Shri Harmitsing Bhagwansing Sethi, Nagpur V. Income tax Officer, Ward.1, Akola, Akola

ITA 115/NAG/2013

• Counselvise Citation: [2015] 134 COUNSELVISE.COM (IT) 1715 (ITAT-NAGPUR)
• Duration Of Justice: 2 year(s) 4 month(s) 23 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-08-2015
• Appeal Filed By: Assessee
• Bench Allotted: DB
• Assessment Year: 2008-2009
• Appeal Filed On: 05-04-2013
• Court: TRIBUNAL
• Department Lawyers: NARENDRA KANE
• Assessee Lawyers: S C THAKAR; C J THAKAR
• Keywords: Difference of opinion; Change of opinion
• Section: 143(3); 263; 2

Judgement Text

1 ITA NO. 115/NAG/2013 IN THE INCOME TAX APPELLATE TRIBUNAL, NAGPUR BENCH, NAGPUR BEFORE SHRI MUKUL K. SHRAWAT, JUDICIAL MEMBER AND SHRI SHAMIM YAHYA, ACCOUNTANT MEMBER. I.T.A. NO.115 /NAG/2013 ASSESSMENT YEAR : 2008 - 09 SHRI HARMITSINGH BHAGWANSINGH SETHI, THE INCOME - TAX OFFICER, 1 ST FLOOR, NARMADA PLAZA, V/S. WARD - 4, AKOLA. OPP. CHILDREN TRAFFIC PARK, VIP ROAD, DHARAMPETH, NAGPUR - 440010. PAN AAFPS 63 76H. APPELLANT. RESPONDENT. APPELLANT BY : SHRI C.J. THAKAR & SHRI S.C. THAKAR. RESPONDENT BY : SHRI NARENDRA KANE. DATE OF HEARING : 07 - 07 - 2015 DATE OF PRONOUNCEMENT : 28 TH AUGUST, 2015 O R D E R PER MUKUL K. SHRAWAT, J.M. . THIS IS AN APPEAL FILED BY THE ASSESSEE ARISING FROM AN ORDER OF LEARNED COMMISSIONER OF INCOME - TAX - I, NAGPUR DATED 31 - 01 - 2013 PASSED UNDER SECTION 263 OF I.T. ACT. THE APPELLANT HAS RAISED THE FOLLOWING GROUNDS: 1. THAT THE LEARNED COMMISSIONER OF INCOME TAX HAS ERRED IN WITHDRAWING CLAIM OF DEDUCTION U/S 80IA(4). 2 ITA NO. 115/NAG/2013 2. THAT THE LEARNED COMMISSIONER OF INCOME TAX HAS ERRED IN SAYING THAT EXPLANATION BELOW SECTION 80IA(13) WAS EFFECTIVE FROM 1 - 4 - 2000 AS AGAINST THE DATE OF AMENDMENT EFFECTIVE FROM 1 - 4 - 2009. 3. THAT THE LEARNED COMMISSIONER OF INCOME TAX HAS ERRED IN SAYING THAT EXPLAN ATION BELOW SECTION 80IA(13) WAS APPLICABLE TO THE ASSESSEE TREATING HIM A WORK CONTRACTOR. 4. THAT THE LEARNED COMMISSIONER OF INCOME TAX HAS NOT EXCEPTED THE FACTS THAT THE ASSESSEE IS COVERED U/S 80IA(4). 2. FACTS IN BRIEF AS MENTIONED IN THE IMPU GNED ORDER PASSED UNDER SECTION 263 OF I.T. ACT WERE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEVELOPING THE ELECTRICAL DISTRIBUTION INFRASTRUCTURE FACILITY. THE LEARNED COMMISSIONER HAS MENTIONED THAT THE ASSESSEE HAS ACTED AS A CONTRACTOR. ACCORD ING TO THE LEARNED COMMISSIONER THE ASSESSEE HAS INSTALLED HIGH TENSION/LOW TENSION ELECTRIC LINES AND TRANSFORMERS AT THE INSTANCES OF THE CONTRACTEE. ACCORDING TO THE LEARNED CIT, THE ASSESSING OFFICER HAS GRANTED DEDUCTION UNDER SECTION 80IA OF THE I.T . ACT OF ` .92,01,893/ - VIDE AN ASSESSMENT ORDER UNDER SECTION 143(3) DATED 30 TH DEC., 2010 . THE OBJECTION OF THE LEARNED CIT WAS THAT THE ASSESSEE IN THE CAPACITY OF A CONTRACTOR ENGAGED IN THE WORK OF LAYING DOWN OF NET WORK OF TRANSMISSION AND DISTRIBUTION LINES FOR MSEDCL. SINCE THE ASSESSEE HAD WORKED AS A C ONTRACTOR , THERE FORE, NOT ENTITLED FOR THE DEDUCTION UNDER SECTION 80IA ( 4 ) READ WITH EXPLANATION INSERTED WITH EFFECT FROM 01 - 04 - 2000. AN OBSERVATION WAS MADE THAT THE IMPUGNED ASSESSMENT ORDER HAS NOT APPRECIATED THE CORRECT POSITION OF LAW , HENCE THE SAID ORDER WAS PREJ UDICIAL TO THE INTEREST OF THE REVENUE. 3. ON THE OTHER HAND, THE ASSESSEE HAS ARGUED THAT THE ASSESSING OFFICER HAD ENQUIRED ABOUT THE ELIGIBILITY OF THE CLAIM OF DEDUCTION UNDER SECTION 80IA AND AFTER CONSIDERING THE EXPLANATION OF THE ASSESSEE THE DEDUC TION WAS ALLOWED. IT WAS FURTHER EXPLAINED THAT THE SAID WORK WAS ALLOCATED BY MSEDCL TO COMPLETE THE INFRASTRUCTURE PROJECT OF DEVELOPING THE ELECTRICAL DISTRIBUTION AND LAYING OF NET - 3 ITA NO. 115/NAG/2013 WORK OF HIGH TENSION ELECTRIC LINES. SINCE IT WAS A PROJECT DEVELOPED BY THE ASSESSEE COMPRISING ERECTION OF NEW LINES, THEREFORE, ENTITLED FOR THE DEDUCTION UNDER SECTION 80IA OF I.T. ACT. BEFORE THE LEARNED COMMISSIONER, THE ASSESSEE HAS FURTHER PLEADED AS UNDER : IN ITS WRITTEN SUBMISSIONS, THE ASSESSEE SAYS THAT THE A.O. DID ENQUIRE ABOUT THE ELIGIBILITY OF THE ASSESSEE TO THIS CLAIM OF DEDUCTION U/S 80IA AND THAT VIDE LETTER DT. 29.11.2010, AN EXPLANATION WAS FURNISHED BEFORE THE A.O. THE ASSESSEE IS SAID TO BE ENGAGED IN THE BUSINESS OF DEVELOPING ELECTRICAL D ISTRIBUTION, INFRASTRUCTURE FACILITIES AND ELECTRICITY DISTRIBUTION BY LAYING NET WORK OF NEW DISTRIBUTION OF HIGH TENSION AND LOW TENSION ELECTRIC LINES. THE WORK WAS ALLOCATED BY MSEDCL TO COMPLETE THE INFRASTRUCTURE PROJECT. THE WORK MAINLY COMPRISED ERECTION OF NEW LINES FOR THE INFRASTRUCTURE DEVELOPMENT OF PARTICULAR AREAS. SECTION 80IA(4) APPLIES TO THE CLAIM OF THE ASSESSEE. IT IS IN FACT A DEVELOPER AND WOULD BE UNDERSTOOD TO BE ENGAGED IN DEVELOPING INFRASTRUCTURE FACILITIES WHICH WILL BE MAINTAINED BY MSEDCL. THE BID DOCUMENTS AND THE AGREEMENTS WITH THE MSEDCL MAKING IT CLEAR THAT THE ASSESSEE IS INDEED ENTITLED TO DEDUCTION U/S 80IA. WHETHER OR NOT THE AGREEMENTS USE THE WORD CONTRA CTOR, IT DOES NOT BY ITSELF DISENTITLE THE ASSESSEE FROM BEING A DEVELOPER. THE NATURE OF ACTIVITY UNDERTAKEN BY THE ASSESSEE ARE DEVELOPING ELECTRICAL DISTRIBUTION INFRASTRUCTURE FACILITY. IT IS ALSO A FACT THAT MSEDCL HAS NOT CLAIMED ANY DEDUCTION U/ S 80IA FOR THE WORK COMPLETED BY THE ASSESSEE. EXPLANATION BELOW SECTION 80IA(13) DOES NOT APPLY SINCE THE ASSESSEE IS A DEVELOPER AND NOT A CONTRACTOR PER SE. DECISIONS IN THE CASE OF ACIT V/S. INDWELL LIANINGS (P) LTD. (ITA 1631 AND 1632/MADRAS/2007 ) DECIDED ON 13.6.2008 BY CHENNAI BENCH A OF ITAT, PATEL ENGINEERING COMPANY V/S. ACIT 84 TTJ 646 (MUM) AND CIT V/S. ABG HEAVY INDUSTRY LTD. DECIDED BY MUMBAI HIGH COURT APPLY TO THE FACTS OF THE ASSESSEES CASE. MOREOVER, IN A SIMILAR CASE TO THAT OF T HE ASSESSEE DECISION IN THE CASE OF OM METAL INFRA PROJECT (P) LTD. V/S. CIT - I, - REVISION U/S 263 WAS OVERRULED BY ITAT JAIPUR BENCH A. IT IS THEREFORE, THE CLAIM THAT THE A.O. HAD PASSED THE ASSESSMENT ORDER AFTER CONSIDERING ALL MATERIAL ON RECOR D AND APPLICATION OF MIND; SUCH ORDER BEING NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST OF REVENUE SHOULD NOT BE REVISED IN A PROCEEDING U/S 263. 4. THE FIRST OBJECTION OF THE LEARNED COMMISSIONER WAS THAT AS PER THE AGREEMENT WITH MAHARASHTRA STATE ELECTRICITY DISTRIBUTION COMPANY LTD. 4 ITA NO. 115/NAG/2013 (MSEDCL) THE ASSESSEE HAS SIGNED THE AGREEMENT AS A CONTRACTOR. AS PER THE TERMS OF THE AGREEMENT THE ASSESSEE WAS REQUIRED TO CARRY OUT ERECTION AND CONSTRUCTION ETC. AGAINST THE PAYMENT MENTIONED IN THE CONTR ACT AGREEMENT. THE MATERIAL WAS REQUIRED TO BE USED AS APPROVED BY MSEDCL AND THE CONSTRUCTION WAS TO BE CARRIED OUT AS PER THE STANDARD METHOD APPROVED BY MSEDCL. THERE WAS A PROVISION FOR A MONTHLY RUNNING BILL TO RELEASE ATLEAST 90% OF THE BILLING AMOUN T TOWARDS MATERIAL, ERECTION AND COMMISSION OF THE PROJECT. THERE WAS ONE MORE CLAUSE THAT ATLEAST 10% OF THE BILL VALUE WOULD BE RETAINED AND TO BE RELEASED AFTER THE COMPLETION OF THE PERIOD OF DEFECT LIABILITY IS OVER. THEREFORE, THE LEARNED COMMISSION ER HAS REPEATED THAT IN THE CONTRACT BETWEEN THE ASSESSEE AND MSEDCL, THE ASSESSEE WAS STYLED AS A CONTRACTOR . ALTHOUGH THE LEARNED COMMISSIONER HAS MENTIONED FEW DECISIONS, NAMELY, CIT V/S. ABG HEAVY INDUSTRIES 322 ITR 323 (MUM) AND PATEL ENGINEERING 9 4 ITD 411 BUT FINALLY CAME TO THE CONCLUSION THAT THE DECISION OF B.T. PATIL & SONS 35 SOT 171 (MUM)(LB) WAS TO BE APPLIED ON THE FACTS OF THE CASE. LEARNED COMMISSIONER HAS, THEREFORE, DIRECTED THE ASSESSING OFFICER TO DISALLOW THE CLAIM OF DEDUCTION UNDE R SECTION 80IA(4) BECAUSE THE ASSESSEE HAD ACTED ONLY AS A CONTRACTOR. AGAINST THE SAID DIRECTION TO DISALLOW THE CLAIM OF DEDUCTION, NOW THE ASSESSEE IS IN APPEAL. 5. FROM THE SIDE OF THE APPELLANT LEARNED A.R. MR. C.J. THAKAR APPEARED AND AT THE OUTSET P LEADED THAT WHILE PASSING THE ORDER UNDER SECTION 143(3) THE ASSESSING OFFICER HAS THOROUGHLY EXAMINED THE FACTS OF THE CASE AND THEREAFTER CAME TO THE CONCLUSION THAT THE ASSESSEE IS ENTITLED FOR THE EXEMPTION UNDER SECTION 80IA(4). LEARNED A.R. HAS PLEAD ED THAT A REPLY WAS GIVEN TO THE ASSESSING OFFICER DURING THE COURSE OF ASSESSMENT PROCEEDINGS DATED 29 TH NOV., 2010 WHEREIN IT WAS EXPLAINED THE TERMS OF THE CONTRACT AND THE WORK ASSIGNED TO THE ASSESSEE. COPY OF THE AGREEMENT WITH MSEDCL HAS ALSO BEEN SUBMITTED BEFORE THE ASSESSING 5 ITA NO. 115/NAG/2013 OFFICER. IT IS ARGUED THAT MERELY BECAUSE THE TERM CONTRACTOR IS USED IN THE SAID DEVELOPMENT AGREEMENT WITH MSEDCL, THERE WAS NO RESTRICTION ON THE ASSESSEE TO EXPLAIN THE CORRECT FACTUAL POSITION THAT THE CONTRACT WAS SIGNED AS A DEVELOPER AND NOT AS A CONTRACTOR. LEARNED A.R. HAS ALSO PLEADED THAT THE INITIAL YEAR OF THE CLAIM WAS ASSESSMENT YEAR 2006 - 07 IN WHICH VIDE AN INTIMATION UNDER SECTION 143(1) THE CLAIM OF DEDUCTION WAS ALLOWED. 5.1 A LEGAL ARGUMENT HAS ALSO BEEN RAISED THAT THE LEARNED COMMISSIONER WHILE PASSING THE ORDER UNDER SECTION 263 HAS PLACED RELIANCE O N THE DECISION OF B.T. PATIL & SONS (SUPRA) BUT THAT ORDER OF THE LARGER BENCH WAS NOT GIVEN EFFECT AND WHILE PASSING THE ORDER, ITAT B - BENCH, PUNE IN ITA NO. 1408 AND 1409/PN/2013 FOR ASSESSMENT YEARS 2000 - 01 AND 2001 - 02 ORDER DATED 28 - 02 - 2013 HAS FOLLOW ED THE DECISION OF BOMBAY HIGH COURT PRONOUNCED IN THE CASE ABG HEAVY INDUSTRIES. A CONCLUSION WAS DRAWN THAT THE LAW AS INTERPRETED BY THE THIRD MEMBER OF THE TRIBUNAL WAS NO LONGER A GOOD LAW ; (REFER PARA 10 OF THE SAID ORDER OF THE TRIBUNAL ). AFTER AN E LABORATE DISCUSSION IT WAS D ECIDED THAT THE DEDUCTION UNDER SECTION 80IA(4) WAS TO BE ALLOWED. LEARNED A.R. HAS ALSO MENTIONED THAT EVEN IN THE CASE OF LAXMI CIVIL ENGINEERING P. LTD. (ITA NO.766/PN/09, 254/PN/08, 431/PN/07 FOR A.Y. 2003 - 04 TO 2006 - 07 ORD ER DATED 8/6/2011 ) THE FACTS AND CIRCUMSTANCES OF B.T. PATIL & SONS 126 TTJ 507 HAVE BEEN DISCUSSED BY RESPECTED ITAT, PUNE AND THE CLAIM OF THE ASSESSEE WAS ALLOWED. 6. FROM THE SIDE OF THE REVENUE, LEARNED D.R. MR. NARENDRA KANE APPEARED AND SUPPORTED THE ACTION OF LEARNED COMMISSIONER. HIS MAIN ARGUMENT IS THAT THE ASSESSEE HAS BEEN WORKING AS A CONTRACTOR , THEREFORE, NOT ENTITLED FOR THE DEDUCTION UNDER SECTION 80IA(4) OF I.T. ACT. 6 ITA NO. 115/NAG/2013 7. WE HAVE HEARD BOTH THE SIDES AT SOME LENGTH AND CAREFULLY PERUSED THE ORDERS OF THE R EVENUE AUTHORITIES IN THE LIGHT OF A SHORT COMPILATION FILED BEFORE US. IN THE COMPILATION LEARNED A.R. HAS FURNISHED THE WRITTEN SUBMISSIONS FILED BEFORE THE AUTHORITIES BELOW AND TWO ORDERS OF THE PUNE TRIBUNAL IN SUPPORT OF THE CONTENTIONS. HOWEVER, AT THE OUTSET WE HAVE FOUND THAT IN THE ASSESSMENT ORDER THE ASSESSING OFFICER HAS NOT DISCUSSED THE ELIGIBILITY OF THE CLAIM OF DEDUCTION UNDER SECTION 80IA(4) OF THE I.T. ACT. THE ASSESSING OFFICER HAS IN FACT CONSIDERED THE COMPUTATION PART OF THE SAID DEDUCTION. FOR READY REFERENCE THE RELEVANT PARAGRAPH OF THE ASSESSING OFFICER IS REPRODUCED BELOW SO AS TO EXAMINE THE MANNER IN WHICH THE ASSESSING OFFICER HAS CONSIDERED THIS ISSUE IN THE ASSESSMENT ORDER : 2 THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEVELOPING ELECTRICAL DISTRIBUTION INFRASTRUCTURE FACILITY AND DISTRIBUTION BY LAYING NETWORK OF NEW DISTRIBUTION LINES IN THE NAME & STYLE AS M/S MANMIT ELECTRICALS & CIVIL CONTRACTORS. IN HIS RETURN OF INCOME THE ASSESSEE HAS CLAIMED DEDUCTION OF ` .95,30,080/ - U/S 80 IA(4)(IV)(B). THE ASSESSEE HAS MAINTAINED SEPARATE TRADING & PROFIT AND LOSS ACCOUNT FOR THE AG TURNKEY BUSINESS AND FOR OTHER BUSINESS NOT COVERED UNDER SECTION 80IA.S THE ASSESSEE HAS ALSO ENCLOSED AUDIT REPORT U/S 80I OF THE I.T. ACT IN FORM NO. 10CCB (AS PRESCRIBED IN RULE 18BBB. THE ASSESSEE HAS MAINTAINED REGULAR BOOKS OF ACCOUNTS AND THE SAME HAVE BEEN AUDITED. THE AUDI T REPORT IN FORM NO. 3CB AND 3CD AND AUDITED PROFIT & LOSS ACCOUNT AND BALANCE SHEET HAVE BEEN ENCLOSED WITH THE RETURN. DURING THE COURSE OF ASSESSMENT PROCEEDINGS ASSESSEES COUNSEL PRODUCED BOOKS OF ACCOUNTS, PURCHASE BILLS, BILLS/VOUCHERS OF EXPENSE S ETC. AND THE SAME WERE DULY VERIFIED ON TEST CHECK BASIS. BANK ACCOUNT STATEMENT HAS BEEN FURNISHED, VERIFIED AND KEPT ON RECORD. THE ASSESSEES COUNSEL HAS ALSO FURNISHED VARIOUS DETAILS AND THE SAME HAVE BEEN PLACED ON RECORD AFTER VERIFICATION. 3 . IN HIS TRADING & PROFIT & LOSS ACCOUNT PERTAINING TO AG TURNKEY BUSINESS FOR WHICH THE ASSESSEE HAS CLAIMED DEDUCTION U/S 80IA(4)(IV)(B), IT IS SEEN THAT BANK INTEREST OF ` .3,28,188/ - AND DISCOUNT RECEIVED OF ` .33,031/ - HAS BEEN CREDITED. AS THE SAID INCOME CANNOT BE SAID TO BE DERIVED FROM THE BUSINESS UNDERTAKING SPECIFIED IN SECTION 80IA, THE COUNSEL WAS ASKED TO EXPLAIN AS TO WHY THE SAME SHOULD NO5T BE EXCLUDED WHILE COMPUTING 7 ITA NO. 115/NAG/2013 DEDUCTION U/S 80IA AND TAXED AS INCOME FROM OTHER SOURCES IN THE H ANDS OF THE ASSESSEE. 4. THE COUNSEL SUBMITTED HIS REPLY ON 27/12/2010 STATING AS UNDER: THE ASSESSEE HAS RECEIVED AN INTEREST ON FIX DEPOSIT AT ` .3,28,187/ - WHICH WAS MADE FOR BANK GUARANTEE FOR THE PURPOSE OF CONTRACT OF TURNKEY PROJECT WORK COVERED U/S 80 - IA(4)(IV)(B). AS INTEREST ON FIX DEPOSIT IS AN INCOME RELATED TO THE UNDERTAKING WORK WHICH IS EXEMPTED U/S 80IA(4)(IV)(B) IT IS TO BE ALLOWED AS EXEMPTED INCOME UNDER SAID SECTION. BESIDES THE ASSESSEE HAS RECEIVED DISCOUNT AT ` .33,031/ - WHICH IS RECEIVED ON THE RAW MATERIAL PURCHASE EFFECTED FOR USE IN EXECUTION OF EXEMPTED WORK U/S 80 - IA(4)(IV)(B). AS DISCOUNT IS ON RAW MATERIAL PURCHASE RELATED WITH THE WORK EXEMPTED U/S 80IA(4)(IV)(B) THIS IS ALSO TO BE EXEMPTED UNDER SAID SECTION. 5. THE SUBMISSION OF THE ASSESSEE HAS BEEN DULY CONSIDERED. THOUGH THE ASSESSEE HAS JUSTIFIED THE NEED OF KEEPING MONEY IN FDRS, HE HAS FAILED TO SUBSTANTIATE AS TO HOW AND WHY THE IN COME ARISING OUT OF THE DEPLOYMENT OF ABOVE FUNDS, CAN BE CONSIDERED AS DERIVED FROM OR IS ARISING OUT OF THE ACTIVITIES ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT. IN THE JUDGMENT OF THE MUMBAI AND OTHER HIGH COURTS AS WELL AS HONBLE SUPREME COURT , IT HAS BEEN CLEARLY HELD THAT OTHER INCOME, IN THE NATURE OF INTEREST AS DEPOSITS FOR ELECTRICITY, MARGIN MONEY FOR LC/BANK GUARANTEE, INSURANCE CLAIM, INCOME ON SALE OF SCRAPE, BY PRODUCT OF SUCH UNIT ETC. IS NOT ELIGIBLE FOR DEDUCTION U/S 80IA/80I B OF THE ACT. THESE LEGAL RATIOS WERE PRONOUNCED IN THE FOLLOWING JUDGMENTS: I PANDIAN CHEMICALS [262 ITR 278 (SC)]. II. TUTICORIN ALKALYS CHEMICALS & FERTILIZERS [227 ITR 172 (SC)]. III. STERLING FOODS [237 ITR 579 (SC)]. IV. CAMBAY ELECTRICALS [113 ITR 84 (SC)] V. CIT V/S. RAVI RATAN EXPORT LTD. [246 ITR 443 (BOM)]. VI. SOUTH INDIA SHIPPING CORPORATION LTD. [240 ITR 24 (MAD)]. 8 ITA NO. 115/NAG/2013 VII. ABAD ENTERPRISES V/S. CIT (2002) {253 ITR 319 (KEWRLA). VIII. CIT V/S. T.C. USHA (2003) [264 ITR 368 (KERALA). IX. CIT V/S. CEMENT DISTRIBUTION LTD. (1994) (208 ITR 355 (DEL)]. X. NIRAM INDUSTRIES LTD. V/S. ACIT [95 ITD 199 (AHMEDABAD)]. XI. RAJKUMAR IMPEX (P) LTD. V/S. DCIT (2008) [15 DTR (MAD) 118]. 7.1 AFTER MENTIONING FEW CASE LAWS THE ASSESSING OFFICER HAS DISCUSSED THE TWO EXPRESSIONS USED IN THE STATUTE VIZ. ATTRIBUTABLE TO AND DERIVED FROM. ON THE BASIS OF THE FEW JUDGMENTS THE BANK INTEREST AS ITSELF RECEIVED BY THE ASSESSEE WAS NOT TAKEN INTO ACCOUNT AS ELIGIBLE INCOME FOR THE PURPOSE OF COMPUTATION OF DEDUCTION UNDER SECTION 80IA. WITH THE RESULT, THE DEDUCTION CLAIMED BY THE ASSESSEE OF ` .95,30,080/ - WAS RESTRICTED TO ` .92,01,893/ - . 8. LEARNED COMMISSIONER HAS PERUSED THE SAID ASSESSMENT ORDER BUT HE WAS OF THE OPINION THAT INSTEAD OF CONSIDERING THE CORRECTNESS OF THE COMPUTATION OF THE SAID DEDUCTION THE ASSESSING OFFICER WAS EXPECTED TO FIRST EXAMINE WHETHER THE ASSESSEE WAS ELIGIBLE FOR THE DEDUCTION AS PRESCRIBED UNDER SECTION 80IA(4) OF I.T. ACT. WE HAVE ALREADY MENTIONED THE REASONS GIVEN BY LEARNED COMMISSIONER TO INVOKE THE PROVISIONS OF SECTION 263 OF I.T. ACT IN THE PRESENT CASE. WITHOUT REPEATING THOSE REASONS, IN SHORT, THE MAIN BASIS OF HOLDING THAT THE ASSESSEE WAS NOT ELIGIBLE FOR THE DEDUCTION UNDER SECTION 80IA(4), LEARNED COMMISSIONER HAS PLACED RELIANCE ON A DECISION OF A LARGER BENCH OF ITAT, MUMBAI IN THE CASE OF B.T. PATIL AND SONS, BELGAON P. LTD. 35 SOT 171 (MUM. ) (LB) IT IS TRUE THAT WHEN THE LEARNED COMMISSIONER HAS DIRECTED NOT TO ALLOW THE CLAIM OF DEDUCTION, THE DECISION OF B.T. PATIL AND SONS (SUPRA) WAS IN EXISTENCE. HOWEVER, THE LATEST POSITION IS THAT AFTER THE DECISION OF HONBLE BOMBAY HIGH COURT PRONOU NCED IN THE CASE OF ABG HEAVY INDUSTRIES 322 ITR 323 THE VIEW TAKEN BY THE LARGER BENCH WAS REVERSED. IT IS VERY MUCH EVIDENT FROM A SUBSEQUENT ORDER OF ITAT - B BENCH, PUNE PRONOUNCED IN THAT VERY CASE OF B.T. PATIL AND SONS BELGAON P. LTD. 9 ITA NO. 115/NAG/2013 (ITA NO. 1408 & 1409/PN/2003) ASSESSMENT YEAR 2000 - 01 AND 2001 - 02 ORDER DATED 28 - 02 - 2013 THAT WHILE PASSING THE ORDER UNDER SECTION 255(4) OF I.T. ACT TO GIVE EFFECT OF THE THIRD MEMBER DECISION IT WAS HELD THAT THE ISSUE OF 80IA(4) WAS SUB - JUDICE BEFORE THE HONBLE BO MBAY HIGH COURT AND AN ORDER WAS MEANWHILE PRONOUNCED BY THE HONBLE COURT IN THE CASE OF ABG HEAVY INDUSTRIES LTD. (SUPRA). DUE TO THAT REASON, THE SAID ORDER OF LARGER BENCH WAS RECALLED. THE ITAT, PUNE HAS FINALLY CONCLUDED THAT THE LAW AS INTERPRETED BY THE THIRD MEMBER WAS NO LONGER A GOOD LAW. AFTER CONSIDERING FEW OTHER DECISIONS, NAMELY, AYUSH AJAY CONSTRUCTIONS 79 ITD 213 AND FOLLOWING THE DECISION OF HONBLE BOMBAY HIGH COURT IT WAS FINALLY CONCLUDED THAT THE SAID ASSESSEE WAS ENTITLED FOR T HE CLAIM OF DEDUCTION UNDER THE PROVISIONS OF SECTION 80IA. 8.1 BECAUSE OF THE REASON THAT B.T. PATIL AND SONS CASE WHICH WAS HEAVILY RELIED UPON BY THE LEARNED COMMISSIONER WAS HELD AS NO MORE A GOOD LAW AND THAT ORDER WAS SUBSEQUENTLY MERGED WITH THE ORDER OF ITAT, PUNE DATED 28 - 02 - 2013 AS DISCUSSED ABOVE, THEREFORE, ONE OF THE BASIS FOR WHICH THE LEARNED COMMISSIONER EXERCISED REVISIONARY POWERS IS NO MORE IN EXISTENCE. HOWEVER, THE OTHER REASON FOR INVOCATION OF REVISIONARY POWER GIVEN BY LEARNED CO MMISSIONER WERE THAT THE ASSESSEE WAS NOT FUNCTIONING AS A DEVELOPER OF THE PROJECT BUT MERELY AS A CONTRACTOR. THIS ASPECT HAS NOT BEEN EXAMINED BY THE ASSESSING OFFICER AS WE HAVE ALREADY MENTIONED HEREIN ABOVE. THE ALLEGATION OF THE LEARNED COMMISSIONER WAS THAT THE CONTRACT BETWEEN THE ASSESSEE AND MSEDCL WAS A CONTRACT AGREEMENT. THE ASSESSEE WAS SUBMITTING THE MONTHLY BILLS AND RECEIVING ABOUT 90% OF THE BILLING AMOUNT. DUE TO THE SAID REASON THE LEARNED COMMISSIONER HAS APPLIED THE EXPLANATION INS ERTED BY FINANCE ACT, 2007 WHICH WAS WITH EFFECT FROM 01 - 04 - 2000. AS PER THE SAID EXPLANATION, IT IS PROVIDED IN THE STATUTE THAT FOR REMOVAL OF DOUBT IT WAS DECLARED THAT NOTHING CONTAINED IN THIS SECTION SHALL APPLY IN RELATION 10 ITA NO. 115/NAG/2013 TO A BUSINESS REFERRED TO IN SUB - SECTION (4) OF SECTION 80IA WHICH IS IN THE NATURE OF WORKS CONTRACT. ACCORDING TO US THE REVENUE DEPARTMENT IS EXPECTED TO EXAMINE FEW THINGS TO ASCERTAIN WHETHER THE ASSESSEE IS A DEVELOPER OR A CONTRACTOR SUCH AS THE UTILIZATION OF FUNDS, DEVE LOPMENT OF PROJECT, THE NATURE OF VENTURE, THE SUBSTANCE OF THE TRANSACTION ETC. MOREOVER THE PROVISIONS OF SECTION 80IA ALSO REQUIRE A FINDING TO THE EFFECT THAT WHETHER THE ASSESSEE AS AN ENTERPRISE CARRIED OUT THE BUSINESS OF DEVELOPING A PROJECT OR TH E ASSESSEE HAS DEVELOPED, MAINTAIN AND ALSO OPERATING THE PROJECT. THE PROVISIONS ARE APPLICABLE IN RESPECT OF THE PROJECT WHICH IS RELATED TO DEVELOPMENT OF INFRASTRUCTURE FACILITY. THEREFORE, ONE OF THE PRIMARY REQUIREMENT IS THAT AN ASSESSEE IS ENTITL ED FOR THE CLAIM OF DEDUCTION IF HE HAS DEVELOPED THE PROJECT. THE HONBLE BOMBAY HIGH COURT HAS, THEREFORE, MENTIONED THAT THE ASSESSEE IS EXPECTED TO SHOULDER OUT THE INVESTMENT AND ALSO SUBJECTED TO TECHNICAL RISK IN RESPECT OF THE WORK EXECUTED. SUCH A DEVELOPER IS LIABLE FOR LIQUIDATED DAMAGES IF FAILED TO FULFILL THE OBLIGATION LAID DOWN IN THE AGREEMENT. TO KEEP BREVITY IN MIND IT IS NOT ADVISABLE TO DISCUSS ALL THE PARAMETERS IN THIS REGARD BUT TO LEAVE IT TO THE REVENUE AUTHORITIES TO EXAMINE THE ISSUE IN ITS ENTIRETY SO AS TO ARRIVE AT THE CORRECT JUDICIAL DECISION. IT IS ALSO WORTH TO MENTION THAT THE GUIDELINES ENUMERATED IN THE CASE OF ABG HEAVY INDUSTRIES LTD. (SUPRA) ARE REQUIRED TO BE FOLLOWED WHILE DECIDING THIS ISSUE. 8.2 BEFORE WE CONCL UDE THIS ISSUE AND GIVE DIRECTIONS , IT IS WORTH TO MENTION THAT IN THE GROUNDS OF APPEAL AS REPRODUCED ABOVE THE APPELLANT HAS NOT CHALLENGED THE JURISDICTION INVOKED BY LEARNED COMMISSIONER UNDER SECTION 263 OF I.T. ACT. IN THE GROUNDS , THIS APPELLANT HA S ONLY CHALLENGED THAT THE LEARNED COMMISSIONER HAS WRONGLY WITHDRAWN THE CLAIM OF DEDUCTION UNDER SECTION 80IA(4) OF I.T. ACT. THEREFORE, THIS IS NOT THE CASE OF THE ASSESSEE THAT ON ONE HAND THE ASSESSING OFFICER HAS RIGHTLY GRANTED THE DEDUCTION UNDER S ECTION 80IA(4) OF I.T. ACT AND ON 11 ITA NO. 115/NAG/2013 THE OTHER HAND THERE WAS A CHANGE OF OPINION OF LEARNED COMMISSIONER WHILE PASSING THE ORDER UNDER SECTION 26 3 OF I.T. ACT. THEREFORE, AFTER RECORDING THESE REASONS, WE ARE OF THE CONSCIENTIOUS VIEW THAT THE ISSUE SHOULD BE RE - EXAMINED BY THE ASSESSING OFFICER. WE, THEREFORE, MODIFY THE DIRECTIONS GIVEN BY THE LEARNED COMMISSIONER IN PARA 5 OF THE IMPUGNED ORDER PASSED UNDER SECTION 263 DATED 31 - 01 - 2013. WE ARE NOT UPHOLDING THE DIRECTIONS OF LEARNED CIT TO DISALLOW THE CLAIM IN ITS ENTIRETY BUT MODIFY THE SAME AND HEREBY DIRECT THE ASSESSING OFFICER TO EXAMINE THE ISSUE OF CLAIM OF DEDUCTION UNDER SECTION 80IA(4) OF I.T. ACT IN THE LIGHT OF THE DISCUSSION MADE HEREIN ABOVE. THE ASSESSING OFFICER IS, THEREFORE, EMPOWERED TO ADJUDICATE AS PER LAW. 9. IN THE RESULT, THE GROUNDS RAISED BY THE ASSESSEE MAY BE TREATED AS ALLOWED BUT FOR STATISTICAL PURPOSES BECAUSE THE ISSUE HAS BEEN RESTORED BACK FOR DENOVO ADJUDICATION AT THE STAGE OF ASSESSING OFFICER. 10. IN THE RESULT, T HE APPEAL OF THE ASSESSEE IS ALLOWED FOR STATISTICAL PURPOSES. OR DER PRONOUNCED IN THE OPEN COURT ON THIS 28 TH DAY OF AUGUST, 2015. SD/ - SD/ - (SHAMIM YAHYA) (MUKUL K. SHRAWAT) (ACCOUNTANT MEMBER. JUDICIAL MEMBER NAGPUR, DATED: 28 TH AUGUST, 2015. 12 ITA NO. 115/NAG/2013 COPY OF ORDER FORWARDED TO : 1. THE ASSESSEE. 2. REVENUE. 3. THE CIT(A) 4. THE CIT, NAGPUR. 5. THE D.R., ITAT, NAGPUR. 6. GUARD FILE. TRUE COPY. BY ORDER WAKODE ASSISTANT REGISTRAR, ITAT, NAGPUR