessment years commencing at any time during the periods as specified in sub-section (2) and thereafter, thirty per cent of such profits ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... d to have been complied with. (4) This section applies to- (i) any enterprise carrying on the business 47[of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining]any infrastructure facility which fulfils all the following conditions, namely :- (a) it is owned by a company registered in India or by a consortium of such companies 48[or by an authority or a board or a corporation or any other body established or constituted under any Central or State Act;] 49[(b) it has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i)developing or (ii)operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility;] (c) it has started or starts operating and maintaining the infrastructure facility on or after the 1st day of April, 1995: Provided that where an infrastructure facility is transferred on or after the 1st day of April, 1999 by an enterprise which developed such infrastructure facility (hereafter referred to in this section as the transferor enterprise) to another enterprise (hereafter in this section referred to as ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... for the remaining period in the ten consecutive assessment years as if the operation and maintenance were not so transferred to the transferee undertaking : 60[Provided further that in the case of any undertaking which deve-lops, develops and operates or maintains and operates an industrial park, the provisions of this clause shall have effect as if for the figures, letters and words "31st day of March, 2006", the figures, letters and words "31st day of March, 60a[2011]" had been substituted;] (iv) an 61[undertaking]which,- (a) is set up in any part of India for the generation or generation and distribution of power if it begins to generate power at any time during the period beginning on the 1st day of April, 1993 and ending on the 31st day of March, 62[2011]; (b) starts transmission or distribution by laying a network of new transmission or distribution lines at any time during the period beginning on the 1st day of April, 1999 and ending on the 31st day of March, 62[2011] : Provided that the deduction under this section to an 63[undertaking]under subclause (b) shall be allowed only in relation to the profits derived from laying of such network of new lines for transmi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the management or control or capital of the assessee; (ii) who holds, directly or indirectly, shares carrying not less than twenty-six per cent of the voting power in the assessee; (iii) who appoints more than half of the Board of directors or members of the governing board, or one or more executive directors or executive members of the governing board of the assessee; or (iv) who guarantees not less than ten per cent of the total borrowings of the assessee.]] (5) Notwithstanding anything contained in any other provision of this Act, the profits and gains of an eligible business to which the provisions of sub-section (1) apply shall, for the purposes of determining the quantum of deduction under that sub-section for the assessment year immediately succeeding the initial assessment year or any subsequent assessment year, be computed as if such eligible business were the only source of income of the assessee during the previous year relevant to the initial assessment year and to every subsequent assessment year up to and including the assessment year for which the determination is to be made. (6) Notwithstanding anything contained in sub-section (4), where housing or other ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of profits and gains of an 76[undertaking]or of an enterprise in the case of an assessee is claimed and allowed under this section for any assessment year, deduction to the extent of such profits and gains shall not be allowed under any other provisions of this Chapter under the heading "C.-Deductions in respect of certain incomes", and shall in no case exceed the profits and gains of such eligible business of 76[undertaking]or enterprise, as the case may be. (10) Where it appears to the Assessing Officer that, owing to the close connection between the assessee carrying on the eligible business to which this section applies and any other person, or for any other reason, the course of business between them is so arranged that the business transacted between them produces to the assessee more than the ordinary profits which might be expected to arise in such eligible business, the Assessing Officer shall, in computing the profits and gains of such eligible business for the purposes of the deduction under this section, take the amount of profits as may be reasonably deemed to have been derived therefrom. (11) The Central Government may, after making such inquiry as it may think f ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... dia or by consortium of such companies or by an authority or a board or a corporation of any other body established or constituted under any Central or State Act , it has entered into an agreement with Central or State Government or a local authority or any other statutory body , it has started or starts operating and maintaining the infrastructure facility on or after the 1st April, 1995. The infrastructure facility means a road including (a) 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 water waterway, inland port or navigational channel in the sea. Explanation below sub-section 13 to Section 80IA provides that for the removal of doubts, it is hereby declared that nothing contained in this section shall apply in relation to a business referred to in sub-section (4) which is in the nature of a works contract awarded by any person (including the Central or State Government) and executed by the undertaking or enterprise ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... en after completion of the work. The developer will be subjected to penal provisions for breach of any provisions of the terms of the contract. The developer shall be liable to recompense for any loss caused to the person awarding the contract for failure to adhere to various laws such as Environmental laws, Labour Laws etc. Thus, as could be seen that the line demarcating Contractor and Developer is well defined. The person who is executing a work contract in the capacity of Contractor is not eligible for deduction u/s 80IA(4) , while the Company executing the Contract as developer is eligible for deduction u/s 80IA(4) provided all other conditions as are stipulated u/s 80IA(4) are fulfilled. To identify, whether a work executed by the Contractee is in the capacity of 'Contractor' or the work undertaken is for the development of the infrastructure facility in the capacity of 'developer' requires deeper and indepth analysis of each and every work executed by the assessee wherein claim of deduction u/s 80IA(4) is made viz. the tender document issued by Government/Statutory Authority, Letter Awarding the work to successful contractor/developer, Agreement entered into by the developer ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e project undertaken by the assessee whether it meets all the parameters to hold the assessee as developer of the project. The AO has also observed that separate audit report in Form No. 10CCB as provided u/r 18BBB sub clause 2, of the Income-tax Rules, 1962 is not furnished by the assessee with respect to several projects under taken by the assessee. The ld. CIT(A) did not address this issue. The AO has also observed that in some of the projects executed by the assessee , the work was awarded to erstwhile partnership firm Ajay Engineers, which it is claimed by the assessee got converted into the assessee company . The assessee claimed that all the Contractees have all been notified and they accepted the assessee as the person to implement the project. The ld. CIT(A) did not record specific finding of fact w.r.t. each project under taken by the assessee as to accepting of the assessee by the Contractee in place of the erstwhile partnership firm , bit rather general finding is given by ld. CIT(A) that the assessee was accepted by the Contractees in place of erstwhile partnership firm. The appellate order of ld. CIT(A) are appealable orders before ITAT, and it is incumbent on ld. CIT ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e specific work executed by the assessee in which the assessee has claimed that it acted as developer and claimed to be eligible for deduction u/s 80IA(4). The assessee as well the AO shall be given opportunity of being heard by the ld. CIT(A), keeping in view principles of natural justice. The evidences filed shall be admitted by ld. CIT(A) in accordance with law, and ld. CIT(A) shall give its finding of fact on all the objections raised by the AO while denying claim of deduction u/s 80IA(4) to the assessee. The appeal of the Revenue on this issue is allowed for statistical purposes. We order accordingly. 8. In the result appeal of the Revenue in ITA no. 2118/Ahd/2013 for assessment year 2009-10 is allowed for statistical purposes. We order accordingly. ITA No.2302/Ahd/2014-Revenue Appeal A.Y.2010-11-Ajay Engineering Infrastructure Private Limited 9. The Revenue has raised following grounds of appeal in Memo of Appeal filed with Income Tax Appellate Tribunal, Ahmedabad Bench, Ahmedabad in ITA No. 2302/Ahd/2014 for assessment year 2010-11 , which reads as under:- "1. The learned CIT(Appeals) has erred in law and on facts in deleting the disallowance made by the AO u/s 80IA( ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IA(4) of the Act which was denied by the AO but later allowed by the ld. CIT(A) . Similar issue arose in assessment year 2009-10 in Revenue's appeal in ITA No. 2118/Ahd/2011, and even grounds of appeal are similar. Both the parties have agreed before us that our decision in Revenue's appeal for assessment year 2009-10 shall be applicable for assessment year 2011-12, as facts and issues in appeal are similar. Our decision in ITA No. 2118/Ahd/2013 for assessment year 2009-10 as adjudicated above in preceding para of this order shall apply mutatis mutandis to the appeal of the Revenue for assessment year 2011-12 in ITA No. 2303/Ahd/2014 on this issue. Thus , this issue is restored back to the file of the ld. CIT(A) for fresh adjudication with similar observations as were made by us as in ITA no. 2118/Ahd/2013 for assessment year 2009-10. The appeal of the Revenue is allowed for statistical purposes. We order accordingly. 14. In the result appeal of the Revenue in ITA no. 2303/Ahd/2014 for assessment year 2011-12 is allowed for statistical purposes. We order accordingly. ITA No.1231/Ahd/2016-Revenue Appeal A.Y.2013-14-Ajay Engineering Infrastructure Private Limited 15. The Revenu ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... sment year 2014-15 , which reads as under:- "i.) The Ld. CIT(A) has erred in law & on facts by allowing deduction of Rs. 10,42,40,977/- u/s 80IA(4)(i) of the I.T.Act, 1961 which was disallowed by the Assessing Officer. ii.) On the facts and circumstances of the case, the Ld. Commissioner of Income- Tax(appeals) ought to have upheld the order of the Assessing Officer. iii.) It is therefore prayed that the order of the learned Commissioner of Income- Tax(Appeals) may be set aside and that of the Assessing Officer be restored. " 19. The issue raised by Revenue in its appeal filed with ITAT in ITA No. 1621/Ahd/2016 is concerning the claim of deduction under section 80IA(4) of the Act which was denied by the AO but later allowed by the ld. CIT(A) . Similar issue arose in assessment year 2009-10 in Revenue's appeal in ITA No. 2118/Ahd/2011, and even grounds of appeal are similar. Both the parties have agreed before us that our decision in Revenue's appeal for assessment year 2009-10 shall be applicable for assessment year 2014-15, as facts and issues in appeal are similar. Our decision in ITA No. 2118/Ahd/2013 for assessment year 2009-10 as adjudicated above in preceding para o ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Thus , this issue is restored back to the file of the ld. CIT(A) for fresh adjudication with similar observations as were made by us as in ITA no. 2118/Ahd/2013 for assessment year 2009-10 in the case of the assessee namely Ajay Engineering Infrastructure Private Limited. The appeal of the Revenue is allowed for statistical purposes. We order accordingly. 23. In the result appeal of the Revenue in ITA no. 1650/Ahd/2017 for assessment year 2014-15 is allowed for statistical purposes.We order accordingly. 24. In the result , all the six appeals of the Revenue adjudicated by us vide common order viz. ITA No. 2118/Ahd/2013 for assessment year 2009-10, ITA no. 2302/Ahd/2014 for assessment year 2010-11, ITA No. 2303/Ahd/2014 for assessment year 2011-12, ITA no. 1231/Ahd/2016 for assessment year 2013-14 and 1621/Ahd/2017 for assessment year 2014-15 in the case of the assessee namely Ajay Engineering Infrastructure Private Limited are allowed for statistical purposes. The appeal of the Revenue in ITA no. 1650/Ahd/2017 for assessment year 2014-15 in the case of the assessee namely Ajay Protech Private Limited is also allowed for statistical purposes. We order accordingly. Order pronounce ..... X X X X Extracts X X X X X X X X Extracts X X X X
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