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TMI Blog2024 (9) TMI 1662X X X X Extracts X X X X X X X X Extracts X X X X ..... erred in ignoring that the facts of the case are not in conformity with clarificatory amendment to Section 80IA of the Act [Explanation 2 to Section 80IA of the Act introduced vide Finance Act 2017] which was introduced to unambiguously explain that only those enterprise that have entered into development agreement with Central / State / Local Authorities and invested their own funds to develop such facilities will only be eligible for benefit of deduction. 5. Whether the ld. CIT(A) is correct in law in upholding the claim of the assessee u/s 80IA of the Act, which is only a constituent of the joint venture or consortia and do not fulfil the requirements of Section 80IA (4) of the Act and the assessee is not a developer but merely a contractor of the projects awarded to joint venture / consortia? 6. The ld.CIT(A) ought to have appreciated the fact that when huge borrowed interest bearing funds are deployed for earning exempt income restriction of the disallowance u/s 14A to exempt income alone would result in disproportionate reduction of taxable income which is not the intended purpose of Section 14A. 7. The ld. CIT(A) ought to have appreciated the fact that the words used ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 1961. The AO has discussed the issue at length in light of provisions of the Act and agreements entered into by the appellant with relevant authorities and noticed that the assessee has executed various projects, which are in the nature of development of infrastructure projects as prescribed under Section 80IA(4) of the Act. The AO had also discussed each project executed by the appellant in light of agreement with relevant authorities and after considering relevant agreements and nature of projects executed by the assessee, observed that the appellant has claimed deduction under Section 80IA(4) of the Act in respect of projects executed by the appellant on its own on the basis of agreements entered into with State or Central Governments and also claimed deduction under Section 80IA(4) of the Act in respect of projects which were awarded to Joint Ventures (hereinafter referred as "JV") and Consortiums, wherein the assessee was one of the constituent members and the works were carried out by the assessee, in proportion to its shares as per the JV / Consortium agreement. However, as per the provisions of Section 80IA(4) of the Act, only the enterprise which enters into an agreement ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... eir share in the JV / Consortium. Further, the JV/ Consortium is only a pass-through entity and whatever bill raised to the State or Central Government is transferred in total to the JV partner and further, the deduction under Section 80IA(4) is only claimed by the constituent partner and not JV. Therefore, merely for the reason that the agreement is in the name of JV, the deduction under Section 80IA(4) of the Act cannot be denied to the assessee, when the assessee has satisfied all the conditions, including conditions of entering into agreement with relevant authorities. In this regard, the appellant relied on the decision of ITAT Visakhapatnam Bench in the case of M/s. Transstory (India) Ltd. Vs. ITO (supra). 5. The ld.CIT(A), after considering relevant submissions of the assessee, as well as the order of the Assessing Officer observed that, as could be seen from the facts brought on record, the appellant company is engaged into infrastructure development activity of various kinds, which are shown to be awarded directly as main developer / builder, while some were awarded to JV's / Consortia but executed by the assessee, as a constituent of the said JV, in proportion to the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... IA of the Act and the Explanation 2 to Section 80IA introduced by the Finance Act 2017, which was introduced and unambiguously, explained that only those enterprises that have entered into development agreements with the Central / State / local authorities and invested their funds to develop such facilities will only be eligible for the benefit of deduction. The ld.DR referring to the provisions of Section 80IA(4)(1)(b) submitted that, in order to be eligible for deduction under the said section, the enterprise shall enter into an agreement with the Central Government or State Government or a local authority, or any other statutory body for developing, operating, and maintaining a new infrastructure facility. In the present case, the appellant has claimed deduction in respect of profits derived from projects awarded to JV/ Consortia in light of agreement between relevant JVs/ Consortiums, and authorities, only on the ground that the project has been executed by the appellant. However, but fact remains that the exemption provisions should be strictly interpreted as held by ITAT Hyderabad Bench in the case of DCIT Vs. HES Infra Private Limited in ITA No. 184 and 185/Hyd/2018, wherein ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... the conditions, but denied the deduction only on the ground that the agreement is not in the name of the appellant, ignoring the fact that the appellant, being a constituent partner of the J.V. / Consortium, has entered into agreement with the authorities, and the agreement entered into by JVs is as good as agreements entered into by the assessee. Therefore, he submitted that the assessee is eligible for deduction u/s 80IA(4) of the Act and ld.CIT(A) after considering relevant facts has rightly allowed deduction and their order should be upheld. 8. Per contra, the ld.CIT-DR submitted that there is no dispute with regard to the fact that the appellant is not entered into agreement on its own, but signed the said agreement as a constituent partner of the JV / Consortia. Further, as per clause (a) of Section 80IA(4)(1) of the Act, it only says that the project should be owned by a company or consortium of such companies, but when it comes to clause (b), it talks about entering into agreement with Central or State Government for developing projects. In the present case, there is no dispute with regard to the fact that the appellant has not entered into agreement with any of the Centr ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... satisfied all the conditions except clause (b) of Section 80IA(4), as noted by the Assessing Officer. In other words, the AO accepted the fact that the projects executed by the appellant, including those projects which were awarded to JVs/Consortiums, but executed by the assessee are infrastructure projects, as defined under Section 80IA(4) of the Act and thus, on being satisfied with the relevant provisions therein, the assessee is eligible for deduction under Section 80IA(4) of the Act. The only dispute is with regard to not satisfying clause (b) of Section 80IA(4)(1), which states that in order to claim deduction under Section 80IA(4) of the Act, the enterprises shall enter into an agreement with the Central government or State Government or local authority or any authority for developing, operating and maintaining or developing, operating and maintaining a new infrastructure facility. The appellant claims that it has satisfied clause (a) of Section 80IA(4) of the Act, because as a constituent partner of JV /Consortia, it has signed agreement with relevant Central or State Government or local authority for development of infrastructure project. Further, as per clause (a) of Sect ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... r activities, including designing, development, and maintenance of the project are undertaken by the assessee. Therefore, we are of the considered view that once the assessee, being a constituent partner of the JV/Consortium, has executed the project and also undertaken relevant risks, including financial risks, the assessee becomes a developer of the infrastructure project and also as a constituent partner of the JV/Consortium, satisfied the condition of entering into an agreement with relevant Central or State government or any authority as specified in clause (b) of Section 80IA(4)(1) of the Act. This is further fortified by the provisions of Section 80IA(4) of the Act and as per the proviso, the deduction is allowed to a successor entity in case one enterprise developed such infrastructure facility and after development, transfer such infrastructure facility to another Enterprise for the purpose of operating and maintaining the infrastructure facility on its behalf in accordance with agreement with the Central / State Government or local authority or statutory body, the provisions of this section shall apply to the transferee enterprise as if it were the enterprise to which thi ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ssign its rights and obligations to any other party without written consent of other party. From a careful perusal of this joint venture agreement and the consortium agreement, it is evidently clear that the joint venture and the consortium was formed only with an object to bid contract. Once the project or contract is awarded to the joint venture or the consortium, it is to be executed by its constituents or the joint ventures in a ratio agreed upon by the parties. In the instant case in case of a joint venture agreement, the assessee was entitled to execute the 40 per cent of total work awarded by the Andhra Pradesh Government to the joint venture and in case of a consortium it was agreed that the entire work is to be executed by the assessee itself. Therefore for all practical purposes, it was the assessee who executed the work contract or the project awarded to the joint venture. No doubt the joint venture is an independent identity and has filed its return of income and was also assessed to tax but it did not offer any profit or income earned on this project/works awarded to it nor did he claim any exemption/deduction under s. 80 - IA(4). These facts clearly indicates that the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t the appellant is eligible for deduction under Section 80IA(4) in respect of the profits derived from the projects awarded to JV / Consortium but executed by the appellant. The decision of the ITAT Lucknow Bench has been upheld by the Hon'ble Allahabad High Court. The sum and substance of the ratios laid down by the various benches of the Tribunal is that when the appellant has satisfied all the conditions prescribed under Section 80IA(4) of the Act, but merely for the reason that the agreement is entered into by JV / Consortium, the deduction under Section 80IA(4) cannot be denied. 13. Coming back to case laws relied upon by the ld.DR for the Revenue. The ld.DR relied upon the decision of ITAT, Hyderabad Bench in the case of DCIT Vs. HES Infra Pvt. Ltd (supra), We have gone through the decision of ITAT, Hyderabad Bench in the above case, and we find that, the Tribunal has gone on sole premise of interpretation of statutory provisions in light of the decision of Hon'ble Supreme Court in the case of Commissioner of Customs (Import), Mumbai Vs. M/s. Dilip Kumar and Company (supra) and held that in case of a person claiming deduction under the provisions of Section 80IA(4), the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... s engaged in the business of developing infrastructure project like irrigation project, water supply system, hydropower plants and roads and railway lines and the statute provides for specific exemption under section 80IA(4) of the Act in respect of infrastructure projects, in our considered view, going by the liberal interpretation of the statute, the assessee must be given the benefit of deduction, having been satisfied all the conditions, including the condition of entering into an agreement with the State Government or Central Government or with any local authority, as a constituent partner of the JV/Consortium, more particularly, except entering into agreement, all other activities were carried out by the assessee. Further, the earlier order of ITAT in assessee's own case was dt.15.02.2019 and order of the Hon'ble Apex Court in Commissioner of Customs (Import), Mumbai Vs. M/s. Dilip Kumar and Company (supra) is dated 31.07.2018. The Co-ordinate Bench of the ITAT had also taken note of the Judgment of the Hon'ble Apex Court in Commissioner of Customs (Import), Mumbai Vs. M/s. Dilip Kumar and Company (supra) while adjudicating the issue of deduction u/s 80IA(4) of the Ac ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... idered view that there is no error in the reasons given by the ld.CIT(A) or to restrict the disallowance to exempt income and thus, we are inclined to uphold the findings of ld.CIT(A) and reject the grounds taken by the Revenue. 16. The next issue that came up for our consideration from additional ground of appeal filed by the Revenue is disallowance under Section 36(1)(va), in respect of belated payment of employee contribution to Provident Fund. The AO has disallowed the belated payment of Employees Contribution Provident Fund as noted in his assessment order at page 43 and disallowed sum of Rs. 1,00,39,226/-. The ld.CIT(A) deleted the addition made by the AO by following certain judicial precedents, including the decision of Hon'ble Supreme Court in the case of CIT Vs. Vinay Cements reported in (2007) 213 CTR 268 (SC). The ld. D.R. referring to the subsequent decision of Hon'ble Supreme Court in the case of Checkmate Service P. Ltd. Vs. CIT, reported in (2022) 143 taxmann.com 178 (SC) wherein the issue has been decided in favour of the Revenue and held that belated payment of Employees Contribution to PF and ESI beyond the due dates specified under respective statue is not allo ..... X X X X Extracts X X X X X X X X Extracts X X X X
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