9911796707
TMI Blog2024 (12) TMI 697X X X X Extracts X X X X X X X X Extracts X X X X ..... all apply mutatis mutandis to remaining three appeals. ITA No. 2498/Ahd/2013 (A.Y. 2010-11): 3. This appeal filed by the assessee has arisen from the appellate order dated 23.08.2013 passed by ld. CIT(Appeals)-XVI, Ahmedabad in Appeal No. CIT(Appeals)-XVI/ITO/Wd. 10(1)/272/12-13 for the assessment year 2010-11, which, in turn, has arisen from the assessment order dated 07.02.2013 passed by Assessing Officer u/s. 143(3) of the Income-tax Act. Revised grounds raised by assessee in this appeal read as under : "1. The Learned Commissioner of Income Tax (Appeals) XVI, Ahmedabad erred in sustaining the order of the Income Tax Officer, Ward-10(1), Ahmedabad denying claim for deduction of Rs. 2,12,15,873/- u/s. 80-IA (4) of the Income Tax Act, 1961. 2. The Learned Commissioner of Income Tax (Appeals) - XVI, Ahmedabad erred in treating the appellant as a contractor of infrastructure facility and not as developer thereof, in the facts and circumstances of the nature of activities carried out by the appellant under the agreement with Airport Authority of India for the airport at Bhopal. 3. The Learned Commissioner of Income Tax (Appeals) XVI, Ahmedabad also erred in relying upon the d ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ", wherein AAI is referred as "Owner" and the assessee, M/s. BGSCTPL-MSKEL Consortium is referred as "Contractor". Assessing Officer observed that the assessee is a contractor and has not taken any risk as per the agreement. The Assessing Officer observed that in case of cost escalation, i.e., increase in price of any material or the duty, AAI shall reimburse to the contractor such increase in price or the additional or increased duty paid by the contractor and hence, no risk is assumed by the contractor for the work as per agreement. The Assessing Officer issued show cause notice to the assessee. 5. In reply to show cause notice, the assessee submitted that the assessee is a joint venture entity, which came into existence with an object to bid for Construction of New Expandable Modular Integrated Terminal Building at Raja Bhoj Airport, Bhopal awarded by AAI. Assessee submitted that as per Explanation 1 to section 80-IA(4), infrastructure means a road, bridge, airport, port, inland waterways and inland ports, rail system etc., and the assessee is engaged in development of New Expandable Modular Integrated International terminal building at Raja Bhoj Air Port, Bhopal which qualifie ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee is a developer of the said infrastructure facility and is not merely a contractor. It was also submitted that the Explanation below section 80-IA(13) cannot be derogatory or override the main provisions of the Act as held by Hon'ble Supreme Court in the case of S. Sundaram Pillai & Ors. reported in AIR 1985 (SC) 582. The assessee submitted that it has deployed its own human resources and technical expertise/know-how and these were not supplied by AAI. It was submitted that entire planning of the work has also been designed and carried out by the assessee and the material procured by assessee was consumed in the project using its own know-how by deploying its own resources at its own risk to develop the said infrastructure facility. Thus, in nutshell, it was submitted that the assessee has duly complied with all the conditions for being entitled for deduction u/s. 80-IA(4) and hence, the deduction u/s. 80-IA(4) may be granted. The assessee relied upon the order of ITAT, Rajkot in the case of TARMATBEL( JV) in ITA No. 1111/RJT/2010. Assessing Officer rejected the claim of the assessee and observed that AAI has invited applications for short listing of contractors for the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... which is applicable to works contractor. Thus, after going through all the terms and conditions and nature of the contract, the Assessing Officer was of the view that the assessee is mainly doing the work of civil construction as part of the contract and whole project is not completed individually by the assessee- AOP. The project is planned by AAI, work is completed under the supervision and direction of the AAI, payment is made in advance upto 70 to 90% and after completion of the work, final payment is made by the AAI along with cost escalation. Thus, the Assessing Officer denied deduction u/s. 80-IA(4) of the assessee. 6. Aggrieved, the assessee filed first appeal with ld. CIT(Appeals) and made elaborate submissions to justify that the assessee is a developer and is entitled for deduction u/s. 80-IA(4) of the Act. Learned CIT(Appeals), after considering the contention of the assessee rejected the claim of the assessee and held that the assessee is merely a contractor and hence, not eligible for deduction u/s. 80-IA(4). 7. Now, still aggrieved, the assessee has filed second appeal with the Tribunal and at the outset the assessee relied upon the decision of Hon'ble Gujrat High ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... pon orders of the authorities below. 9. We have considered rival contentions and perused material on record including the cited case laws. We have observed that the assessee is an AOP, and is a joint venture consortium of M/s. B.G. Shirke Construction and Technology Pvt. Ltd. and M/s. M.S. Khurana Engineering Ltd., which is claimed to be formed for the purpose of Construction of New Expandable Modular Integrated Terminal Building at Raja Bhoj Air Port, Bhopal. The assessee has claimed itself to be engaged in the development of infrastructure facility, and has claimed that it is eligible for deduction u/s. 80-IA(4). The said Airport is owned by Airport Authority of India(AAI) who has entered into an agreement with assessee for Construction of New Expandable Modular Integrated Terminal Building at Raja Bhoj Air Port, Bhopal. Thus, the work is assigned by AAI to the assessee under the agreement entered into between AAI and the assessee for Construction of New Expandable Modular Integrated Terminal Building at Raja Bhoj Air Port, Bhopal. The facility is to be handed over by the assessee after completion to the AAI (owner of the Airport). Assessee has filed voluminous paper book with I ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... t years commencing at any time during the periods as specified in subsection (2) and thereafter, thirty per cent of such profits and gains for further five assessment years. (3) This section applies to an undertaking referred to in clause (ii) or clause (iv) of subsection (4) which fulfils all the following conditions, namely :- (i) it is not formed by splitting up, or the reconstruction, of a business already in existence : Provided that this condition shall not apply in respect of an undertaking which is formed as a result of the re-establishment, reconstruction or revival by the assessee of the business of any such undertaking as is referred to in section 33B, in the circumstances and within the period specified in that section; (ii) it is not formed by the transfer to a new business of machinery or plant previously used for any purpose: Provided that nothing contained in this sub-section shall apply in the case of transfer, either in whole or in part, of machinery or plant previously used by a State Electricity Board referred to in clause (7) of section 2 of the Electricity Act, 2003 (36 of 2003), whether or not such transfer is in pursuance of the splitting up or rec ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e) to another enterprise (hereafter in this section referred to as the transferee enterprise) for the purpose of operating and maintaining the infrastructure facility on its behalf in accordance with the agreement with the Central Government, State Government, local authority or statutory body, the provisions of this section shall apply to the transferee enterprise as if it were the enterprise to which this clause applies and the deduction from profits and gains would be available to such transferee enterprise for the unexpired period during which the transferor enterprise would have been entitled to the deduction, if the transfer had not taken place: Provided further that nothing contained in this section shall apply to any enterprise which starts the development or operation and maintenance of the infrastructure facility on or after the 1st day of April, 2017. Explanation.-For the purposes of this clause, "infrastructure facility" means- (a) a road including toll road, a bridge or a rail system; (b) a highway project including housing or other activities being an integral part of the highway project; (c) a water supply project, water treatment system, irrigation project ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... e 31st day of March, 2017: Provided that the deduction under this section to an undertaking under sub-clause (b) shall be allowed only in relation to the profits derived from laying of such network of new lines for transmission or distribution; (c) undertakes substantial renovation and modernisation of the existing network of transmission or distribution lines at any time during the period beginning on the 1st day of April, 2004 and ending on the 31st day of March, 2017. Explanation.-For the purposes of this sub-clause, "substantial renovation and modernisation" means an increase in the plant and machinery in the network of transmission or distribution lines by at least fifty per cent of the book value of such plant and machinery as on the 1st day of April, 2004; (v) an undertaking owned by an Indian company and set up for reconstruction or revival of a power generating plant, if- (a) such Indian company is formed before the 30th day of November, 2005 with majority equity participation by public sector companies for the purposes of enforcing the security interest of the lenders to the company owning the power generating plant and such Indian company is notified before the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... if any, for such transfer as recorded in the accounts of the eligible business does not correspond to the market value of such goods or services as on the date of the transfer, then, for the purposes of the deduction under this section, the profits and gains of such eligible business shall be computed as if the transfer, in either case, had been made at the market value of such goods or services as on that date : Provided that where, in the opinion of the Assessing Officer, the computation of the profits and gains of the eligible business in the manner hereinbefore specified presents exceptional difficulties, the Assessing Officer may compute such profits and gains on such reasonable basis as he may deem fit. Explanation.-For the purposes of this sub-section, "market value", in relation to any goods or services, means- (i) the price that such goods or services would ordinarily fetch in the open market; or (ii) the arm's length price as defined in clause (ii) of section 92F, where the transfer of such goods or services is a specified domestic transaction referred to in section 92BA. (9) Where any amount of profits and gains of an undertaking or of an enterprise in the ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... red in a scheme of amalgamation or demerger on or after the 1st day of April, 2007. (13) Nothing contained in this section shall apply to any Special Economic Zones notified on or after the 1st day of April, 2005 in accordance with the scheme referred to in sub-clause (iii) of clause (c) of sub-section (4). 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 or State Government) and executed by the undertaking or enterprise referred to in sub-section (1). 9.2 On perusal of above provisions, it is discernible that the taxpayers are eligible for claim of deduction u/s. 80-IA(4), inter alia, for development of airports. It is not necessary that the taxpayers develop airport as well as operate and/or maintain itself the airport, and even if the airport is developed and handed over for operation to the owner of the infrastructure facility, it will be sufficient compliance of section 80-IA(4), which is itself clear from the language of the provisions of Section 80IA(4)(i). It is ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... he assessee is being paid promptly by AAI on submission of the bills as is evident from the fund flow statement submitted by the assessee and hence the assessee is not taking financial risks, but on perusal of the same and other terms and conditions, funds are released after certification by the Engineers-in-charge of AAI that the work has been performed as per quality specifications specified in the tender documents/agreement entered into by the assessee with AAI, and thereafter, the payments are released in timely manner, which is itself in the interest of AAI to expedite the completion of the work within the stipulated time framework to meet deadlines as well as to avoid cost escalations in case of delays. Said prompt payment does not mean that the assessee has not taken the financial risks associated with execution of development of New Expandable Modular Integrated Terminal Building at Raja Bhoj Airport, Bhopal. It is also observed that the assessee has not merely carried out construction, but also installed Air conditioning plant, Fire Fighting safety measure, Electrification, Display system etc. within the building developed by the assessee. The assessee has filed copies of ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... iolation of patent etc., the assessee shall be liable for the same and indemnify AAI for the damages suffered by AAI. It is also stipulated that all charges on account of Octroi, Terminal or Sales Tax and other duties on materials obtained for the construction shall be borne by the assessee. No doubt, some of the materials as provided in para 15(b) is to be provided by AAI as is listed in Schedule-B. All costs of loading, transportation, unloading etc. has to be borne by the assessee. The material, which is supplied by AAI, shall be incorporated in the work and accordingly billed to AAI for which AAI shall make deduction while making payment for the material supplied by AAI. There are other deductions from the running bills such as mobilisation advance released by AAI, secured advance released by AAI and amounts are withheld towards security deposits. The assessee is also made to comply with all the laws relating to employment of labour for the purpose of completion of awarded work and all risks associated such as accidents, damages, claims, violation of any Rules and Regulations shall be borne by the assessee. The assessee, as per clause 25.1 of GCC is required to employ technical ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... of material and there is a provision for providing bank guarantee by the assessee to the AAI, which is by way of performance guarantee to the tune of 5% of the contract value issued by Nationalized/Scheduled bank. It is also seen from the fund flow statement that the assessee has been timely paid by AAI on submission of bill, but that does not derogate from the fact that the assessee has taken onerous responsibility and such timely payments are in the interest of AAI itself for timely completion of the work and maintaining strict time schedules and quality specifications and standards. The assessee is also eligible to get mobilisation advance not exceeding to 10% of the contract (upto Rs. 5 crores) against bank guarantee from the Nationalized/Scheduled banks, which advance carries the rate of interest mentioned at Sl. No. 30 of Schedule-E of NIT, which will be utilized for the purpose of contract only. Thus, the mobilisation advance released by AAI is not free of cost but carries interest costs which is to be borne by the assessee apart from being accountable for such mobilisation advance in case of any deficiency or defect in performance .This mobilisation advance is also a secur ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... etc." 9.6 It is also stipulated in para-4 of SCC-Electrical that on award of work, the assessee shall prepare and furnish the shop drawings for approval to the Engineer-in-charge before execution as stipulated as under : "4. DRAWINGS On award of work, the successful tenderer shall prepare and furnish the shop drawings for approval to the Engineer-in-charge before execution. Such drawings shall be based upon item specifications, local laws and regulations for the following works. a) Internal & External Electrification including UPS system. b) Air-conditioning & BMS system. c) Fire Alarm, Fire fighting including sprinkler system d) Public Addressing System e) FIDS System f) CCTV System g) Conveyors Belts, Escalators & Elevators h) Sub station equipments The shop drawings for complete systems shall be submitted within one month of placement of work order. The contractor shall not proceed with the installation works until the drawings are approved." 9.7 The assessee has to hand over four sets of "AS - Built" drawings to AAI on completion of work as stipulated in para 27 of SCC-Electrical. It is also stipulated in para 42 that the assessee shall be continued to b ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... is taking full financial risks and responsibility for these advances. Further, these mobilisation/secured advances are adjusted against the running bills submitted by the assessee. We have also perused the running bills as well as the ledger account submitted by the assessee in the paper book. 9.9 The assessee has also relied upon the judgment and order of Hon'ble Gujarat High Court in the case of PCIT(Central) v. Monte Carlo Construction Limited R/Tax Appeal 786 of 2023, wherein Hon'ble Gujarat High Court dismissed the appeal of Revenue and upheld the order of ITAT, Ahmedabad in the case of Monte Carlo Construction Limited in ITA no. 1544/Ahd/2008 wherein Ahmedabad-Tribunal allowed the deduction u/s 80IA(4) by holding that the taxpayer is a developer, wherein Hon'ble Gujarat High Court held that no substantial question of law arises and dismissed the appeal of the Revenue and allowed the deduction u/s 80IA(4) ,by holding as under: 3.7. The Tribunal after considering the submissions of the assessee and after analysing the facts of the case arrived at the following conclusion: "11.16 On the detailed analysis of the above project, we find that the assessee meets the criteria lai ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... in the tender documents furnished by the assessee, it is clear that the assessee was not a works contractor simply but a developer and hence, the explanation to section 80-IA(13) does not apply to the assessee." 3.8. The Tribunal also dealt with the contention raised on behalf of the Revenue with regard to the issue of award of contract by the MPRDCL, a nodal agency being wholly owned undertaking of the Government of Madhya Pradesh as such contention was raised that the assessee was only awarded the works contract and therefore no development was undertaken by the assessee. The Tribunal observed as under: "11.25. The next aspect of the case is that the impugned project for the road development as discussed above was awarded by the MPRDCL- a nodal agency being a wholly owned undertaking of the Government of Madhya Pradesh. MPRDCL in its books of accounts will not record the payment made to the assessee in the form of expenses. It is because MPRDCL against such expenditure has not shown any income. It also appears that MPRDCL is not claiming any deduction under section 80IA(4) of the Act. At the time of hearing, a question was raised to the learned DR but he failed to provide an ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... 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 or by an authority or a board or a corporation or any other body established or constituted under any Central or State Act; (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:" 3.12. Explanation below Subsection 13 of Section 80IA of the Act was introduced by the Finance (No.2) of the Act, 2009 with effect from 01.04.2000, 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... relevant clauses of the Tender Documents in support of its contention of being "Developer of the Infrastructure Facilities" 3.14. The CIT (Appeal) has further examined as to whether the project assigned to the assessee was in capacity of a contractor or the same was executed as a developer with respect to the canal projects, agreements were entered into by the assessee was analysed and tendered documents containing the terms and conditions of the project were taken into consideration with respect to the following aspects as to the entire investment in the project was to be made by the assessee. Interim payment to the tune of estimated contract value in respect of the development work done for each month after retention and other adjustments were to be made, security deposit was to be paid by the assessee, there was a penalty for delay, procurement of the material was the responsibility of the assessee, procurement of land for camp, for shop, labour camp etc. also the employment of qualified engineers, action and compensation in respect of bad work, defect liability of the accidents to persons in relation to Workman Compensation Act, indemnity insurance of the workmen employed. T ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... above M/s. N.C.C-M.S.K.E.L. (JV) vs. ITO Asst. Years -2007-08 & 2008- 09 organizations were merged in April 1995 by an Act of Parliament, namely, the Airports Authority of India Act, 1994 and has been constituted as a Statutory Body and was named as Airports Authority of India (AAI). Therefore, AAI is a statutory body and in terms of the plain language of Section 80-IA(4) of the Act, and if other conditions of eligibility are satisfied by the assessee, it would be eligible for claim of deduction under Section 80-IA(4) of the Act, if the assessee has entered into an agreement with any statutory body for carrying out development work. Therefore, in our considered view, claim of deduction under Section 80-IA(4) of the Act cannot be denied to the assessee only on the ground that since the assessee has entered into a contract with AAI, which does not constitute as a Central / State Government, the assessee is not eligible for claim of deduction under Section 80-IA(4) of the Act. Other conditions for eligibility of claim of deduction under Section 80-IA(4) of the Act 13. Now we shall proceed to analyze whether other conditions for eligibility of claim of deduction under Section 80-IA ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... assessee is engaged in "development" for any "new infrastructural facility" or is engaged only in carrying out repair works or other incidental works, not amounting to development of a new infrastructural facility. In order to be eligible for claim of deduction under Section 80-IA(4) of the Act and to qualify as a "developer", the assessee should be engaged in "development" of a new infrastructural facility and mere "repairs and maintenance" or "upkeep" or "revamp" work of existing facility and other incidental works would not qualify for deduction under Section 80-IA(4) of the Act, being primarily in the nature of "works contract" only. Once the essential threshold of assessee being engaged in "development" of a "new infrastructural facility" is satisfied, as a subsequent step, we need to analyze whether the "other conditions" for qualifying as a "developer" are satisfied i.e. the assessee has taken the necessary financial and entrepreneurial risk associated with development of a new project, so as to qualify as a "developer". 17. In this case, we observe that the assessee entered into contract a contract for construction of new domestic arrival block at Sardar Vallabhbhai Pate ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... atent or design etc. (refer Pages 132 of Paper Book). Accordingly, looking into the facts of the instant case, it is observed that the assessee has M/s. N.C.C-M.S.K.E.L. (JV) vs. ITO Asst. Years - 2007-08 & 2008-09 undertaken to bring into existence a new infrastructure facility being new domestic arrival block at Sardar Vallabhbhai Patel International Airport, Ahmedabad and further the assessee is also undertaken various financial and entrepreneurial risks required to be borne by a "Developer" of a project viz. providing bank guarantee to AAI, procurement of certain materials by the assessee at it's own cost during the construction phase, preparation of various architectural designs relating to the project for approval of AAI etc. which all support the fact that the assessee is in the instant facts is a "developer" within the meaning of Section 80-IA of the Act and is eligible for claim of deduction under Section 80-IA(4) of the Act. We observe that Ld. CIT(A) undertook a detailed analysis of the scope of work undertaken by the assessee and the various risks and responsibilities undertaken by the assessee and then came to conclusion that assessee qualifies as a "developer" and ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... Hyderabad order in the case of GVPR Engineers Limited (2012) 32 CCH 0296 (xiii) ITAT, Pune Bench order in the case of Laxmi Civil Engineers Private Limited v. Addl CIT in ITA no. 766/PN/09 &Ors. (xiv) ITAT, Hyderabad Bench order in the case of Gayatri Projects Limited v. ACIT in ITA no. 211/Hyd/2008 & Ors. (xv) ITAT Hyderabad order in the case of Koya & Co. Construction Private Limited v. ACIT (2012) 32 CCH 0043 (xvi) ITAT, Mumbai Bench, order in the case of Pratibha Industries Limited v. ACIT in ITA No. 2197 to 2199/Mum/20008 dated 19.12.2012 9.13 All these documents filed by the assessee which are part of record, contentions raised before us as well case laws relied upon the assessee, clearly point out that the assessee is a developer and not merely works contractor and is eligible and entitled for deduction u/s. 80-IA(4) of the Act. Thus, keeping in view the aforesaid facts and circumstances of the case and judicial pronouncements relied upon by the assessee, we hold that the assessee is a developer within the meaning of section 80-IA(4) and is eligible for deduction u/s. 80-IA(4).Thus, we allow the claim of the assessee for deduction u/s 80IA(4). We order accordingly. ..... X X X X Extracts X X X X X X X X Extracts X X X X
|
