Appeal Details
Counselvise Citation
[2012] 140 COUNSELVISE.COM (IT) 59318 (ITAT-HYDERABAD)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
1 year(s) 6 month(s) 10 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
16-03-2012
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
A
Next Hearing Date
20-07-2011
Assessment Year
2007-2008
Appeal Filed On
06-09-2010
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER I.T.A. NO. 269/HYD/2009 ASSESSMENT YEAR : 2005-06 I.T.A. NO. 1165/HYD/2009 ASSESSMENT YEAR : 2006-07 I.T.A. NO. 1171/HYD/2010 ASSESSMENT YEAR : 2007-08 M/S. SUSHEE HI TECH CONSTRUCTIONS PVT. LTD. HYDERABAD PAN: AACCS8560Q VS. DY. COMMISSIONER OF INCOME- TAX, CIRCLE-3(2) HYDERABAD APPELLANT RESPONDENT APPELLANT BY: SHRI S. RAMA RAO RESPONDENT BY: SHRI D.D. GOYAL DATE OF HEARING: 02.02.2012 DATE OF PRONOUNCEMENT: 16.03.2012 O R D E R PER CHANDRA POOJARI, AM: ALL THE ABOVE THREE APPEALS BY THE ASSESSEE ARE DI RECTED AGAINST THE DIFFERENT ORDERS OF THE CIT(A)-IV, HYDE RABAD FOR ASSESSMENT YEARS 2005-06 TO 2007-08. SINCE COMMON ISSUES ARE INVOLVED, ALL THE ABOVE THREE APPEALS ARE CLUBBED T OGETHER, HEARD TOGETHER AND ARE BEING DISPOSED OF BY THIS ORDER FO R THE SAKE OF CONVENIENCE. 2. THE FIRST COMMON ISSUE IN ALL THESE THREE APPEALS I S WITH REGARD TO ALLOWABILITY OF DEDUCTION U/S. 80IA(4) OF THE INCOME-TAX ACT, 1961. ACCORDING TO THE ASSESSEE, IT HAS UNDERTAKEN THE DEVELOPMENT OF IRRIGATION CANALS AND RAILWAY TRACKS INCLUDING C ONVERSION OF GAUGE AND IT IS ENTITLED FOR DEDUCTION U/S. 80IA(4) OF TH E ACT. ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 2 SUBMISSIONS BY AUTHORISED REPRESENTATIVE OF THE ASS ESSEE: 3. THE COUNSEL FOR THE ASSESSEE SUBMITTED THAT IN SO F AR AS THE IRRIGATION CANALS ARE CONCERNED, THEY ARE THE INFRA STRUCTURE FACILITIES WITHIN THE MEANING OF THE EXPLANATION. ACCORDING T O THE EXPLANATION THE WATER SUPPLY PROJECT, WATER TREATMENT SYSTEM, I RRIGATION PROJECT, SANITATION AND STORAGE SYSTEM, SOLID WASTE MANAGEME NT SYSTEM ETC., FORM PART OF THE INFRASTRUCTURE FACILITY. THE ASSE SSEE ALSO UNDERTOOK THE DEVELOPMENT OF RAIL SYSTEMS. BOTH THE ACTIVITI ES ARE DEVELOPMENT OF INFRASTRUCTURE FACILITY. THE ASSESSEE CLAIMED DE DUCTION U/S 80IA(4)(I) OF THE I.T. ACT IN RESPECT OF THE INFRAS TRUCTURE FACILITIES DEVELOPED BY IT. ALL THE ACTIVITIES ARE ENTRUSTED T O THE ASSESSEE BY GOVERNMENT DIRECT. HE DREW OUR ATTENTION TO THE COP IES OF THE AGREEMENTS ENTERED INTO BY THE ASSESSEE WHICH ARE PLACED ON RECORD. THEY SHOW THAT THE GOVERNMENT ENTRUSTED THE DEVELOP MENT TO THE ASSESSEE. 4. THE COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE PRO JECTS UNDERTAKEN DURING THE YEARS UNDER CONSIDERATION EXE CUTED BETWEEN THE ASSESSEE AND THE SUPERINTENDING ENGINEER, HNSS CIRCLE, ANANTAPUR ON 25-02-2005 AND COPIES OF CERTAIN PORTI ONS OF THE AGREEMENTS ENTERED INTO WITH OTHER GOVERNMENT ORGAN IZATIONS INCLUDING THE RAILWAYS ARE PLACED ON RECORD. IN SO FAR AS THE IRRIGATION CANALS ARE CONCERNED, HE SUBMITTED THAT IT IS A TUR NKEY AGREEMENT ENTERED INTO WITH THE GOVERNMENT OF ANDHRA PRADESH. THE PROJECT WORK INCLUDED INVESTIGATION, PREPARATION OF HYDRAUL IC PARTICULARS, DESIGNS, DRAWINGS AND EXCAVATION OF HNSS MAIN CANAL INCLUDING CM AND CD WORKS AND DISTRIBUTORY SYSTEM TO FEED AN AYA CUT OF 2300 ACRES IN KHARIF . THE DETAILED WORKS INVOLVED AS PER THE AGREEMENT ENTERED INTO ARE AS FOLLOWS: A. DETAILED INVESTIGATION AND PREPARATION OF HPS (WHER EVER NECESSARY) OF MAIN CANAL AND ITS APPROVAL. B. FIXING OF B.M. STONES FOR MAIN CANAL AND DISTRIBUTA RIES. C. PREPARATION OF SITE SURVEYS FOR CM & CD WORKS. D. SUB SOIL EXPLORATION ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 3 E. PREPARATION OF DESIGNS AND DRAWING AND APPROVAL OF MAIN CANAL AND ALL ITS CM AND CD WORKS. F. PREPARATION OF ESTIMATES AND APPROVALS FOR MAIN CAN AL AND ALL ITS CM & CD WORKS. G. EXCAVATION AND CONSTRUCTION OF ALL ITS CM & CD WORK S FOR MAIN CANAL H. PLANTATION OF TREES AT 10 M INTERVALS ON EITHER SID E OF THE CANAL SYSTEM WITH TWO YEARS MAINTENANCE AFTER COMPLETION OF WORK. I. SERVICE ROADS FOR 5 M WIDE (INSPECTION PATHS) ON LE FT SIDE OF BANK ALONG THE MAIN CANAL J. STEPS ON MAIN AT NEARBY VILLAGES/VILLAGE LIMITS WHE REVER NECESSARY K. PROVIDING RAMPS OUTSIDE CANAL PROFILE IN DEEP CUT REACHES FOR MAINTENANCE PURPOSE. L. FIXING OF HECTOMETERS AT KM STONES ON MAIN CANAL. M. EXECUTION OF MODEL SECTIONS (TEMPLATES) AT EVERY 25 M INTERVAL IN STRAIGHT PORTION AND 12.5 M. IN CURVED PORTION FOR CANAL PROFILE. N. MAINTAINING THE CANAL SYSTEM FOR 2 YEARS AFTER ISSU E OF COMPLETION CERTIFICATE BY THE ENGINEER-IN-CHARGE. O. FIXING OF HYDRAULIC PARTICULARS, SIGN BOARDS, GAUGE S ETC. AT STRUCTURES LOCATION WHEREVER NECESSARY AS DIRECT ED BY ENGINEER-IN-CHIEF. 5. FOR THE PURPOSE OF DEVELOPMENT, THE ASSESSEE IS INV OLVED IN: A. CARRYING OUT SURVEYS AND DETAILED INVESTIGATION REQ UIRED FOR THE WHOLE CANAL SYSTEM AS PER THE CODES, CWC MANUALS ETC. THIS IS TO BE DONE WITHOUT CLAIMING FO R ANY ADDITIONAL COST. B. DETAILED ENGINEERING DESIGNS OF THE CANALS, STRUCTU RES AND THE DISTRIBUTORY SYSTEM ARE TO BE PROVIDED TO T HE GOVERNMENT BY THE ASSESS. C. THE GOVERNMENT HANDS OVER THE LAND WHERE DEVELOPMEN T HAS TO BE TAKEN PLACE. D. THE LAND ACQUISITION IS MADE BY THE GOVERNMENT WITH THE HELP OF THE CONTRACTOR. E. THE AREA REQUIRED FOR CONDUCTING OPERATION AND DEVELOPMENT ALSO IS ACQUIRED BY THE ASSESSEE WITH T HE ASSISTANCE OF THE GOVERNMENT. F. THE WORK OF DEVELOPMENT OF THE PROJECT IS UNDERTAKE N BY THE ASSESSEE. G. ALL THE REQUIRED MEN, MATERIAL AND MACHINERY IS ACQUIRED BY THE ASSESSEE AND THE DEVELOPMENT OF THE PROJECT IS UNDERTAKEN WITH THE HELP OF THE TECHNICA L EXPERTS ARRANGED BY THE ASSESSEE. ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 4 H. THE SCOPE OF WORK IS ALREADY EXPLAINED IN THE ABOVE PARAGRAPHS. I. THE ASSESSEE SHALL BE RESPONSIBLE FOR ALL THE RISKS IN THE PROCESS OF THE DEVELOPMENT OF THE PROJECT. 6. ON COMPLETION OF THE WORK, THE DEVELOPED INFRASTRUC TURE FACILITY IT IS HANDED OVER TO THE GOVERNMENT. THEREAFTER, TH E ASSESSEE HAS TO MAINTAIN THE FACILITY FOR EITHER 24 MONTHS OR FOR A MINIMUM OF TWO KHARIF SEASONS. THE ABOVE WOULD CLEARLY INDICATE T HAT THE ASSESSEE IS CONVERTING THE LAND INTO A USEFUL INFRASTRUCTURE FA CILITY I.E. THE IRRIGATION CANAL. THEREFORE, IT IS DEVELOPING THE I NFRASTRUCTURE AFTER TAKING OVER THE POSSESSION OF THE PREMISES. 7. THE ASSESSEE COUNSEL SUBMITTED THAT IN SO FAR AS TH E RAIL PROJECTS ARE CONCERNED, THE WORKS INVOLVED ARE (A) TAKING OVER OF THE SITE FROM THE GOVERNMENT, (B) DEVELOPING THE INFRAS TRUCTURE FACILITY BY RAISING/WIDENING OF EXISTING FORMATION IN LAYERS IN CLUDING EARTHWORK, (C) THE WORK INCLUDES STRENGTHENING/EXTENSION/REBUI LDING OF MINOR BRIDGES INCLUDING CONSTRUCTION OF SIDE DRAINS AND O THER PROTECTION WORKS. THE WORKS INCLUDE GAUGE CONVERSION FROM METE R GAUGE TO BROAD GAUGE. THE PREMISES IS HANDED OVER BY THE GOV ERNMENT TO THE ASSESSEE FOR DEVELOPING INTO AN INFRASTRUCTURE AND THE SCOPE OF WORK INVOLVES TAKING OVER OF THE SITE, DEVELOPING THE SI TE, RE-HANDING OVER OF THE SITE AFTER DUE DEVELOPMENT. THE ASSESSEE SHA LL HAVE TO MAINTAIN THE DEVELOPED INFRASTRUCTURE FACILITY FOR A CERTAIN PERIOD AS PROVIDED IN THE AGREEMENT. THE DETAILS ARE SUBMITTE D IN THE ANNEXURE. 8. THE RISKS INVOLVED DURING THE PERIOD FROM THE DATE OF TAKING OVER TILL THE DATE OF HANDING OVER OF THE INFRASTRU CTURE SHALL BE THAT OF THE ASSESSEE. ANY LOSS SUFFERED IN THE PROCESS OF D EVELOPMENT SHALL BE THAT OF THE ASSESSEE. THE LOSS OF MATERIAL A LIF E IN THE PROCESS OF WORK, SHALL BE COMPENSATED BY THE ASSESSEE. FURTHER , DURING THE COURSE OF DEVELOPMENT, THE EXISTING INFRASTRUCTURE HAS TO BE MAINTAINED BY THE ASSESSEE. ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 5 9. THE ASSESSEE POSSESSED ITS OWN FUNDS AND BORROWED F UNDS AS FOLLOWS: PAID UP SHARE CAPITAL - RS. 5,00,00,000 RESERVES - RS. 30,64,64,529 SECURED LOANS - RS. 26,75,32,532 - RS. 62,39,97,061 10. ACCORDING TO AR THE ASSESSEE INVESTED THE ENTIRE CA PITAL IN THE ACTIVITY OF DEVELOPMENT OF INFRASTRUCTURE. AS THE A SSESSEE IS ENGAGED IN DEVELOPMENT OF THE INFRASTRUCTURE FACILITY, IT C LAIMED DEDUCTION U/S 801A. 11. THE LD. AUTHORISED REPRESENTATIVE FOR THE ASSESSEE HAS SUBMITTED THAT THE ASSESSEE MADE THE CLAIM OF DEDUC TION UNDER THE SAID SECTION, AS ACCORDING TO THE ASSESSEE, IT IS E LIGIBLE FOR SUCH DEDUCTION. IN THIS REGARD, THE AR SUBMITTED THAT ON E HAS SEE THE PURPOSE OF INTRODUCTION AND CHANGES MADE BY THE LEG ISLATURE TO SECTION 80IA(4) OF THE ACT. THE SAID SECTION IS MEA NT FOR ALLOWING DEDUCTION IN RESPECT OF PROFITS AND GAINS FROM INDU STRIAL UNDERTAKINGS OR ENTERPRISES ENGAGED IN INFRASTRUCTU RE DEVELOPMENT. THE ASSESSEE CLAIMED DEDUCTION AS IT IS ENGAGED IN DEVELOPMENT OF INFRASTRUCTURE AND AS IT SATISFIED ALL THE CONDITIO NS MENTIONED THEREIN. THE PROVISIONS OF SEC. 80IA(4)(I) AS INTRO DUCED BY THE BY THE FINANCE ACT, 1999 AND AS AMENDED FROM TIME TO TIME ARE APPLICABLE TO THE CASE OF THE ASSESSEE. 12. HE DREW OUR ATTENTION TO THE LEGISLATIVE HISTORY OF THE SAID PROVISION AS FOLLOWS: I) UP TO THE ASSESSMENT YEAR 1995-96, SEC.80IA(4) WAS APPLICABLE TO THE BUSINESS OF ANY HOTEL FOR WHICH THE PROVISIO NS OF THE SAID SECTION WERE MADE APPLICABLE. THE FINANCE ACT, 1995 INTRODUCED ANOTHER SUB SECTION 80IA(4A). ACCORDING TO THE SAID SUB SECTION ANY ENTERPRISE CARRYING ON THE BUSINESS OF DEVELOPMENT, MAINTAINING AND OPERATING ANY INFRASTR UCTURE ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 6 FACILITY WAS MADE ELIGIBLE FOR DEDUCTION. IN THE SA ID SECTION, THE WORDS USED ARE BUSINESS OF DEVELOPING, MAINTAININ G AND OPERATING ANY INFRASTRUCTURE FACILITY. SUB SECTION (4) CONTINUES TO EXEMPT THE INCOME DERIVED FROM THE BUSINESS OF A HOTEL. THE DEDUCTION FOR AN INFRASTRUCTURE DEVELOPMENT WAS FOR THE FIRST TIME MADE AVAILABLE BY THE FINANCE ACT, 1995 W.E.F. THE ASSESSMENT YEAR 1996-97. II) THE FINANCE ACT, 1996 DID NOT AMEND SUB SECTION (4) AND CONTINUE THE EXEMPTION AVAILABLE TO INFRASTRUCTURE FACILITY WHICH DEVELOPS, MAINTAINS AND OPERATES U/S 80IA(4) OF THE I.T. ACT. BOTH THE SUB SECTIONS (4) AND (4A) EXISTED FOR THE ASSESSMENT YEAR 1996-97. III) THE FINANCE ACT, 1997 ALSO DID NOT MODIFY THE SUB SECTION (4) OF SEC.80IA(4). THE SUB SECTION (4) CONTINUES TO AP PLY TO THE BUSINESS OF A HOTEL OR THE BUSINESS OF A HOTEL LOCA TED IN A HILL AREA OR URBAN AREA OR A PILGRIMAGE CENTRE. SUB-SECT ION (4A) CONTINUED TO APPLY TO THE BUSINESS OF INFRASTRUCTUR E FACILITIES WHICH DEVELOPS, MAINTAINS AND OPERATES A NEW INFRAS TRUCTURE FACILITY. IV) THE FINANCE ACT, 1998 CONTINUED TO PROVIDE EXEM PTION TO THE BUSINESS OF A HOTEL BY VIRTUE OF THE PROVISIONS OF SEC.80IA (4) OF THE ACT. SUB SECTION (4A) ALLOWS DEDUCTION IN RESPE CT OF AN ENTERPRISE CARRYING ON THE BUSINESS OF DEVELOPING, MAINTAINING AND OPERATING ANY INFRASTRUCTURE FACILITY. TILL THE FINANCIAL YEAR 1998-99 I.E. UP TO THE ASSESSMENT YEAR 1999-2000, T HE INTENTION OF THE LEGISLATURE WAS TO EXEMPT THE INCO ME OF A HOTEL BY VIRTUE OF THE PROVISIONS OF SEC.80IA(4) OF THE I .T. ACT FOR THE INCOMES DERIVED FROM MAINTENANCE OF HOTELS AT PART ICULAR PLACES AND TO GRANT DEDUCTION IN RESPECT OF INCOME DERIVED FROM THE BUSINESS OF DEVELOPMENT, MAINTENANCE AND O PERATION ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 7 OF INFRASTRUCTURE PROJECT U/S 80IA(4A) OF THE I.T. ACT. THE DEDUCTION U/S 80IA(4A) WAS AVAILABLE ONLY TO SUCH E NTERPRISES WHO DEVELOP, MAINTAIN AND OPERATE ANY INFRASTRUCTUR E FACILITY. THE WORDING OF THE STATUTORY PROVISION IS CLEAR THA T IT WAS MADE APPLICABLE TO ENTERPRISES ENGAGED IN ALL THE THREE ACTIVITIES CUMULATIVELY. V) IN THE FINANCE ACT, 1999, AN AMENDMENT WAS INTRO DUCED BY THE LEGISLATURE. THE SAID SECTION WAS NO LONGER APP LICABLE TO THE ENTERPRISES CARRYING ON THE BUSINESS OF HOTEL. SUCH EXEMPTION IS MADE AVAILABLE BY INTRODUCING SEC.80IB OF THE I. T. ACT. A COMPLETELY NEW SECTION 80IA(4) WAS INTRODUCED TO ALLOW DEDUCTION TO ANY ENTERPRISE CARRYING ON THE BUSINES S OF DEVELOPING OR OPERATING AND MAINTAINING OR DEVELOPING, OPERATING AND MAINTAINING ANY INFRASTRUCTURE FACILI TY. THIS PROVISION IS RELEVANT TO THE CLAIM OF THE ASSESSEE. VI ) THE SAID AMENDED SECTION 80IA(4)(I) READS AS UNDER: (4) THIS SECTION APPLIES TO: (I) ANY ENTERPRISE CARRYING ON THE BUSINESS OF )I) DEVE LOPING OR (II) OPERATING AND MAINTAINING OR (III) DEVELOPI NG, OPERATING AND MAINTAINING ANY INFRASTRUCTURE FACILI TY WHICH FULFILS ALL THE FOLLOWING CONDITIONS, NAMELY: - (A) IT IS OWNED BY A COMPANY REGISTERED IN INDIA OR BY A CONSORTIUM OF SUCH COMPANIES; (B) IT HAS ENTERED INTO AN AGREEMENT WITH THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT OR A LOCAL AUTHORI TY OR ANY OTHER STATUTORY BODY FOR (I) DEVELOPING OR ( II) OPERATING AND MAINTAINING OR (III) DEVELOPING, OPER ATING AND MAINTAINING A MEW INFRASTRUCTURE FACILITY; ) (C) IT HAS STARTED OR STARTS OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY ON OR AFTER THE 1 ST DAY OF APRIL, 1995. PROVIDED THAT WHERE AN INFRASTRUCTURE FACILIT Y IS TRANSFERRED ON OR AFTER THE 1 ST DAY OF APRIL, 1999 BY AN ENTERPRISE WHICH DEVELOPED SUCH INFRASTRUCTURE FACI LITY (HEREINAFTER REFERRED TO IN THIS SECTION AS THE TRA NSFEROR ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 8 ENTERPRISE) TO ANOTHER ENTERPRISE (HEREINAFTER IN T HIS SECTION REFERRED TO AS THE TRANSFEREE ENTERPRISE) F OR THE PURPOSE OF OPERATING AN MAINTAINING THE INFRASTRUCT URE FACILITY ON ITS BEHALF IN ACCORDANCE WITH THE AGREE MENT WITH THE CENTRAL GOVERNMENT, STATE GOVERNMENT, LOCA L AUTHORITY OR STATUTORY BODY, THE PROVISIONS OF THIS SECTION SHALL APPLY TO THE TRANSFEREE ENTERPRISE AS IF IT W ERE 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 B EEN ENTITLED TO THE DEDUCTION, IF THE TRANSFER HAD NOT TAKEN PLACE. (EXPLANATION FOR THE PURPOSE OF THIS CLAUSE, INFRASTRUCTURE FACILITY MEANS (A) A ROAD INCLUDING TOLL ROAD, A BRIDGE OR A RAIL SYST EM; (B) A HIGHWAY PROJECT INCLUDING HOUSING OR OTHER ACTIVITIES BEING AN INTEGRAL PART OF THE HIGHWAY PROJECT; (C) A WATER SUPPLY PROJECT, WATER TREATMENT SYSTEM, IRRIGATION PROJECT, SANITATION AND SEWERAGE SYSTEM OR SOLID WASTE MANAGEMENT SYSTEM; (D) A PORT, AIRPORT, INLAND WATERWAY OR INLAND PORT) VII) FROM A READING OF THE SECTION IT IS CLEAR THAT THE DEDUCTION IS ALLOWABLE TO: (A) ANY COMPANY INCORPORATED; (B) WHICH ENTERED INTO AGREEMENT WITH GOVERNMENT; OR ANY GOVERNMENT BODY ; AND UNDERTAKES DEVELOPMENT OF INFRASTRUCTURE FACILITY. 13. THE AR FURTHER SUBMITTED THAT THE PURPOSE OF INTROD UCTION OF SEC.80IA(4) FOR THE ASSESSMENT YEAR 2000-2001 AND ONWARDS IS AS FOLLOWS: I) THE PURPOSE FOR WHICH THE SAID SECTION WAS AMENDED WITH EFFECT FROM THE ASSESSMENT YEAR 2000-01, CAN BE TRA CED TO A BROCHURE ISSUED BY THE GOVERNMENT OF INDIA, MINISTR Y OF ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 9 ROADS, TRANSPORT AND HIGH WAYS IN AUGUST, 2001 A CO PY OF WHICH IS SUBMITTED. IN THE SAID BROCHURE, THE GOVER NMENT OF INDIA EXTRACTED SOME OF THE DECISIONS TAKEN BY IT T O BRING IN THE DEVELOPMENT OF INFRASTRUCTURE FACILITY IN THE COUNT RY. CERTAIN OF THE POINTS MENTIONED THEREIN ARE RELEVANT FOR THE P URPOSE AND THEY ARE EXTRACTED HEREUNDER: II) THE SAID INFRASTRUCTURE DEVELOPMENT PROGRAMME WAS INITIALLY INITIATED IN JANUARY, 1999 AND THE AMENDMENTS TO SE CTION 80 IA(4) WERE INTRODUCED BY THE FINANCE ACT, 1999 I.E. , IMMEDIATELY THEREAFTER. IN THIS CONTEXT, THE OTHER OBSERVATIONS MADE IN THE SAID BROCHURE ARE ALSO RELEVANT. III ) WHILE LAUNCHING OF NATIONAL HIGHWAYS DEVELO PMENT PROJECT (NHDP) ON 02-01-2000 AT DEVANHALLI, KARNATAKA, THE PRIME MINISTER OF INDIA EXPRESSED THAT THE PROJECT ENVISAGES A SIX-LANE GOLDEN QUADRILATE RAL LINKING THE DELHI-KOLKATA-CHENNAI-MUMBAI-DELHI CIRC UIT, A NORTH-SOUTH CORRIDOR CONNECTING KASHMIR TO KANYAKUMARI AND A SIMILAR EAST-WEST CORRIDOR CONNECTING SILCHAR TO SAURASHTRA. IT IS INDEED THE LARGEST AND THE MOST AMBITIOUS INFRASTRUCTURE PROJECT UNDERTAKEN IN INDEPENDENT INDIA A HIGHWAY TO PROSPERITY; TO INDIAS INTEGRATED DEVELOPMENT. IV ) THE MINISTER OF STATE, MINISTRY OF ROAD TRANSP ORT AND HIGHWAYS IN AUGUST, 2001 MENTIONED THAT CERTAIN INC ENTIVES WERE PROVIDED TO THE INDIAN CONCERNS PARTICIPATING IN SUCH DEVELOPMENT IN THE DEVELOPMENT OF INFRASTRUCTURE FA CILITY. IN ORDER TO ENCOURAGE ENTREPRENEURS WITHIN THE COU NTRY, THE CENTRAL GOVERNMENT OFFERED THEM CERTAIN INCENTIVES SOME OF WHICH ARE AS FOLLOWS: I) TOTAL CUSTOM DUTY EXEMPTION ON ROAD BUILDING EQUIPMENT NOT BEING PRODUCED IN THE COUNTRY. 21 SUC H ITEMS HAVE BEEN IDENTIFIED. ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 10 II) INCOME-TAX EXEMPTION FOR 10 YEARS FROM NHDP EARNING S HAS BEEN GIVEN. III) IN THE BUILD-OPERATE-TRANSFER (BOT) SCHEMES, GRANT UP TO 40% CAN BE GIVEN. IV) THE NHAI BONDS HAVE BEEN EXEMPTED FROM CAPITAL GAINS. V ) IT IS ALSO EXPLAINED BY HIM THAT CERTAIN SECTI ONS OF THE SOCIETY HAVE CREATED AN IMPRESSION THAT THE WORK OF NHDP W AS BEING AWARDED TO ONLY FOREIGNERS AND MULTI NATIONAL FIRMS . TO DISPEL SUCH IMPRESSION, HE MENTIONED THE FOLLOWING: SIMILARLY, THERE ARE ALSO SOME MISGIVINGS REGARDIN G THE SIZE OF CONTRACTS. THE DETAILS, AS REGARDS THE NUMBER OF ON GOING CONTRACTS ON MARCH, 1, 2002, ARE AS FOLLOWS: ABOVE RS.500 CRORES 4 ABOVE RS.400-500 CRORES 5 ABOVE RS.300-400 CRORES 8 ABOVE RS.200-300 CRORES 25 ABOVE RS.100-200 CRORES 43 ABOVE RS.50-100 CRORES 38 BELOW RS.50 CRORES 23 TOTAL 146 THUS, IT CAN BE SEEN THAT THE CONTRACT PACKAGES ALS O, ARE BEING ORGANIZED TO ENSURE MAXIMUM PARTICIPATION OF INDIAN ENTREPRENEURS, WHILE MAINTAINING THE QUALITY OF WOR K. VI ) HE SUBMITTED THAT THE GOVERNMENT CLEARLY MENTI ONED THAT THEY PROVIDED THE BENEFITS AS MENTIONED ABOVE TO THE IND IAN ENTREPRENEURS BY PROVIDING CONTRACT PACKAGES TO THE PRIVATE ENTERPRISES. WHILE PROVIDING BENEFITS, THE GOVERNME NT SPECIFICALLY SPECIFIED CERTAIN GRANTS ONLY TO BOT S CHEMES. FOR THE OTHER SCHEMES ALL THE OTHER BENEFITS ARE MADE A VAILABLE. THE CLASSIFICATION PROVIDED CLEARLY INDICATES THAT THE SCHEME OF PACKAGES ARE MEANT FOR ALL THE ENTERPRISES WHETHER ENGAGED IN THE DEVELOPMENT OF INFRASTRUCTURE OR UNDER BOT. ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 11 VII ) THE OBSERVATIONS MADE ABOVE CLEARLY INDICATE THAT THE GOVERNMENT OF INDIA WITH A VIEW TO DEVELOP THE INFR ASTRUCTURE FACILITY PROVIDED VARIOUS INCENTIVES TO THE INDIAN CONCERNS FOR DEVELOPMENT OF SUCH INFRASTRUCTURE FACILITY. WITH A VIEW TO PROVIDE THE EXEMPTIONS TO THE ENTREPRENEURS CARRYIN G ON SUCH ACTIVITY, THE LEGISLATURE INTRODUCED THE AMENDMENT TO SEC. 80 IA(4) IN THE FINANCE BILL 1999 TO BE EFFECTIVE FOR AND FROM THE ASSESSMENT YEARS 2000-01 AND ONWARDS TO FULFIL THE OBJECTIVE OF THE PRIME MINISTER. THE PROVISIONS OF SEC.80IA(4 ) ARE MADE APPLICABLE TO ANY ENTERPRISE CARRYING ON THE BUSIN ESS OF (I) DEVELOPING, (II) MAINTAINING AND OPERATING OR (III) DEVELOPING, MAINTAINING AND OPERATING OR DEVELOPMENT, MAINTENAN CE AND OPERATING ANY INFRASTRUCTURE FACILITY. BECAUSE OF THE AMENDMENT, THE ENTERPRISES WHICH ARE ENGAGED IN ANY OF THE THREE ACTIVITIES BECAME ELIGIBLE FOR DEDUCTION COMPARED TO THE EARLIER PROVISION, WHICH WAS MADE A PPLICABLE ONLY TO SUCH ENTERPRISES ENGAGED IN ALL THE THREE A CTIVITIES CUMULATIVELY. THE PROVISIONS OF SUB SECTION (4A) WH ICH WERE EARLIER APPLICABLE TO THE ENTREPRENEURS ENGAGED IN DEVELOPING, MAINTAINING AND OPERATING WAS DELETED W.E.F. 01-04- 2000; BUT IS INCORPORATED IN SEC. 80IA(4) OF THE ACT. IT IS C LEAR THAT THE ENTERPRISES WHICH WERE DEVELOPING, OPERATING AND MA INTAINING AND DEVELOPING, OPERATING AND MAINTAINING WERE ONLY ELIGIBLE FOR SUCH DEDUCTION UP TO THE ASSESSMENT YEAR 1999-2 000 BY VIRTUE OF THE PROVISIONS OF SEC.80IA(4A). WITH THE INTRODUCTION OF THE NEW SEC.80IA(4) AMENDING THE SUB SECTION (4) OF SEC.80IA AND DELETING THE SUB SECTION (4A), THE LEG ISLATURE PROVIDED DEDUCTION FOR ANY ENTERPRISE CARRYING ON T HE BUSINESS EITHER DEVELOPING OR OPERATING AND MAINTAINING OR DEVELOPMENT, OPERATING AND MAINTAINING INSTEAD ALLO WING DEDUCTION ONLY TO THE ENTERPRISES ENGAGED IN ACTIV ITY COVERING ALL THE THREE ACTIVITIES TOGETHER. THE PROVISION EXTENDED TO AN ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 12 ENTERPRISE CARRYING ON ANY ONE OF THE THREE ACTIVIT IES. IT MAKES THE MATTERS MORE CLEAR THAT THE SUB SECTION (4) IS AMENDED AGAIN BY THE FINANCE ACT, 2001 W.E.F.01-04-2002. TH E EARLIER PROVISION WHICH WAS READING AS (I) ANY ENTERPRISE CARRYING ON THE BUSINESS OF (I) DEVELOPING, (II) MAINTAINING AND OPERATING OR (III) DEVELOPING, MAIN TAINING AND OPERATING ANY INFRASTRUCTURE FACILITY WHICH FULFILS ALL THE FOLLOWING CONDITIONS, NAMELY- WAS AMENDED BY THE FINANCE ACT, 2001 AND THE SAID P ROVISION READS AS: (I) ANY ENTERPRISE CARRYING ON THE BUSINESS (OF (I ) DEVELOPING OR (II) OPERATING AND MAINTAINING OR (III) DEVELOPING, OPERATING AND MAINTAINING) ANY INFRASTRUCTURE FACILITY WHICH FULF ILS ALL HE FOLLOWING CONDITIONS, NAMELY. VIII) THE LEGISLATURE SPECIFICALLY ADDED THE CONJUN CTION OR BETWEEN THE WORDS (DEVELOPING), (OPERATING AND MAINTAINING) (DEVELOPING, OPERATING AND MAINTAINING). IT MAKES I T CLEAR THAT THE PROVISION WOULD APPLY TO ANY ENTERPRISE CARRYIN G ON THE BUSINESS OF DEVELOPING OR CARRYING ON THE BUSINESS OF OPERATING AND MAINTAINING OR CARRYING ON THE BUSINESS OF DEVE LOPMENT, OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILI TY. THEREFORE, THERE IS NO REQUIREMENT THAT ALL THE THR EE ACTIVITIES SHOULD HAVE BEEN CARRIED ON BY A SINGLE ENTERPRISE SO AS TO ENABLE IT TO CLAIM DEDUCTION U/S 80IA(4) OF THE I.T . ACT. THIS VIEW IS ALSO SUPPORTED BY THE DECISION OF THE BOMBA Y HIGH COURT IN THE CASE OF CIT VS. ABG HEAVY INDUSTRIES L TD (322 ITR 323). IT MENTIONED CLEARLY THAT THE THREE CONDITIO NS DEVELOPMENT, OPERATION AND MAINTENANCE WERE NOT INT ENDED TO BE CUMULATIVE IN NATURE. THEREFORE, ANY ASSESSEE WH O HAS UNDERTAKEN ANY ONE OF THE ACTIVITY IS ELIGIBLE FOR DEDUCTION U/S 80IA (4) OF THE I.T. ACT. ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 13 IX ) THE MUMBAI BENCH OF THE ITAT IN THE CASE OF AC IT VS. BHARAT UDYOG LIMITED( 118 ITD 336) ALSO HELD THAT AFTER TH E AMENDMENT OF SEC.80IA(4) IT IS APPLICABLE TO ENTERP RISES WHO ARE ENGAGED IN DEVELOPING INFRASTRUCTURAL FACILITY . EARLIER, THE MUMBAI BENCH IN THE CASE OF PATEL ENGINEERING LTD., VS. DICT REPORTED IN 94 ITD 411 ALSO OBSERVED THAT THE CIVIL CONTRACTORS WHO ARE DEVELOPING THE INFRASTRUCTURE FACILITY IS E LIGIBLE FOR DEDUCTION U/S 80IA(4). IT IS MENTIONED THAT THE STA TUTORY PROVISIONS AS CONTAINED IN 80IA (4) PROVIDES FOR DE VELOPMENT OF INFRASTRUCTURE FACILITY. X ) THEREFORE, IT IS CLEAR THAT TO BE ELIGIBLE FOR DEDUCTION U/S 80IA (4), AN ENTERPRISE NEED NOT NECESSARILY BE ENGAGED IN ALL THE THREE ACTIVITIES OF DEVELOPING, MAINTAINING AND OPE RATING THE INFRASTRUCTURE. IT IS ENOUGH IF IT IS CARRYING ON T HE BUSINESS OF EITHER DEVELOPING OR MAINTAINING AND OPERATING OR D EVELOPING, MAINTAINING AND OPERATING THE INFRASTRUCTURE FACILI TY. 5) APPLICATION OF THE PROVISION TO DEVELOPMENT OF ROADS& WATER PROJECTS: I ) IT CAN ALSO BE SEEN THAT THE PROVISIONS OF SEC. 80IA(4) WHEN INTRODUCED AFRESH BY THE FINANCE ACT, 1999, THE PR OVISIONS U/S 80IA(4A) WERE DELETED FROM THE ACT. THE DEDUCTI ON AVAILABLE FOR ANY ENTERPRISE EARLIER U/S 80IA (4A) ARE ALSO MADE AVAILABLE UNDER SEC. 80IA (4) ITSELF. FURTHER, T HE VERY FACT THAT THE LEGISLATURE MENTIONED THE WORDS (I) DEVELOPING OR (II) OPERATING AND MAINTAINING OR (III) DEVELOPING, O PERATING AND MAINTAINING CLEARLY INDICATES THAT ANY ENTERPRISE WHICH CARRIED ON ANY OF THESE THREE ACTIVITIES WOULD BECO ME ELIGIBLE FOR DEDUCTION. THEREFORE, THERE IS NO AMBIGUITY IN THE INCOME- TAX ACT. THEREFORE, THE APPELLANT HUMBLY SUBMITS T HAT AN ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 14 ENTERPRISE WHICH DEVELOPS THE INFRASTRUCTURE FACILI TY IS ELIGIBLE FOR DEDUCTION U/S 80IA(4) OF THE I.T. ACT. II) THERE IS NO DISPUTE WITH REGARD TO THE MEANING OF THE INFRASTRUCTURE FACILITY USED U/S 80IA OF THE I.T. A CT. AN EXPLANATION IS INTRODUCED BELOW SUB SECTION (4) OF SEC.80IA WHICH READS AS UNDER; EXPLANATION FOR THE PURPOSE OF THIS CLAUSE, INFR ASTRUCTURE FACILITY MEANS (A) A ROAD INCLUDING TOLL ROAD, A BRIDGE OR A RAIL SYST EM; (B) A HIGHWAY PROJECT INCLUDING HOUSING OR OTHER ACTIVI TIES BEING AN INTEGRAL PART OF THE HIGHWAY PROJECT; (C) A WATER SUPPLY PROJECT, WATER TREATMENT SYSTEM, IRRIGATION PROJECT, SANITATION AND SEWERAGE SYSTEM OR SOLID WASTE MANAGEMENT SYSTEM; (D) A PORT, AIRPORT, INLAND WATERWAY OR INLAND PORT; III ) DEVELOPMENT OF A ROAD IS DEVELOPMENT OF INFRA STRUCTURE FACILITY. SIMILARLY, THE WATER SUPPLY PROJECT OR IRRIGATION P ROJECT ARE ALSO CALLED AS INFRASTRUCTURE FACILITY. THEREFORE, THERE CANNOT BE ANY DISPUTE WITH REGARD TO THE FACT THAT THE ASSESSEE H EREIN IS ENGAGED IN THE ACTIVITY OF DEVELOPING INFRASTRUCTUR E FACILITY. 6) MEANING OF THE WORD DEVELOP I ) THE NEXT QUESTION IS WHETHER THE ASSESSEE IS D EVELOPING THE INFRASTRUCTURE FACILITY OR NOT. THE WORD DEVELOP IS NOT DEFINED BY THE INCOME-TAX ACT. IT IS NECESSARY TO DEPEND UP ON THE MEANING ASSIGNED TO IT BY VARIOUS DICTIONARIES. II) AS PER THE ACCURATE & RELIABLE DICTIONARY, THE MEANING OF THE WORD DEVELOP INCLUDES THE ACT OF MAKING SOME AR EA OF LAND OR WATER MORE PROFITABLE OR PRODUCE OR USEFUL ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 15 III). THE MEANING GIVEN TO THE WORD DEVELOP AS P ER THE RANDOM HOUSE DICTIONARY OF THE ENGLISH LANGUAGE THE UNAB RIDGED EDITION INCLUDES TO CAUSE TO GROW , TO ELABORATE OR EXPAND IN DETAIL. IV ) THE MEANING GIVEN TO THE WORD DEVELOP AS PER THE RANDOM HOUSE DICTIONARY OF THE ENGLISH LANGUAGE THE UNAB RIDGED EDITION INCLUDES TO CAUSE TO GROW, TO ELABORATE OR EXPAND IN DETAIL. V ) SYNONYMS OF THE WORD DEVELOP ARE GIVEN TO BE STRENGTHENING, WIDENING, EXPANDING, ELABORATING, GROWING ETC. VI) THE CBDT, IN ITS CIRCULAR NO. 3 OF 2008 DATED 12-3-2008 (168 TAXMAN (STATUTE) 12,54) CLARIFIED THE NATURE OF THE WORD DEVELOPER. AT PARA 34.3. IT IS MENTIONED THAT: THUS, IN A CASE WHERE A PERSON MAKES THE INVESTMEN T AND HIMSELF EXECUTES THE DEVELOPMENT WORK I.E., CARRIES OUT THE CIVIL CONSTRUCTION WORK, HE WILL BE ELIGIBLE FOR TAX BENE FIT UNDER SEC. 80 IA. IN CONTRAST TO THIS, A PERSON, WHO ENTERS I NTO A CONTRACT WITH ANOTHER PERSON (INCLUDING GOVERNMENT OR AN UN DERTAKING OR ENTERPRISE REFERRED TO IN SEC. 80 IA FOR EXECUTI NG WORKS CONTRACT, WILL NOT BE ELIGIBLE FOR THE TAX BENEFIT UNDER SEC. 80 IA THE CLARIFICATION ISSUED BY THE BOARD MAKES IT CLEA R THAT AN ASSESSEE WHO EXECUTES THE DEVELOPMENT WORK AND CARR IES OUT THE CIVIL CONSTRUCTION WORK IS A DEVELOPER. THE BO ARD IS ALSO OF THE VIEW THAT THOSE PERSONS WORKING FOR OTHERS ARE THE WORKS CONTRACTORS AND NOT DEVELOPERS. IN THE CASE OF THE ASSESSEE, THE ASSESSEE ITSELF UNDERTOOK THE WORK OF DEVELOPMENT A ND THEREFORE, IT IS A DEVELOPER, EVEN ACCORDING TO THE CIRCULAR ISSUED BY THE BOARD. ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 16 7) THE ACTIVITIES UNDERTAKEN BY THE ASSESSEE: PARTICULARS OF WORKS CLAIMED DEDUCTION U/S. 80IA OF THE INCOME-TAX ACT FOR THE ASSESSMENT YEARS 2005-0 6, 2006-07 AND 2007-08 NAME OF THE WORK BY WHOM AWARDED NATURE OF WORK TAKING OVER OF THE SITE FROM DEPARTMENT. COMPLETION MAINTENANCE PERIOD HANDING OVER TO DEPARTMENT. MATERIAL SUPPLIES BY THE GOVT. RISK FACTORS SL. NO. 1 2 3 4 5 6 7 8 9 1. AMRP-NALGONDA-EARTH WORK EXCAVATION AND FORMATION OF EMBANKMENT FROM KM 135.125 TO KM 136.150 LEADING CHANNEL TO MUSI RESERVOIR INCLUDING EXCAVATION OF TRANSITITION & DIVERSION CHANNEL IN KM 134.000 TO KM 135.000 OF AMRP. GOVT. OF AP, IRRIGATION & CAD DEPT. MUSI RESERVOIR DEVELOPMENT 10.09.2004 CL. AT PAGE 49. 18.03.2005 24 MONTHS CL. AT PAGE NO. 28.03.2007 CL. AT PAGE NO. NIL ALL LOSSES DURING THE COURSE OF DEVELOPMENT INCLUDING MEN AND MATERIAL ARE TO THE ACCOUNT OF THE ASSESSEE 2. SRSP-FFC-EARTH WORK EXCAVATION & FORMING EMBANKMENT OF KAKATIYA MAIN CANAL KM. 336.00 TO 337.00 I&CADD GOVT. OF AP KAKATIYA MAIN CANAL FORMATION 01.4.2004 20.1.2005 24 MONTHS CL. 9.1 AT PAGE NO. 512 20.1.2007 CL. AT PAGE NO. 515 NIL -DO- 3. SRSP-FFC-EARTH WORK EXCAVATION OF FLOOD FLOW CANAL FROM KM 6.000 TO KM 7.000 OF FLOOD FLOW CANAL PROJECT FROM SRSP. -DO- FLOOD FLOW CANAL PROJECT FROM SRSP 5.8.2004 CL. AT PAGE NO. 480 4.8.2005 24 MONTHS CL. 3.2 AT PAGE NO. 476 4.8.2007 CL. 21.1 AT PAGE NO. 479 NIL -DO- 4. SRSP-FFC-EARTH WORK EXCAVATION OF FLOOD FLOW CANAL FROM KM 7.000 TO KM 8.000 OF FLOOD FLOW CANAL PROJECT FROM SRSP. -DO- FLOOD FLOW CANAL PROJECT FROM SRSP 31.5.2004 CL. AT PAGE NO. 486 20.10.2004 24 MONTHS CL. 3.2 AT PAGE NO. 482 20.10.2006 CL. 21.1 AT PAGE NO. 485 NIL -DO- 5. SRSP-FFC-EARTH WORK EXCAVATION OF FLOOD FLOW CANAL FROM KM 8.000 TO KM 9.000 OF FLOOD FLOW CANAL PROJECT FROM SRSP. -DO- FLOOD FLOW CANAL PROJECT FROM SRSP 31.5.2004 CL. AT PAGE NO. 492 14.10.2004 24 MONTHS CL. 3.2 AT PAGE NO. 488 14.10.2006 CL. 21.1 AT PAGE NO. 491 NIL -DO- 6. SRSP-FFC-EARTH WORK EXCAVATION OF FLOOD FLOW CANAL FROM KM 9.000 TO KM 10.000 OF FLOOD FLOW CANAL PROJECT FROM SRSP. -DO- FLOOD FLOW CANAL PROJECT FROM SRSP 3.3.2004 . 20.10.2004 24 MONTHS CL. 9.1 AT PAGE NO. 470 20.10.2006 NIL -DO- 7. EARTH WORK EXCAVATION OF FLOOD FLOW CANAL FROM KM 10.000 TO KM 11.000 OF FLOOD FLOW CANAL PROJECT FROM SRSP. -DO- FLOOD FLOW CANAL PROJECT FROM SRSP 3.3.2004 CL. AT PAGE NO. 468 20.10.2004 24 MONTHS CL. 9.1 AT PAGE NO. 464 20.10.2006 CL. AT PAGE NO. 468 NIL -DO- ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 17 8. SRSP-FFC-EARTH WORK EXCAVATION OF FLOOD FLOW CANAL FROM KM 12.600 TO KM 14.000 OF FLOOD FLOW CANAL PROJECT FROM SRSP. -DO- FLOOD FLOW CANAL PROJECT FROM SRSP 9.1.2004 CL. AT PAGE NO. 462 20.11.2004 24 MONTHS CL. 9.1 AT PAGE NO. 458 20.11/2006 CL. AT PAGE NO. 462 NIL -DO- 9. SRSP-FFC-EARTH WORK EXCAVATION OF FLOOD FLOW CANAL FROM KM 17.000 TO KM 18.000 OF FLOOD FLOW CANAL PROJECT FROM SRSP. -DO- FLOOD FLOW CANAL PROJECT FROM SRSP 3.11.2004 CL. AT PAGE NO. 498 31.12.2004 24 MONTHS CL. 3.2 AT PAGE NO. 494 31.12.2006 CL. 21.1 AT PAGE NO. 497 NIL -DO- 10. SRSP-FFC-EARTH WORK EXCAVATION OF FLOOD FLOW CANAL FROM KM 19.000 TO KM 20.000 OF FLOOD FLOW CANAL PROJECT FROM SRSP. -DO- FLOOD FLOW CANAL PROJECT FROM SRSP 30.7.2004 CL. AT PAGE NO. 504 16.12.2004 24 MONTHS CL. 9.1 AT PAGE NO. 500 16.12.2006 CL. 21.1 AT PAGE NO. 503 NIL -DO- 11. SRSP-FFC-EARTH WORK EXCAVATION OF FLOOD FLOW CANAL FROM KM 27.000 TO KM 28.400 OF FLOOD FLOW CANAL PROJECT FROM SRSP. -DO- FLOOD FLOW CANAL PROJECT FROM SRSP 21.5.2004 CL. AT PAGE NO. 510 12.7.2004 24 MONTHS CL. NO. 3.2 AT PAGE NO. 506 12.7.2006 CL. 21.1 AT PAGE NO. 509 NIL -DO- 12. SRSP-FFC-EARTH WORK EXCAVATION OF FLOOD FLOW CANAL FROM KM 14.000 TO KM 15.000 OF FLOOD FLOW CANAL PROJECT FROM SRSP. -DO- FLOOD FLOW CANAL PROJECT FROM SRSP 9.3.2004 20.11.2004 24 MONTHS 20.11.2006 NIL -DO- 13. CONSTRUCTION OF NEW PUSHKAR GHAT NEAR LINGALAGATTU ON THE RIGHT BANK OF KRISHNA RIVER (LOA IS THERE WITH 96 LACS) -DO- CONSTRUCTION OF GHAT 4.6.2004 31.10.2004 24 MONTHS 31.10.2006 NIL -DO- 14. CONSTRUCTION OF NEW PUSHKAR GHAT NEAR LOWER END ROPEWAY AT PATALAGANGA AND RENOVATION OF EXISTING PUSHKAR GHAT AT SRI SAILAM (SIVAGIRI) -DO- CONSTRUCTION OF GHAT 4.6.2004 31.10.2004 24 MONTHS 31.10.2006 NIL -DO- 15. CONSTRUCTION OF GHAT ROAD AT EI+ 402 TO 270M AT LEADING TO PATALAGANGA PUSHKAR GHAT AT SRI SAILAM (SIVAGIRI) ON UPSTREAM OF NSRS PROJECT, IN KURNOOL (DIST.) VIDE. AGT. NO. 21SE/2004-05/07.07.04. -DO- CONSTRUCTION OF GHAT ROAD 7.7.2004 31.10.2004 24 MONTHS CL. NO. 13.1 AT PAGE NO. 517 31.10.2006 CL. 21.1 AT PAGE NO. 519 NIL -DO- 16. EARTHWORK IN FORMATION FOR RAISING / WIDENING OF EXISTING FORMATION IN LAYERS INCLUDING EARTHWORK IN CUTTING TO MAKE PROFILE AS PER BG STANDARD INCLUDING STRENGTHENING/EXTENSION/REBUILDING OF MINOR BRIDGES INCLUDING CONSTRUCTION OF SIDE DRAIN AND OTHER PROTECTION WORKS FROM KM 93.615 TO KM 94.500 BETWEEN STATIONS MIGRENDISA TO NEW HAFLONG IN CONNECTION WITH THE GAUGE CONVERSION WORK BETWEEN LUMDING- SILCHAR (WO NO. CA NO. 804) NF RAILWAY, MALIGAON GAUGE CONVERSION FOR NF RAILWAY 19.3.2004 CL. AT PAGE NO. 2081 10.7.2007 6 MONTHS CL. 7 AT PAGE NO. 205 10.1.2008 NIL -DO- ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 18 17. EARTHWORK IN FORMATION FOR RAISING / WIDENING OF EXISTING FORMATION IN LAYERS INCLUDING EARTHWORK IN CUTTING TO MAKE PROFILE AS PER BG STANDARD INCLUDING STRENGTHENING/EXTENSION/REBUILDING OF MINOR BRIDGES INCLUDING CONSTRUCTION OF SIDE DRAIN AND OTHER PROTECTION WORKS FROM KM 94.500 TO KM 95.780 BETWEEN STATIONS MIGRENDISA TO NEW HAFLONG IN CONNECTION WITH THE GAUGE CONVERSION WORK BETWEEN LUMDING- SILCHAR (WO NO. 23 CA NO. 703) -DO- GAUGE CONVERSION FOR NF RAILWAY 21.2.2003 CL. AT PAGE NO. 206 2.7.2006 6 MONTHS CL. AT PAGE NO. 210 2.1.2007 NIL -DO- 18. EARTHWORK IN FORMATION FOR RAISING / WIDENING OF EXISTING FORMATION IN LAYERS INCLUDING EARTHWORK IN CUTTING TO MAKE PROFILE AS PER BG STANDARD INCLUDING STRENGTHENING/EXTENSION/REBUILDING OF MINOR BRIDGES INCLUDING CONSTRUCTION OF SIDE DRAIN AND OTHER PROTECTION WORKS FROM KM 95.780 TO KM 96.500 BETWEEN STATIONS MIGRENDISA TO NEW HAFLONG IN CONNECTION WITH THE GAUGE CONVERSION WORK BETWEEN LUMDING- SILCHAR (WO NO. 24 CA NO. 697) -DO- GAUGE CONVERSION FOR NF RAILWAY 17.2.2003 CL. AT PAGE NO. 211 2.7.2006 6 MONTHS CL. 7 AT PAGE NO. 215 2.1.2007 NIL -DO- 19. EARTHWORK IN FORMATION FOR RAISING / WIDENING OF EXISTING FORMATION IN LAYERS INCLUDING EARTHWORK IN CUTTING TO MAKE PROFILE AS PER BG STANDARD INCLUDING STRENGTHENING/EXTENSION/REBUILDING OF MINOR BRIDGES INCLUDING CONSTRUCTION OF SIDE DRAIN AND OTHER PROTECTION WORKS FROM KM 96.500 TO KM 97.000 BETWEEN STATIONS MIGRENDISA TO NEW HAFLONG IN CONNECTION WITH THE GAUGE CONVERSION WORK BETWEEN LUMDING- SILCHAR (WO NO. 25 CA NO. 701) -DO- GAUGE CONVERSION FOR NF RAILWAY 19.2.2003 CL. 2.6 AT PAGE NO. 171 2.7.2006 6 MONTHS CL. 7 AT PAGE NO. 178 2.1.2007 NIL -DO- 20. EARTHWORK IN FORMATION FOR RAISING / WIDENING OF EXISTING FORMATION IN LAYERS INCLUDING EARTHWORK IN CUTTING TO MAKE PROFILE AS PER BG STANDARD INCLUDING STRENGTHENING/EXTENSION/REBUILDING OF MINOR BRIDGES INCLUDING CONSTRUCTION OF SIDE DRAIN -DO- GAUGE CONVERSION WORK FOR NF RAILWAY 19.2.2003 CL. AT PAGE NO. 216 2.7.2006 6 MONTHS CL. AT PAGE NO. 220 2.1.2007 NIL -DO- ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 19 AND OTHER PROTECTION WORKS FROM KM 97.000 TO KM 97.800 (NEW CHAINAGES) BETWEEN STATIONS MIGRENDISA TO NEW HAFLONG IN CONNECTION WITH THE GAUGE CONVERSION WORK BETWEEN LUMDING-SILCHAR (W NO. 26 CA NO. 700) 21. CONSTRUCTION OF RBG BUILDING OF NF RAILWAY (BETWEEN STATIONS MIGRENDISA TO NEW HAFLONG IN CONNECTION WITH THE GAUGE CONVERSION WORK BETWEEN LUMDING SILCHAR (WO NO. 13 DT. 3.2.2004) -DO- GAUGE CONVERSION FOR NF RAILWAY 3.2.2004 CL.AT PAGE NO. 221 10.7.2005 6 MONTHS CL. AT PAGE NO. 224 30.7.2007 NIL -DO- 22. EPC TURNKEY SYSTEM : INVESTIGATION, PREPARATION OF HYDRAULIC PARTICULARS, DESIGNS AND DRAWINGS AND EXCAVATION OF HNSS MAIN CANAL FROM KM 20.000 TO KM 42.000, INCLUDING CM & CD WORKS AND DISTRIBUTORY SYSTEM TO FEED AN AYACUT OF 2300 ACRES KHARIF I.C. (PK 24) & INVESTIGATION, PREPARATION OF HYDRAULIC PARTICULARS, DESIGNS AND DRAWINGS AND EXCAVATION OF HNSS MAIN CANAL FROM KM 77.000 TO KM 100.000 INCLUDING CM & CD WORKS AYACUT OF 5100 ACRES KHARIF I.D. (PACKAGE-27). GOVT. OF IRRIGATION & CAD DEPT. AVR HANDRI NIVA SAJALA SRAVANTHI MAIN CANAL 25.2.2005 CL. 20 AT PAGE NO. 270. WORK IN PROGRESS 24 MONTHS CL. 1 AT PAGE NO. 306 CL. 53.1 AT PAGE NO. 279 NIL -DO- 23. EARTH WORK EXCAVATIONAND FORMING EMBANKMENT OF GRAVITY CANAL FROM KM 11.000 TO KM 13.000 OF KALWAKURTHY LIFT IRRIGATION SCHEME, MAHABUBNAGAR DIST. I &CADD GOVT. OF AP GRAVIT CANAL KALWAKURTHY LIFT IRRIGATION SCHEME. 30.4.2005 CL. 8 AT PAGE NO. 526 25.6.2006 24 MONTHS CL. 9.1 AT PAGE NO. 526 25.6.,2008 CL. 25.1 AT PAGE NO. 529 NIL -DO- 24 RESTORATION TO DESIGN STANDARDS OF B.M. DRAIN FROM KM 0.00 TO 16.000 AND B.M. DRAIN LEFT ARM FROM KM 0.00 TO 16.00 AND BM DRAIN LEFT ARM FROM KM 0.00 TO 10.00 IN GUNTUR DIST. -DO- DRAIN WORK 21.4.2005 CL. AT PAGE NO. 524 14.8.2005 24 MONTHS 14.8.2007 CL. 21.1 AT PAGE NO. 523 NIL -DO- 25. NS PROJECT, ONGOLE IMPROVEMENT TO NALLAMADA DRAIN BELOW COMMAMURU FROM KM 2.60 TO 21.20 INVOLVING EARTHWORK EXCAVATION FOR THE REACH FROM KM 2.60 TO 8.60 INCLUDING FORMATION AND REMOVAL OF CROSS BUND AT KM 2.60 AT GUNTUR I&CAD GUNTUR NALLAMADA DRAIN WORK 30.3.2005 CL. AT PAGE NO. 535 15.9.2005 24 MONTHS 15.9.2007 CL. 21 AT PAGE NO. 524 NIL -DO- ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 20 26. IMMEDIATE RESTORATION OF TRACK BY REMOVING SLIPPED EARTH ON THE TRACK BY THE SIDE OF TRACK BR NO. HCS/241/06 DATED 26.9.2006, BR NO. 8795 DATED 28.9.06 CA NO. SE/148 DATED 20.6.2006 NF RAILWAY MALIGAON GAUGE CONVERSION FOR NF RAILWAY 28.9.2006 15.7.2007 6 MONTHS 15.1.2008 NIL -DO- 27. IMMEDIATE RESTORATION OF TRACK BY REMOVING SLIPPED EARTH ON THE TRACK BY THE SIDE OF TRACK BR NO. HCS/240/06 DATED 26.9.06, BR NO. 894 DATED 28.9.06 CA NO. SE/146 DATED 20.6.2006. -DO- -DO- 28.9.2006 15.7.2007 6 MONTHS 15.1.2008 NI L -DO- 28. IMMEDIATE RESTORATION OF DAMAGED BANK AT KM 96.300 TO 93.400 BY PROVIDING RAIL BILING, STONE CONCRETE BR NO. 507 DATED 24.7.06 CA NO. SE/143 DATED 20.6.2006 -DO- -DO- 20.6.2006 15.7.2007 6 MONTHS 15.1.2008 NI L -DO- CLAIMED FOR WHICH THE ASSESSEE IS NOT ELIGIBLE AS T HEY ARE SUB-CONTRACT WORKS 1. EARTH WORK EXCAVATION OF FLOOD FLOW CANAL FROM KM 4.000 TO KM 5.000 OF FLOOD FLOW CANAL PROJECT FROM SRI RAM SAGAR PROJECT (BACK TO BACK SUB CONTRACT FROM GVR & CO., HYDERABAD). I&CADD GOVT. OF AP FLOOD FLOW CANAL PROJECT FROM SRI RAM SAGAR PROJECT 15.10.2003 20.8.2004 24 MONTHS 20.8.2006 NIL ALL LO SSES DURING THE COURSE OF DEVELOPMENT INCLUD8ING MEN AND MATERIALS ARE TO THE ACCOUNT OF THE ASSESSEE. 2. EARTH WORK EXCAVATION OF FLOOD FLOW CANAL FROM KM 5.000 TO KM 6.000 OF FLOOD FLOW CANAL PROJECT FROM SRI RAM SAGAR PROJECT (BACK TO BACK SUB CONTRACT FROM GVR & CO., HYDERABAD). -DO- -DO- 15.10.2003 13.10.2004 24 MONTHS 13.10.200 6 NIL -DO- ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 21 I) FOR THIS PURPOSE, THE POSSESSION OF THE SITE I S HANDED OVER TO THE ASSESSEE BY THE GOVERNMENT. THE ASSESSEE TAKES POSSESSION AND ACCESS TO THE PROPERTY AND THEREAFTE R IT SHALL BE THE RESPONSIBILITY OF THE ASSESSEE TO DEVELOP THE S AID AREA INTO MORE USEFUL INFRASTRUCTURE FACILITY. IN THE PROCESS , EVERY ACT REQUIRED (WHETHER MENTIONED IN THE AGREEMENT OR NOT ) IN CONVERTING THE AREA INTO MORE USEFUL ONE SHALL BE T HAT OF THE ASSESSEE. THE ASSESSEE HAS TO UNDERTAKE THE RESPONS IBILITY OF MAINTENANCE OF THE EXISTING TRAFFIC AND THERE SHOUL D NOT BE INCONVENIENCE TO THE REGULAR TRAFFIC. THE DEVELOPED AREA AFTER COMPLETION OF THE DEVELOPMENT OF INFRASTRUCTURE IS HANDED OVER TO THE GOVERNMENT. AFTER HANDING OVER, THE ASSESSEE SHALL MAINTAIN THE INFRASTRUCTURE FOR A PERIOD OF 48 MONT HS AND ANY DEFECTS ARE TO BE RECTIFIED. II) FROM THE ABOVE FACTS IT IS CLEAR THAT THE ASSES SEE IS CONVERTING THE AREA ENTRUSTED TO IT INTO MORE USEFUL AND MORE PROFITABLE AREA AND HANDING OVER THE DEVELOPED ONE TO THE GOVE RNMENT. THEREFORE, THE ACTIVITY OF THE ASSESSEE IS TO DEV ELOP AN EXISTING TWO LANE ROAD INTO FOUR LANE ROAD THEREBY MAKING THE ROAD MORE USEFUL AND PROFITABLE. 8) EXPLANATIONS INTRODUCED BY THE FINANCE ACT 2007 AND 2009: I) THE NEXT QUESTION TO BE CONSIDERED IS WHETHER TH E EXPLANATION INTRODUCED EITHER BY FINANCE ACT, 2007 OR BY FINANC E ACT, 2009 RETROSPECTIVELY WOULD DEBAR THE ASSESSEE FROM CLAIMING THE DEDUCTION U/S 80IA(4). THE EXPLANATION INTRODUCED BY THE FINANCE ACT, 200 7 READS AS UNDER: EXPLANATION FOR THE REMOVAL OF DOUBTS IT IS HERE BY DECLARED THAT NOTHING CONTAINED IN THIS SECTION SHALL APPLY TO A PERSON ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 22 WHO EXECUTES A WORKS CONTRACT ENTERED INTO WITH THE UNDERTAKING OR ENTERPRISE, AS THE CASE MAY BE. II) IT IS CLEAR FROM THE ABOVE THAT ANY ASSESSEE WH O ENTERED INTO A CONTRACT WITH THE ENTERPRISE MENTIONED IN SUB SECTI ON (4) WOULD NOT BE ELIGIBLE FOR DEDUCTION. IT CLEARLY IND ICATES THAT ANY SUB CONTRACTOR WHO UNDERTAKES A PART OF THE WORK FR OM THE UNDERTAKING WHICH WAS ALLOTTED THE WORK WOULD NOT B E ELIGIBLE FOR SUCH DEDUCTION. THE SAID EXPLANATION HAS NO APP LICATION TO THE ASSESSEE. THE ASSESSEE DID NOT CLAIM SUCH DEDUC TION OR ANY INCOME PERTAINING TO A SUB CONTRACT WORK UNDERT AKEN FROM THE ENTERPRISES REFERRED TO IN SEC.80IA(4). THEREF ORE, THE EXPLANATION INTRODUCED BY THE FINANCE ACT, 2007 SHA LL NOT AFFECT THE CLAIM MADE BY THE ASSESSEE. III) THE EXPLANATION INTRODUCED BY THE FINANCE ACT, 2009 ADDED THAT THOSE THE ENTERPRISES UNDERTAKING SIMPLE WORKS CONTRACTS BY ENTERING INTO AGREEMENTS WITH THE ENTERPRISES OR WITH THE GOVERNMENT OR GOVERNMENT ORGANIZATIONS. THE SAID AM ENDED EXPLANATION READS AS UNDER: FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED T HAT NOTHING CONTAINED IN THIS SECTION SHALL APPLY IN RELATION T O A BUSINESS REFERRED TO IN SUB SECTION (4) WHICH IS IN THE NATU RE OF A WORKS CONTRACT AWARDED BY ANY PERSON (INCLUDING THE CENTR AL OR STATE GOVERNMENT ) AND EXECUTED BY THE UNDERTAKING OR ENT ERPRISE REFERRED IN SUB SECTION (1). IV) IT CAN BE SEEN FROM THE ABOVE EXPLANATION THAT ANY ENTERPRISES WHICH ENTERS INTO A MERE WORKS CONTRACT EITHER WITH ANY OTHER ENTERPRISE OR GOVERNMENT OR GOVERNMENT CORPORATION SHALL NOT BE ELIGIBLE FOR THE DEDUCTION. V) IT IS MADE CLEAR THAT ANY ENTERPRISE, WHICH ENTE RED INTO DEVELOPMENT OF INFRASTRUCTURE, WOULD BE ELIGIBLE FO R DEDUCTION AND NOT THOSE ENTERPRISES, WHICH ENTER INTO CONTRAC T FOR EXECUTING WORKS CONTRACTS. THE ASSESSEE HEREIN ENTE RED INTO ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 23 AGREEMENT FOR DEVELOPMENT OF INFRASTRUCTURE FACILIT Y AND NOT FOR A MERE WORKS CONTRACT. IT IS SUBMITTED THAT THIS E XPLANATION HAS TO BE READ IN THE CONTEXT OF THE APPLICATION OF THE MAIN PROVISIONS OF SEC.80IA (4) OF THE ACT. VI) THE PURPOSE OF INTRODUCTION; AND THE AMENDMENT S BROUGHT IN ARE ALREADY DISCUSSED IN THE EARLIER PARAGRAPHS. F ROM A READING OF SEC.80IA (4)(I) IT IS CLEAR THAT THE DED UCTION IS AVAILABLE FOR ANY COMPANY WHICH ENTERS INTO AGREEMENT WITH ANY GOVERNMENT OR GOVERNMENT BODY . IT IS CLEAR THAT THE DEDUCTION IS AVAILABLE NOT FOR ANY PERSON BUT FOR THOSE COMPANIES ENTERING INTO AGREEMENT WITH THE GOVERNME NT OR OTHER GOVERNMENT BODIES/CORPORATIONS. IT IS ALSO M ADE CLEAR THAT THE DEDUCTION IS AVAILABLE FOR THE CORPORATE B ODIES ENTERING INTO AGREEMENT WITH THE GOVERNMENT ORGANIZ ATIONS. THEREFORE, THE MAIN PROVISION MAKES IT CLEAR THAT T HE DEDUCTION IS AVAILABLE TO COMPANIES ENTERING INTO AGREEMENT W ITH GOVERNMENT BODIES OR GOVERNMENT VII) THEREFORE, IT IS NOT CORRECT TO READ THE EXPLA NATION TO MEAN THAT THE GOVERNMENT BODY IS ELIGIBLE FOR DEDUCTION U/S 8 0IA AND THE COMPANY ENTERING INTO AGREEMENT WITH SUCH GOVERNMEN T BODY IS NOT ELIGIBLE FOR DEDUCTION. VIII) THE EXPLANATION NEWLY INTRODUCED CLEARLY INDI CATES THAT THE COMPANIES REGISTERED IN INDIA OR A CONSORTIUM OF SU CH COMPANIES AS IS REFERRED TO SUB SECTION (4) ARE ELI GIBLE FOR DEDUCTION. THERE IS NO MENTION IN THE EXPLANATION T HAT THE GOVERNMENT BODIES OR THE GOVERNMENT CORPORATIONS AR E ONLY ELIGIBLE FOR DEDUCTION. THEY MAY ALSO BE ELIGIBLE F OR SUCH DEDUCTION ALONG WITH THE OTHER PRIVATE COMPANIES, P ROVIDED THEY THEMSELVES UNDERTAKE DEVELOPMENT OF INFRASTRUC TURE FACILITY. ALL THAT THE SAID EXPLANATION EXCLUDES AR E THE CONTRACTS ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 24 ENTERED INTO BY A COMPANY WHICH ARE IN THE NATURE O F WORKS CONTRACT . THE EXPLANATION DISTINGUISHED BETWEEN A WORKS CONTRACT AND A CONTRACT FOR DEVELOPMENT. 9) MEANING OF THE WORD WORKS CONTRACT: I) IN SO FAR AS THE MEANING OF THE WORD WORKS CON TRACT IS CONCERNED, THE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GLENMARK PHARMACEUTICALS LTD., REPORTED IN 324 ITR 199 EXPLAINED AS UNDER: HELD, DISMISSING THE APPEAL, THAT THE AGREEMENT WA S ON A PRINCIPAL TO PRINCIPAL BASIS. THE MANUFACTURER HAD HIS OWN ESTABLISHMENT WHERE THE PRODUCT WAS MANUFACTURED. T HE MATERIAL REQUIRED IN THE MANUFACTURE OF THE ARTICLE OR THING WAS OBTAINED BY THE MANUFACTURER FROM A PERSON OTHE R THAN THE ASSESSEE. THE PROPERTY IN THE ARTICLES PASSED U PON THE DELIVERY OF THE PRODUCT MANUFACTURED. UNTIL DELIVER Y, THE ASSESSEE HAD NO TITLE TO THE GOODS. THE GOODS HAD A N IDENTIFIABLE EXISTENCE PRIOR TO DELIVERY. THE CONTR ACT ENTERED INTO BY THE ASSESSEE WAS NOT A CONTRACT FOR CARRYIN G ON ANY WORK WITHIN THE MEANING OF SECTION 194C. THE REVENU E WAS NOT JUSTIFIED IN TREATING THE ASSESSEE, AS AN ASSES SEE IN DEFAULT.. II) THE ACTIVITY CARRIED ON BY THE ASSESSEE IS NOT ONE WHICH CAN BE SAID TO BE A WORKS CONTRACT. THE BOMBAY HIGH COURT MADE IT CLEAR THAT IN A WORKS CONTRACT, THE CONTRACTEE WOUL D PROVIDE THE MATERIAL AND ALL OTHER REQUIREMENTS IN THE PROC ESS OF MANUFACTURE/PRODUCTION. THE CONTRACTOR MERELY CARRI ES ON THE WORK WITH THE MATERIAL SUPPLIED BY THE CONTRACTEE A ND THE KNOWLEDGE SUPPLIED BY THE CONTRACTEE. FURTHER, IN A WORKS CONTRACT, THE RISK IS UNDERTAKEN BY THE CONTRACTEE AND IN CASE OF DEVELOPMENT CONTRACT, THE CONTRACTOR UNDERTAKES THE RISKS INVOLVED. IN THE CASE OF THE ASSESSEE, IT WAS ALLO TTED A PREMISES AND THE POSSESSION OF THE PREMISES WAS HANDED OVER TO THE ASSESSEE. IT WAS ASKED BY THE GOVERNMENT TO DEVELO P THE SAID AREA INTO AN INFRASTRUCTURE FACILITY. ALL THE ACTIV ITIES NECESSARY ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 25 IN THE PROCESS OF DEVELOPMENT AND THE LOSSES SUFFER ED IN THE PROCESS, THE MATERIAL TO BE USED INCLUDING THE EXPE RTISE SHALL BE OF THE ASSESSEE. THE MAINTENANCE OF THE EXISTING FACILITY DURING THE PERIOD OF DEVELOPMENT ALSO SHALL BE OF T HE ASSESSEE. THEREFORE, THE ASSESSEE IS A DEVELOPER AND NOT A WO RKS CONTRACTOR. THE ASSESSEE ALSO SUBMITTED IN DETAIL T HE MEANING OF THE WORD DEVELOPMENT. THE MEANINGS GIVEN IN TH E ABOVE MENTIONED PARAGRAPHS TO THE WORD DEVELOP WOULD BE MAKING SOME AREA OF LAND MORE PROFITABLE OR USEFUL . THE ASSESSEE IS MAKING THE AREA MORE USEFUL THAN IT WAS EARLIER AND, THEREFORE, THE ACTIVITY CARRIED BY THE ASSESSE E IS AKIN TO DEVELOPMENT AND CERTAINLY NOT A WORKS CONTRACT. III) IN THIS CONTEXT, IT MAY BE NECESSARY TO REFER TO THE CIRCULAR NO.4 OF 2010 DT.18-05-2010 (AFTER INTRODUCTION OF T HE EXPLANATION BY THE FINANCE ACT, 2009) WHICH IS EXTR ACTED BELOW: REFERENCES HAVE BEEN RECEIVED BY THE BOARD AS TO W HETHER WIDENING OF EXISTING ROADS CONSTITUTES CREATION OF NEW INFRASTRUCTURE FACILITY FOR THE PURPOSE OF SECTION 80-IA(4)(I) OF THE INCOME-TAX ACT, 1961. SECTION 80-IA(4)(I) PROVIDES FOR A DEDUCTION TO AN UNDERTAKING ENGAGED IN DEVELOPING, OR OPERATING AND MAINTAINING , OR DEVELOPING, OPERATING AND MAINTAINING ANY INFRASTRU CTURE FACILITY SUBJECT TO SATISFACTION OF THE CONDITIONS LAID DOWN IN THE SECTION. THE EXPLANATION TO SUB SECTION 80-IA(4)(I) STATES THAT FOR THE PURPOSE OF THIS CLAUSE, INFRASTRUCTURE FACI LITY MEANS INTER ALIA:- (A) A ROAD INCLUDING TOLL ROAD, A BRIDGE OR A RAIL SYSTEM; (B) A HIGHWAY PROJECT INCLUDING HOUSING OR OTHER AC TIVITIES BEING AN INTEGRAL PART OF THE HIGHWAY PROJECT. THE ISSUE HAS BEEN EXAMINED BY THE BOARD. IT HAS BE EN DECIDED THAT WIDENING OF AN EXISTING ROAD BY CONSTR UCTING ADDITIONAL LANES AS A PART OF A HIGHWAY PROJECT BY AN UNDERTAKING WOULD BE REGARDED AS A NEW INFRASTRUCTU RE FACILITY ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 26 FOR THE PURPOSE OF SECTION 80-IA(4)(I). HOWEVER, SI MPLY RELAYING OF AN EXISTING ROAD WOULD NOT BE CLASSIFIABLE AS A NEW INFRASTRUCTURE FACILITY FOR THIS PURPOSE. IV) THE BOARD CLEARLY MENTIONED THAT WIDENING OF EX ISTING ROAD IN AN INFRASTRUCTURE FACILITY AND ANY ENTERPRISE CARRY ING ON THE ACTIVITY OF WIDENING OF AN EXISTING ROAD WOULD BE E LIGIBLE FOR DEDUCTION U/S 80IA(4) AS THE CBDT CONSIDERED SUCH W ORKS TO BE DEVELOPMENT OF AN INFRASTRUCTURE FACILITY. V) THE ABOVE MENTIONED CIRCULAR IS ISSUED AFTER THE FINANCE ACT, 2009 AMENDING THE EXPLANATION. IN VIEW OF THE ABOV E, THE ASSESSEE IS OF THE VIEW THAT IT IS ENTITLED FOR DED UCTION U/S 80IA (4)(I) OF THE I.T. ACT AND ACCORDINGLY CLAIMED SUC H DEDUCTION IN THE RETURNS OF INCOME FILED FOR THE ASSESSMENT YEA RS 2000- 2001 AND ONWARDS. 10. THE VIEWS OF THE LOWER AUTHORITIES MENTIONED HEREIN BELOW IS CONTARY TO THE TRUE SPIRIT OF THE PROVISIONS OF SE CTION:: I) WHILE COMPLETING THE ASSESSMENTS IN THE ASSESSIN G OFFICER REJECTED THE CLAIM MADE BY THE APPELLANT ON THE GRO UND THAT THE ASSESSEE IS NOT THE OWNER OF THE INFRASTRUCTUR E FACILITY. ACCORDING TO THE ASSESSING OFFICER, SUB SECTION (4 ) WHICH READS IT IS OWNED BY THE COMPANY REGISTERED IN INDIA OR BY A CONSORTIUM OF SUCH COMPANIES. WOULD MEAN THAT THE INFRASTRUCTURE SHOULD BE OWNED BY THE COMPANY. THE APPELLANT SUBMITTED THAT THE OWNERSHI P MENTIONED IN SEC. 80IA(4) REFERS TO THE ENTERPRISE CARRYING ON THE BUSINESS OF DEVELOPMENT AND NOT TO THE INFRAST RUCTURE FACILITY AS PRESUMED BY THE ASSESSING OFFICER. A) ACCORDING TO AR THE ASSESSEE HEREIN IS NOT CARR YING ON THE ACTIVITY AS MENTIONED IN U/S 80IA (4)(I) R.W.S .80IA(4) (I) (C) ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 27 OF THE SAID SECTION. THE ASSESSING OFFICER REFERRE D TO THE SUB CLAUSE (C) WHICH MENTIONS THAT IT HAS STARTED OR STARTS OPERATING OR MAINTAINING THE INFRASTRUCTURE FACILI TY ON OR AFTER FIRST DAY OF APRIL, 1995 WOULD MEAN THAT SUCH DEDUCTION IS ALLOWABLE ONLY FOR AN ENTERPRISE WHICH DEVELOPS AND OPERATES AND MAINTAINS INFRASTRUCTURE FACILITY. B) THE ASSESSING OFFICER IS ALSO OF THE VIEW THAT THE ASSESSEE IS A MERE CONTRACTOR AND NOT A DEVELOPER. IN VIEW OF THE AMENDMENT BROUGHT IN RETROSPECTIVELY BY THE FIN ANCE ACT, 2007 THE ASSESSING OFFICER CAME TO THE CONCLUSION THAT THE INCOME FROM MERE WORKS CONTRACT WOULD NOT BE ELIGI BLE FOR DEDUCTION U/S 80IA (4) OF THE I.T. ACT. IN THE LAT ER ASSESSMENT YEARS, THE ASSESSING OFFICER ALSO REFERRED TO THE A MENDMENT BROUGHT IN BY THE FINANCE ACT, 2009 RETROSPECTIVELY . IV) THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS ) FOR THE ASSESSMENT YEARS CONFIRMED THE VIEW TAKEN BY THE AS SESSING OFFICER. 14. THE AR FURTHER SUBMITTED HIS ARGUMENTS AS FOLLOWS: I ) WHETHER THE ASSESSEE NEEDS TO BE THE OWNER OF T HE INFRASTRUCTURE FACILITY OR NOT : THE AR SUBMITTE D THAT THE WORD OWNED IN SUB CLAUSE (A) OF CLAUSE (1) OF S UB SECTION (4) OF SEC.80IA REFER TO THE ENTERPRISE. IT IS CLEAR FR OM A READING OF THE SECTION THAT THE ENTERPRISES CARRYING ON DEVELO PMENT OF INFRASTRUCTURE DEVELOPMENT SHOULD BE OWNED BY THE C OMPANY AND NOT THAT THE INFRASTRUCTURE FACILITY SHOULD BE OWNED BY A COMPANY. THE PROVISIONS ARE MADE APPLICABLE TO THE PERSON TO WHOM SUCH ENTERPRISE BELONGS TO IS EXPLAINED IN SUB CLAUSE (A). THEREFORE, THE WORD OWNERSHIP IS ATTRIBUTABLE ON LY TO THE ENTERPRISE CARRYING ON THE BUSINESS WHICH WOULD MEA N THAT ONLY COMPANIES ARE ELIGIBLE FOR DEDUCTION U/S 80IA (4) AND NOT ANY OTHER PERSON LIKE INDIVIDUAL, HUF, FIRM ETC. THIS VIEW IS SUPPORTED BY THE DECISION OF THE HONBLE ITAT, MU MBAI F- BENCH IN THE CASE OF PATEL ENGINEERING LTD. VS DEP UTY COMMISSIONER OF INCOME-TAX REPORTED IN 94 ITD 411. ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 28 II) IT IS FURTHER SUBMITTED THAT ACCORDING TO SUB CLAUSE (A), CLAUSE (I) OF SUB SECTION (4) OF SEC. 80-IA THE WORD IT DENOTES THE ENTERPRISE CARRYING ON THE BUSINESS. THE WORD IT CANNOT BE RELATED TO THE INFRASTRUCTURE FACILITY, PARTICULARL Y IN VIEW OF THE FACT THAT INFRASTRUCTURE FACILITY INCLUDES RAIL SY STEM, HIGHWAY PROJECT; WATER TREATMENT SYSTEM, IRRIGATION PROJEC T; A PORT, AN AIRPORT OR AN INLAND PORT WHICH CANNOT BE OWNED BY ANY ONE. EVEN OTHERWISE, THE WORD IT IS USED TO DENOTE AN ENTERPRISE. THEREFORE, THE ASSESSEE SUBMITS THAT THERE IS NO RE QUIREMENT THAT THE ASSESSEE SHOULD HAVE BEEN THE OWNER OF THE INFRASTRUCTURE FACILITY. 15. THE NEXT CONTENTION OF THE ASSESSING OFFICER IS THA T THE ASSESSEE IS NOT A DEVELOPER BUT IS ONLY A WORKS CON TRACTOR. THE AUTHORITIES BELOW RELIED ON THE AMENDMENTS BROUGH T IN BY THE FINANCE ACT 2007 AND 2009 TO MENTION THAT THE ACTI VITY UNDERTAKEN BY THE APPELLANT HEREIN IS NOT ELIGIBLE FOR DEDUCT ION U/S 80IA (4) OF THE I.T ACT. IN THIS REGARD AN ANALYSIS HAS TO BE MADE BY THE AUTHORITIES AS TO WHETHER A PARTICULAR WORK UNDERTA KEN BY THE ASSESSEE HEREIN IS A MERE WORKS CONTRACT OR IN THE NATURE OF DEVELOPMENT. EACH OF THE WORK UNDERTAKEN HAS TO BE ANALYZED AND A CONCLUSION HAS TO BE DRAWN ABOUT THE NATURE OF THE WORK UNDERTAKEN BY THE APPELLANT. THE AGREEMENT ENTERED INTO WITH THE GOVERNMENT. OR THE GOVERNMENT BODY MAY BE A MERE WORKS CONTRA CT OR FOR DEVELOPMENT OF INFRASTRUCTURE. 16. IT WAS SUBMITTED THAT IT CAN BE SEEN FROM THE AGRE EMENTS ENTERED INTO THAT THE APPELLANT WAS HANDED OVER THE POSSESSION OF THE PREMISES VARIOUS PROJECTS TILL THE DEVELOPMENT OF INFRASTRUCTURE FACILITY WAS COMPLETE AND WAS HANDED OVER TO THE GO VERNMENT, IT SHALL BE THE ASSESSEES RESPONSIBILITY TO DO EVERY ACT. THE ASSESSEE HAS TO DEVELOP THE INFRASTRUCTURE FACILITY IN THE P REMISE HANDOVER TO THE ASSESSEE. IN THE PROCESS, ALL THE WORKS ARE T O BE EXECUTED BY THE ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 29 ASSESSEE. IT MAY BE LAYING OF A DRAINAGE SYSTEM, E XCAVATION OF TRANSITION AND DIVERSION CHANNEL OR MAY BE CONSTRUC TION OF A PROJECT; PROVISION OF WAY FOR THE CATTLE AND BULLOCK CARTS I N THE VILLAGE; PROVISION FOR TRAFFIC WITHOUT ANY HINDRANCE, THE AS SESSEES DUTY IS TO DEVELOP INFRASTRUCTURE WHETHER IT INVOLVES CONSTRUC TION OF A PARTICULAR ITEM AS AGREED TO IN THE AGREEMENT OR NO T. THE AGREEMENT IS NOT FOR A SPECIFIC WORK; IT IS FOR DEVELOPMENT OF FACILITY AS A WHOLE. THE ASSESSEE IS NOT ENTRUSTED WITH ANY SPECIFIC WOR K TO BE DONE BY THE ASSESSEE. THE MATERIAL REQUIRED IS TO BE BROUG HT IN BY THE ASSESSEE BY STICKING TO THE QUALITY; AND QUANTITY I RRESPECTIVE OF THE COST OF SUCH MATERIAL. THE GOVERNMENT DOES NOT PRO VIDE ANY MATERIAL TO THE ASSESSEE. IT PROVIDES THE WORKS I N PACKAGES AND NOT AS A WORKS CONTRACT. THE ASSESSEE UTILIZES ITS FUN DS INITIALLY, ITS EXPERTISE; ITS EMPLOYEES AND TAKES THE RESPONSIBILI TY OF DEVELOPING THE INFRASTRUCTURE FACILITY. THE LOSSES SUFFERED E ITHER BY THE GOVT. OR THE PEOPLE IN THE PROCESS OF SUCH DEVELOPMENT WOULD BE THAT OF THE ASSESSEE. THE ASSESSEE HANDS OVER THE DEVELOPED IN FRASTRUCTURE FACILITY TO THE GOVERNMENT ON COMPLETION OF THE DEV ELOPMENT. THEREAFTER, THE ASSESSEE HAS TO UNDERTAKE MAINTENAN CE OF THE SAID INFRASTRUCTURE FOR A PERIOD OF 12 TO 48 MONTHS. DU RING THIS PERIOD, IF ANY DAMAGES ARE OCCURRED IT SHALL BE THE RESPONSIBI LITY OF THE ASSESSEE. FURTHER, DURING THIS PERIOD, THE ENTIRE INFRASTRUCTURE SHALL HAVE TO BE MAINTAINED BY THE ASSESSEE ALONE WITHOUT HINDRANCE TO THE REGULAR TRAFFIC. THEREFORE, IT IS CLEAR THAT F ROM AN UNDEVELOPED AREA, INFRASTRUCTURE IS DEVELOPED AND HANDED OVER T O THE GOVERNMENT AND AS EXPLAINED BY THE CBDT VIDE ITS CIRCULAR DATE D 18-05-2010, SUCH ACTIVITY IS ELIGIBLE FOR DEDUCTION UNDER SEC. 80IA(4) OF THE ACT. THIS CANNOT BE CONSIDERED AS A MERE WORKS CONTRACT BUT HAS TO BE CONSIDERED AS A DEVELOPMENT OF INFRASTRUCTURE FACIL ITY. THEREFORE, THE ASSESSEE IS A DEVELOPER AND NOT A WORKS CONTRACTOR AS PRESUMED BY THE ASSESSING OFFICER. THE ASSESSEE SUBMITS THAT TH E CIRCULAR ISSUED BY THE BOARD EXTRACTED ABOVE WOULD CLEARLY INDICATE THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SEC. 80IA(4) OF THE ACT. ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 30 17. THE LOWER AUTHORITIES MENTIONED THAT THE ASSESSEE I S A MERE CONTRACTOR OF THE WORK AND NOT A DEVELOPER. IN THI S REGARD, THE ASSESSEE MAY BE PERMITTED TO REFER TO THE PROVISION S OF THE ACT. IT IS MENTIONED THAT TO BE ELIGIBLE FOR DEDUCTION U/S 80 IA (4) OF THE I.T. ACT, A PERSON BEING A COMPANY HAS TO ENTER INTO AN AGREEMENT WITH THE GOVERNMENT. SUCH AN AGREEMENT IS A CONTRACT AN D FOR THE PURPOSE OF THE AGREEMENT A PERSON MAY BE CALLED AS A CONTRACTOR AS HE ENTERED INTO A CONTRACT. BUT THE WORD CONTRACT OR IS USED TO DENOTE A PERSON ENTERING INTO AN AGREEMENT FOR UNDE RTAKING THE DEVELOPMENT OF INFRASTRUCTURE FACILITY. EVERY AGR EEMENT ENTERED INTO IS A CONTRACT. THE WORD CONTRACTOR IS USED TO D ENOTE THE PERSON WHO ENTERS INTO SUCH CONTRACT. EVEN A PERSON WHO E NTERS INTO A CONTRACT FOR DEVELOPMENT OF INFRASTRUCTURE FACILITY IS A CONTRACTOR. THEREFORE, THE CONTRACTOR AND THE DEVELOPER CANNOT BE VIEWED DIFFERENTLY. EVERY CONTRACTOR MAY NOT BE A DEVELOP ER BUT EVERY DEVELOPER DEVELOPING INFRASTRUCTURE FACILITY ON BEH ALF OF THE GOVERNMENT IS A CONTRACTOR. THEREFORE, THE VIEW TA KEN BY THE AUTHORITIES IN THIS REGARD IS NOT CORRECT. THE ASS ESSEES VIEW IS SUPPORTED BY THE FOLLOWING DECISIONS: 1) THE DECISION OF THE ITAT, PUNE BENCH A VIDE ORDER DATED 8.6.2011 IN THE CASE OF LAKSHMI CIVIL ENGINEE RING PVT. LTD., VS ADDL CIT, RANGE-II, KOLHAPUR. WHEREIN IT IS HELD THAT EVEN IF A PERSON IS A CONTRACTOR, IF ALL THE CONDITIONS MENTIONED IN SEC.80-IA(4) ARE FULFILLED, THE ASSESSEE BECOMES ELIGIBLE FOR DEDUCTION. 2) THE DECISION OF THE HONBLE ITAT, MUMBAI F-B ENCH IN THE CASE OF PATEL ENGINEERING LTD. VS DEPUTY COMMISSIONER OF INCOME-TAX REPORTED IN 94 ITD 411 WHEREIN IT IS HELD THAT THE TERM CONTRACTOR IS NO T ESSENTIALLY CONTRADICTORY TO THE TERM DEVELOPER. THE HONBLE TRIBUNAL FOUND THAT A PERSON WHO HAS UNDERTAKEN THE CONTRACT FOR DEVELOPMENT IS NOT ONL Y A ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 31 CONTRACTOR BUT IS ALSO A DEVELOPER ELIGIBLE FO R DEDUCTION U/S 80IA(4) OF THE I.T ACT. 3) DECISION OF THE MUMBAI BENCH OF THE HONBLE IT AT IN THE CASE OF ACIT VS BHARAT UDYOG LTD. REPORTED I N (2008) 24 SOT 412 WHEREIN IT IS HELD THAT AN ASS ESSEE ENGAGED IN DEVELOPMENT OF INFRASTRUCTURE BUT NOT IN MAINTAINING AND OPERATING THE SAME WOULD BE ELIGIBL E FOR DEDUCTION U/S 80IA (4) THOUGH HE IS DESCRIBED AS A CONTRACTOR AND WAS PAID BY THE GOVERNMENT. 4) THE DECISION OF THE ITAT IN THE CASE OF METAL I NFRA PROJECTS LTD., VS. CIT REPORTED IN 26 DTR 359, WHER EIN IT IS HELD THAT SIMPLY BECAUSE THE AGREEMENT MENTIONED THE ASSESSEE AS CONTRACTOR, HE WOULD NOT CEASE TO B E THE DEVELOPER. 18. IT CAN BE SEEN FROM THE ABOVE THAT THE WORD CONTRA CTOR USED IN THE AGREEMENTS ENTERED INTO WOULD NOT DEBAR THE ASSESSEE FROM BEING A DEVELOPER. IN FACT THE ASSESSEE ENTERED IN TO AGREEMENT FOR DEVELOPMENT OF INFRASTRUCTURE FACILITY AND THEREFOR E, HE IS A CONTRACTOR. THEREFORE, THE AUTHORITIES ARE NOT JUS TIFIED TO HOLD THAT THE ASSESSEE IS NOT A DEVELOPER SIMPLY BECAUSE HE I S MENTIONED AS A CONTRACTOR IN THE AGREEMENT. 19. THE REVENUE AUTHORITIES CANNOT MAKE A DISTINCTION B ETWEEN THE WORDS CONTRACTOR AND DEVELOPER. THE CONDIT IONS MENTIONED IN THE INCOME-TAX ACT IN SEC. 80-IA ARE THAT THE ASSES SEE SHALL BE A COMPANY AND SHOULD HAVE ENTERED INTO AN AGREEMENT W ITH THE GOVERNMENT OR GOVERNMENT BODY FOR DEVELOPMENT OF TH E INFRASTRUCTURE FACILITY. EVEN IF IT DID SO IN THE PROCESS OF FULFILLING THE CONTRACT, IT WOULD BE ELIGIBLE FOR DEDUCTION UNDE R THE SAID SECTION. ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 32 20. THE LEARNED AR SUBMITTED THAT: I) BOTH THE ASSESSING OFFICER AND THE LEARNED COMMI SSIONER OF INCOME-TAX (APPEALS) ARE NOT CORRECT IN REJECTING T HE CLAIM MADE BY THE ASSESSEE FOR DEDUCTION UNDER SEC. 80IA( 4) OF THE ACT. II) THE LOWER AUTHORITIES ARE OF THE VIEW THAT SE PARATE BOOKS OF ACCOUNT WERE NOT MAINTAINED FOR EACH OF THE WORK. IN THIS REGARD IT IS SUBMITTED THAT PROPER ACCOUNTS WERE MA INTAINED SEPARATELY FOR EACH WORK EXCEPT FOR THE HEAD OFFICE EXPENDITURE. FURTHER, IT IS HELD BY THE HONOURABLE ITAT IN THE C ASE OF PATWA KINARIWALA ELECTRONICS VS. IAC REPORTED IN 51 TTJ 2 80, WHEREIN IT IS HELD THAT MAINTENANCE OF SEPARATE BOO KS IS NOT FATAL. A SIMILAR DECISION IS TAKEN BY THE HONOURABL E ITAT IN THE CASE OF SHOGHI COMMUNICATIONS LTD., VS. DCIT REPORT ED IN 9 SOT 489. THE HONOURABLE ITAT, CHENNAI BENCH IN THE CASE OF CAVINKARE (P) LTD., VS. ACIT REPORTED IN 16 DTR 322 HELD THAT SEPARATE BOOKS OF ACCOUNT FOR EACH UNIT NEED NOT BE MAINTAINED. HOWEVER, IT WAS SUBMITTED THAT THE AS SESSEE HAS MAINTAINED SEPARATE BOOKS OF ACCOUNT AND CAN ARRIVE AT THE PROFIT FOR EACH OF THE UNIT. III) THE LOWER AUTHORITIES FOR ONE OF THE ASSESSME NT YEARS ARE OF THE VIEW THAT THE DEDUCTION IS ALLOWABLE ONLY WHEN THE ASSESSEE ENTERS INTO AGREEMENT WITH GOVERNMENT AND NOT WITH ANY OTHER BODY CORPORATE. THE ASSESSEE IN THIS REGARD HUMBLY SUBMITS THAT THE PROVISIONS OF SEC. 80IA(4) MAKES IT CLEAR THAT AN AGREEMENT CAN BE ENTERED INTO BY THE ASSESSEE WITH EITHER THE GOVERNMENT OR THE GOVERNMENT ORGANIZATION OR A STAT UTORY BODY. THE STATUTORY BODY INCLUDES ANY CORPORATION OR CORPORATE BODY INCORPORATED BY THE GOVERNMENT. 21. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESE NTATIVE SUBMITTED WRITTEN SUBMISSIONS BASED ON THE ARGUMENT S PUT FORTH ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 33 BEFORE US. HE RELIED ON THE ORDERS OF THE LOWER AU THORITIES AND SUBMITTED THAT TO BE ELIGIBLE FOR DEDUCTION UNDER S ECTION 80IA(4) OF THE ACT, ALL THE THREE CONDITIONS MENTIONED IN THE SUB-SECTION SHOULD BE CUMULATIVELY FULFILLED. ACCORDING TO HIM, THE AS SESSEE SHOULD HAVE BEEN ENGAGED IN DEVELOPMENT AND MAINTENANCE OF INFR ASTRUCTURE FACILITY. ACCORDING TO HIM, A MERE DEVELOPER IS NO T ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA (4) OF THE ACT. IN TH IS REGARD, HE REFERRED TO SUB-SECTION (2) OF SEC.80IA (4) AND ALS O SUB CLAUSE (C) OF THE SECTION 80IA(4) (I). THE WORDS USED IN SUB-CLA USE (C) STARTED OR STARTS OPERATING AND MAINTAINING INFRASTRUCTURE F ACILITY ON OR AFTER FIRST OF APRIL, 1995 WOULD APPLY ONLY TO THE SECOND TYPE OF ENTERPRISE WHO UNDERTAKES THE WORK OF MAINTAINING AND OPERATI ON. IT WOULD NOT APPLY TO A PERSON WHO IS ENGAGED IN DEVELOPING INFRASTRUCTURE FACILITY AS THE WORD DEVELOPED IS NOT USED IN THE SAID SUB CLAUSE. FURTHER, THIS IS ANALYSED BY VARIOUS COURTS. IT IS HELD CLEARLY THAT SUCH A PROVISION I.E. CLAUSE (C) WOULD APPLY ONLY T O SUCH ENTERPRISES ENGAGED IN MAINTAINING AND OPERATING THE INFRASTRUC TURE. THE BOMBAY HIGH COURT IN THE CASE OF CIT VS ABG HEAVY I NDUSTRIES LTD.,[SUPRA] OBSERVED THAT THE REQUIREMENT THAT THE OPERATION AND MAINTENANCE OF THE INFRASTRUCTURE FACILITY CAME AFT ER FIRST OF APRIL, 1995 HAS TO BE HARMONIOUSLY CONSIDERED WITH THE MAI N PROVISION UNDER WHICH DEDUCTION IS AVAILABLE TO THE ASSESSE E WHICH DEVELOPS OR OPERATES, MAINTAINS AND DEVELOPS OR OPERATES AND MAINTAINS INFRASTRUCTURE FACILITY. THERE IS SIGNIFICANCE FOR CLAUSE-(C) IN SO FAR AS THE ENTERPRISES CARRYING ON BUSINESS OF DEVELOPING AND MAINTAINING AND OPERATING INFRASTRUCTURE FACILITY ARE CONCERNED . TO BE ELIGIBLE FOR DEDUCTION UNDER SUB-SECTION (4A), ANY ENTERPRISE HA S TO COMMENCE ITS OPERATION ON OR AFTER 01-04-1995. THIS CLARIFIE D THAT ANY ENTERPRISE COMMENCING ITS OPERATIONS PRIOR TO THE S AID DATE, BUT CONTINUING TO DO THE SAID ACTIVITY FOR THE ASSESSME NT YEARS 1996-97 AND ONWARDS WOULD NOT BE ELIGIBLE. AS SUBMITTED THA T SUB SECTION (4A) WAS REMOVED WITH EFFECT FROM THE ASSESSMENT YE AR 2000-01 BY THE FINANCE ACT, 1999. A NEW SUB SECTION (4) WAS IN TRODUCED BY THE SAID FINANCE ACT. SUB SECTION (4) EXTENDED DEDUCTIO N TO SUCH ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 34 ENTERPRISES WHICH DEVELOP INFRASTRUCTURE OR WHICH M AINTAIN AND OPERATE INFRASTRUCTURE FACILITY OR WHICH DEVELOPS, MAINTAINS AND OPERATES AN INFRASTRUCTURE FACILITY. IT IS CLARIFIE D BY THE BOARD THAT SUB SECTION (4A) WAS DELETED AND THE DEDUCTION EARL IER AVAILABLE CONTINUES IN LIEU OF SUB SECTION (4) OF SECTION 80I A. THEREFORE, THE CONDITION MENTIONED IN SUB SECTION (4A) THAT AN ENT ERPRISE COMMENCING ITS ACTIVITY OF OPERATING, MAINTAINING T HE INFRASTRUCTURE FACILITY ON OR AFTER THE FIRST DAY OF APRIL, 1995 W OULD ONLY BE ELIGIBLE FOR DEDUCTION. THEREFORE, IT APPLIES TO THOSE ENTE RPRISES WHICH WERE EARLIER ELIGIBLE FOR DEDUCTION UNDER SUB SECTION (4 A) AND WHICH WILL BE CONTINUED TO BE ELIGIBLE FOR DEDUCTION UNDER SUB-SE CTION (4). SUCH PROVISION HAS NO APPLICATION TO THE CASE OF THE ASS ESSEE, WHICH BECAME ELIGIBLE FOR DEDUCTION UNDER SUB-SECTION (4) OF SEC. 80IA OF THE ACT. THEREFORE, SUB-CLAUSE (C) CAME INTO PLAY ONLY IN RESPECT OF THOSE CONCERNS WHICH CLAIMED DEDUCTION FOR MAINTAIN ING AND DEVELOPING THE INFRASTRUCTURE FACILITY AND NOT FOR THE ASSESSEE WHO ONLY DEVELOPS. THE MEANING OF THE WORD DEVELOPER AND THE ELIGIBILITY OF THE BUSINESS TO CLAIM DEDUCTION MEANT FOR DEVEL OPMENT OF INFRASTRUCTURAL FACILITIES WITHIN THE MEANING OF S ECTION 80IA HAS TO BE SEEN IN THE CONTEXT OF THE GENESIS AND LEGISLATIVE HISTORY OF THE SECTION AS HELD BY THE SUPREME COURT IN THE CASE OF CIT VS. N.C. BUDDHIRAJA (204 ITR 412,433) THE PROVISION AS INTRO DUCED BY THE FINANCE ACT, 1991 AS AMENDED BY FINANCE ACT, 1996, FINANCE ACT, 1999, FINANCE ACT, 2001, UP TO FINANCE ACT 2007 AND FINANCE ACT, 2009 AND AS EXPLAINED BY CIRCULAR 794 DATED 9-8-200 0 CIRCULAR 779 DATED 14-9-1999 (240 ITR ST. 32), CIRCULAR 794 DATE D 9-8-2000, CIRCULAR 779 DATED 14-98-1999 (240 ITR ST. 32), CIR CULAR 794 DATED 19-8-2000, CIRCULAR 14/2001 (252 ITR ST. 98) AND CI RCULAR 3/2008 DATED 12-03-2008 (168 TAXMAN ST. 12,54) BRINGS OUT THE OBJECTIVES OF THE STATUTE AND EXPECTATIONS OF THE LAW-MAKERS I N BRINGING THE ENACTMENT. THE STATUTORY PROVISIONS AS WOULD BE AP PARENT FROM THE CIRCULARS AND EXPLANATORY NOTES REFERRED TO HEREIN- ABOVE SEEK TO INCORPORATE A QUID PRO QUO BETWEEN INTRODUCTION OF INVESTMENT AND ENTREPRENEURIAL RESOURCES FROM THE PRIVATE SECTOR A ND A TAX ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 35 DEDUCTION FROM THE GOVERNMENT TO ENABLE RECOUPMENT OF EXPENDITURE INCURRED. THE BOT/BOOT MODELS SEEK TO AUGMENT INFR ASTRUCTURAL ASSETS IN ADDITION TO GOVERNMENTAL SPENDING AND NOT SIMPLY FEED ON GOVERNMENT EXPENDITURE. THE DEDUCTION UNDER SECTIO N 80IA IS, THEREFORE, AVAILABLE TO THE FORMER, AND NOT TO THE LATTER FORMS OF BUSINESS. THE DEDUCTION CLAIMED UNDER SECTION 80I A OF THE ACT AS PRESCRIBED IN SUB-SECTION (1) IS IN ACCORDANCE WIT H AND SUBJECT TO THE PROVISIONS OF THIS SECTION.... IN SUB SECTION (2), IT IS STATED THAT THE DEDUCTION IS AVAILABLE FOR THE SPECIFIED NUMBER OF YEARS BRINING FROM THE YEAR IN WHICH THE UNDERTAKING OR THE ENTER PRISE DEVELOPS AND BEGINS TO OPERATE ANY INFRASTRUCTURE FACILITY O R STARTS PROVIDING TELECOMMUNICATION SERVICES OR... IT IS CLEAR THERE FORE THAT THE DEDUCTION IS INEXTRICABLY CONNECTED TO THE COMMENCE MENT OF OPERATIONS OF THE INFRASTRUCTURE FACILITY. IT IS A PPARENT THAT THE FACILITY HAS TO BE CONCEIVED OF IN ITS TOTALITY BEC AUSE PART OF THE INFRASTRUCTURE FACILITY HAS NOT EXISTENCE INDEPENDE NT OF THE WHOLE. A CERTAIN NUMBER OF KILOMETRES OF A HIGHWAY OR IRRIGA TION CANAL HAS NO EXISTENCE BY ITSELF, AND IS INCAPABLE OF BECOMING O PERATIONAL WITHOUT REFERENCE TO THE REST OF THE PROJECT, OF WHICH IT I S ONLY A PART. IT IS EVIDENT FROM THE AGREEMENTS FILED BY THE ASESSEE TH AT THE ASSESSEE UNDERTOOK TO EXECUTE THE WORK ON NHAIS SPECIFICATI ONS, AT RATES AGREED UPON, SUBJECT TO MEASUREMENT, WITHIN A PERIO D OF 36 MONTHS OF COMMENCEMENT. 22. HE SUBMITTED THAT AGREEMENT FILED BY THE ASSESEE IN THE PAPER BOOK WHEREIN THE DETAILS OF RATE ANALYSIS, BILL OF QUANTITIES ETC., MAKE IT CLEAR THAT THE ASSESSEE HAD NO AUTONOMY IN MATTERS OF DESIGN AND SPECIFICATION WHICH COMPLETELY VESTED WI TH THE EMPLOYER. THE ONLY LAWFUL ENTITLEMENT OF THE ASSESSEE WAS TO BE PAID FOR THE MEASUREMENT OF WORK COMPLETED AT RATES AGREED UPON. THE PARTIAL AND SECTIONAL NATURE OF THE PROPOSED WORK IS IMMEDI ATELY CLEAR FROM THIS NOTICE AND IT IS ALSO APPARENT FROM THIS THAT THE SECTION OF THE ROAD PROPOSED FOR IMPROVEMENT HAS NO INDEPENDENT EX ISTENCE CAPABLE OF SATISFYING THE REQUIREMENT OF SECTION 80 IA (2). THEREFORE, ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 36 THIS PROJECT IS INCAPABLE OF COMMENCEMENT OF OPERAT IONS BY ITSELF, OR TO QUALITY THE LARGER INFRASTRUCTURE FACILITY OF WH ICH IT IS A PART. THE ASSESSEE ALSO GETS MOBILISATION ADVANCE AS WELL AS INTEREST-FREE ADVANCE FOR MACHINERY PURCHASE AND THERE IS NO ELEM ENT OF ENTREPRENEURIAL INITIATIVE OR FINANCIAL PARTICIPATI ON OF THE CONTRACTOR IN THIS KIND OF A PROJECT. THE SUCCESSFUL BIDDER M ERELY EXECUTES A GOVERNMENT CONTRACT AND GETS PAID FOR IT AT MUTUALL Y AGREED RATES AND THE NATURE OF RESPONSIBILITIES ASSUMED UNDER TH E OTHER CONTRACTS AS PER AGREEMENTS. IT IS FURTHER STATED THAT DUR ING THE HEARING, THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE WAS AT PA INS TO EMPHASISE THAT THE ASSESSEE UNDERTOOK MAINTENANCE WORK AND WA S HENCE IN THE SAME LEAGUE AS A DEVELOPER. HOWEVER, IT IS CLEAR F ROM THE DOCUMENT AS FURNISHED IN THE PAPER BOOK THAT THE MAINTENANCE FUNCTION WAS ACTUALLY REMEDYING OF DEFECTS FOR A PRESCRIBED PERI OD. NO SEPARATE CHARGES HAVE BEEN COLLECTED AND THIS CANNOT BE SEEN AS A MAINTENANCE FUNCTION. 23. THE LD. DR SUBMITTED THAT ON THESE FACTS, HAVING RE GARD TO THE RESPONSIBILITIES ASSUMED UNDER THE AGREEMENT, THE A SSESSEE CANNOT BE SEEN AS A DEVELOPER; INSTEAD IT PLAYS THE ROLE O F AN EXECUTOR/CONTRACTOR. THE CONTRACTS IN QUESTION ARE IN THE NATURE OF WORKS CONTRACTS, THE EXPLANATION INSERTED BELOW SEC TION 80IA (13) OF THE ACT WITH RETROSPECTIVE EFFECT FROM 1-4-2000 HAS OVER-RIDING INFLUENCE AND DEBARS THE ASSESSEES CLAIM. THE LAW ON THE SUBJECT OF APPLICATION OF A RETROSPECTIVE AMENDMENT IS CLEAR F ROM THE SPECIAL BENCH DECISION OF THE TRIBUNAL IN THE CASE OF AQUAR IUS TRAVELS P LTD. VS. ITO (111 ITD 53). SUCH PROVISIONS SHOULD BE AP PLIED IN PENDING PROCEEDINGS, EVEN WHEN THEY HAVE NOT BEEN INVOLVED EARLIER. AS MATTERS STAND, THEREFORE, THE MOST IMPORTANT QUESTI ON FOR EXAMINATION ON FACTS IS WHETHER THE BUSINESS AGREEM ENT IN QUESTION CAN BE TERMED A WORKS CONTRACT OR NOT. IF THE ANSW ER IS IN AFFIRMATIVE, NOTHING ELSE MATTERS BECAUSE THE EXPLA NATION TAKES OVER. IF NOT, THE OTHER FACTORS SUCH A DEVELOPMENT/OPERAT ION ETC., AND OTHER SPECIFIED CONDITIONS BECOME RELEVANT. RELIAN CE WAS PLACED IN ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 37 THIS REGARD ON THE DECISION OF THE MUMBAI HIGH COUR T IN THE CASE OF GLENMARK PHARMA (324 ITR 199) WHICH DIGESTS THE CAS E LAW FOR ASCERTAINMENT OF WHETHER FACTS OF THE AGREEMENT WOU LD AMOUNT TO A CONTRACT FOR WORK OR FOR SALE. 24. HE PLACED RELIANCE ON THE DECISION OF JURISDICTIONA L HIGH COURT IN THE CASE OF DR. MRS. RENUKA DATLA VS. CIT (240 I TR 463) (AP), THE PROVISIONS GRANTING EXEMPTIONS HAVE TO BE STRICTLY CONSTRUED. IT WAS HELD BY THE SUPREME COURT IN THE CASE OF IPCA LABOR ATORY LIMITED VS. DCIT (SC) 266 ITR 521 THAT WHEN THERE IS NO AMB IGUITY, PROVISIONS CANNOT BE INTERPRETED TO CONFER A BENEFI T UPON THE ASSESSEE. THE PROVISION IS INCAPABLE OF APPLICATIO N TO THE FACTS OF THE ASSESSEES CASE BECAUSE THE ASSESSEE IS ONLY AN EXE CUTOR OF A CONTRACT, WHICH IS IN TURN, PART OF A LARGER PROJEC T UNDERTAKEN BY THE GOVERNMENT, OR ITS AGENCY. BY REFERRING TO THE TW O DECISIONS RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESEE, MUMBAI HIGH COURT IN THE CASE OF CIT VS. ABG HEAVY INDUSTRIES LIMITED R EPORTED IN 322 ITR 323 AND ITAT PUNE BENCH IN THE CASE OF LAXMI CI VIL ENGINEERING PVT. LTD., VS. ADDL. CIT KOLHAPUR (UNREPORTED/ITA N O.766/PN/09 DATED 8-6-2011), IT IS SUBMITTED THAT THESE DECISIO NS SUPPORTED THE PROPOSITION THAT (I) THE ITATS DECISION IN THE CA SE OF B.T. PATIL & SONS, LARGER BENCH (MUMBAI) REPORTED IN 126 TTJ 577 IS NO LONGER GOOD LAW, AND (II) THE DISTINCTION BETWEEN DEVELOP ER AND CONTRACTOR IS NO LONGER RELEVANT IN THE CONTEXT OF CHANGED LAW EX PLAINED BY THE MUMBAI HIGH COURT IN THE CASE OF ABG HEAVY INDUSTRI ES (SUPRA) AND FOLLOWED WITHIN ITS JURISDICTION BY THE PUNE BENCH OF THE ITAT IN THE CASE OF LAXMI CIVIL ENGG. (SUPRA). IT IS SUBMITTED THAT SUCH RELIANCE IS NEITHER CORRECT NOR RELEVANT IN DECIDING THE ISS UES ON HAND. THIS POSITION IS ELABORATED IN THE FOLLOWING PARAS. IN THE CASE OF LAXMI CIVIL ENGG. PVT. LTD., THE ARGUMENT OF THE ASSESSEE THAT WAS ACCEPTED BY THE ITAT, PUNE BENCH IS BROADLY- THE ASSESSEE IS A CONTRACTOR, EVERY CONTRACTOR IS A DEVELOPER AS PER THE MUMBAI H IGH COURT DECISION IN THE CASE OF ABG HEAVY INDUSTRIES AND A DEVELOPER NEED NOT OPERATE AND MAINTAIN THE INFRASTRUCTURE FACILIT Y, AS HELD BY THE ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 38 MUMBAI HIGH COURT IN THE CASE OF ABG HEAVY INDUSTRI ES. IT IS SUBMITTED THAT THE DECISION OF THE PUNE BENCH OF TH E ITAT IN THE CASE OF CIVIL ENGG. (SUPRA) IS OF NO HELP IN DECIDI NG THE ISSUES IN THE IMPUGNED APPEALS FOR THE REASON THAT THE TERMS AND CONDITIONS OF THE CONTRACTS AND THE NATURE OF OBLIGATIONS ASSUMED THERE-UNDER, BY THE BUSINESS ARE NOT DISCUSSED IN THE SAID ORDER. T HIS IS THE FACTUAL FULCRUM ON WHICH THE DECISION OF THE ITAT (LARGER B ENCH) IN B.T. PATIL AS WELL AS THE MUMBAI HIGH COURT IN ABG CASE WAS DE CIDED. WITHOUT SUCH DETAIL, THERE IS NO POINT OF COMPARABILITY BET WEEN THE PUNE BENCH DECISION AND THE OTHER CASES. THE UNANSWERED QUESTIONS EMERGING THERE-FROM ARE I) CAN WE ASSUME THAT THERE WAS A BOLT CONTRACT OR WAS IT A WORKS CONTRACT? II) CAN WE ASSUME THAT THE ASSESSEE TOOK OWNERSHIP CONT ROL OF THE ASSET CREATED? III) THE CIRCUMSTANCES UNDER WHICH THE ENTERPRISE IN ABG HEAVY INDUSTRIES BECAME AKIN TO A DEVELOPER, AND DO THEY OBTAIN IN THE CASE OF LCE? SUCH AS 10 YEAR OWNERSHIP; RETRANS FER; ASSUMPTION OF ASSURED RESPONSIBILITY REGARDING OPER ATIONAL READINESS, ETC., NOTICED IN ABG HEAVY INDUSTRIES AR E NOT NOTICED IN THE FACTS OF THE CASE AS DIGESTED BY THE AFORE MENTIONED DECISION OF THE PUNE BENCH OF THE ITAT IN THE CASE OF LCE. IV) THE UNBUNDLING OF CONDITIONS OF DEVELOPMENT, OPERAT ION & MAINTENANCE, AND DEVELOPMENT OPERATION AND MAINTENA NCE, IN THE SENSE OF MAKING THEM NON CUMULATIVE BY AMENDMEN T OF LAW EFFECTIVE FROM 1-4-2002 IS NOT THE ONLY RELEVAN T ISSUE. THE LARGER ISSUE IS WHETHER THE ASSESSEE IS A DEVELOPER IN THE FIRST PLACE. V) IN THE CASE OF B.T. PATIL, THE CUMULATIVE OR NON CU MULATIVE SATISFACTION OF CONDITIONS IN SECTION 80IA(4)(I) WA S NEVER A MATERIAL FACT. THIS WAS SO NOT ONLY BECAUSE THE IM PUGNED ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 39 APPEALS RELATED TO PRE 1-4-2002 PERIOD, BUT ALSO BE CAUSE THE MATTER WAS DECIDED ON THE PRELIMINARY ISSUE OF WHET HER THE ASSESSEE WAS A DEVELOPER OR NOT IN THE FIRST PLACE. VI) SOME OF THE ATTRIBUTES OF A DEVELOPER WERE DISCUSSE D IN THE CASE OF B.T. PATIL, NONE OF WHOM WERE ABSENT IN THE CASE OF ABG HEAVY INDUSTRIES. 25. THE DECISION OF THE MUMBAI HIGH COURT, THOUGH LATER IN TIME WAS DIFFERENT IN FACTS THAT THERE WAS NO OCCASION E VEN TO REFER TO THE ITATS DECISION IN THE CASE OF B.T. PATIL. THEREFO RE, IT CAN BE SAID THAT THE DECISION OF THE MUMBAI HIGH COURT IN THE C ASE OF ABG HEAVY INDUSTRIES WILL BE BINDING IN ITS JURISDICTION FOR INFRASTRUCTURE CONTRACT CASES, ONLY IN SO FAR AS THE FACTS OF THE CASE ARE COMPATIBLE. FOR THE SAME REASON, THERE CAN BE NO ADVERSE IMPLIC ATION FOR THE PRECEDENT VALUE OF THE B.T. PATIL CASE. AS SUBMI TTED HEREINABOVE, ON IMMEDIATE AND NECESSARY CONSEQUENCE OF THE RETRO SPECTIVE AMENDMENT INTRODUCED BY THE FINANCE ACT, 2009 INSER TING EXPLANATION BELOW SECTION 80 IA(13), IS THAT ANY BU SINESS TRANSACTED IN TERMS OF A WORKS CONTRACT STANDS DISQUALIFIED FR OM SEEKING DEDUCTION UNDER SECTION 80I(A(4). THE DECISION OF THE MUMBAI HIGH COURT IN THE CASE OF ABG WOULD HAVE NO APPLICATION FROM THIS POINT OF VIEW ALSO. SINCE THE AGREEMENT IN ABG WAS A BOL T AGREEMENT AND NOT A WORKS CONTRACT THEIR LORDSHIPS HAD NO OCC ASION TO CONSIDER THE EXPLANATION INTRODUCED IN FINANCE ACT, 2009 WITH EFFECT FROM 1-4-2001. EVEN IF IT IS ASSUMED, HYPOTHETICAL LY, THAT THE AGREEMENT IN ABG WAS IN THE NATURE OF A WORKS CONTR ACT, OR THAT EVERY CONTRACTOR WAS A DEVELOPER, THE DECISION OF T HE MUMBAI HIGH COURT WITHOUT CONSIDERING THE EXPLANATION CANNOT O PERATE TO OVERRULE THE ITATS DECISION IN THE CASE OF B.T. PA TIL WHERE THE BENCH OF THE TRIBUNAL CONSIDERED THE EFFECT OF THE EXPLAN ATION AND IT WAS EXPLAINED BY THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF HYDERABAD CHEMICALS SUPPLIES LIMITED (ITA NO.352/HY D/2005 AND 6 OTHERS APPEALS DATED 21-1-2011, IN THE CONTEXT OF AN APPARENT ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 40 CONFLICT BETWEEN A SPECIAL BENCH (AHMEDABAD) DECISI ON OF THE ITAT AND MADRAS HIGH COURT AT PARA-15 ON PAGE-8 AS FOLLO WS:- FURTHER, JUDGMENT OF HIGH COURT THOUGH NOT OF THE JURISDICTIONAL HIGH COURT, PREVAILS OVER AN ORDER O F THE SPECIAL BENCH EVEN THOUGH IT IS FROM THE JURISDICTI ONAL BENCH OF THE TRIBUNAL, HOWEVER, WHERE THE JUDGMENT OF THE NON JURISDICTIONAL HIGH COURT, THOUGH THE ONLY JUDGMENT ON THE POINT, HAS BEEN RENDERED WITHOUT HA VING BEEN INFORMED ABOUT CERTAIN STATUTORY PROVISIONS TH AT ARE DIRECTLY RELEVANT, IT IS NOT TO BE FOLLOWED. 26. WITHOUT PREJUDICE TO THE ARGUMENT THAT THE STAND TH AT THE MUMBAI HIGH COURTS ORDER IN ABG RUNS ON COMPLETELY DIFFERENT FACTS, IT IS RESPECTFULLY POINTED OUT THAT THIS DEC ISION CANNOT BE A BINDING PRECEDENT, IN ANY CASE, FOR THE ABOVE-CITED REASON ALSO AND THIS ISSUE CAN BE SEEN IN ANOTHER PERSPECTIVE. THE RE IS NOTHING IN THE CASE OF ABG HEAVY INDUSTRIES THAT SUPPORTS THE VIEW THAT THE DEVELOPER HAS TO BE SEEN DE HORS THE CONTRACT AND ITS STIPULATIONS. IN THE CASE OF ABG HEAVY INDUSTRIES THE REVENUE TOO K THE STAND THAT THE ASSESSEE WAS NOT A DEVELOPER BECAUSE IT WAS ONL Y A SUPPLIER OF THE EQUIPMENT. THIS DID NOT FIND FAVOUR BECAUSE IT WAS HELD THAT THE NATURE OF THE BUSINESS HAD TO BE SEEN IN TERMS OF T HE OBLIGATIONS ASSUMED UNDER THE CONTRACT WHICH INCLUDED NOT ONLY SUPPLY AND INSTALLATION OF THE CRANES BUT ALSO TESTING, COMMIT MENT OF OPERATIONAL READINESS FOR A PERIOD OF TEN YEARS ON THE PAIN OF LIQUIDATED DAMAGES AND EVENTUAL RE-TRANSFER AFTER SUCH PERIOD. IN TH E CASE OF ABG HEAVY INDUSTRIES, THE CREATION OF CERTAIN STANDALON E PARTS OF THE PART COMPLEX QUALIFIED FOR BEING TERMED ON INFRASTRUCTUR E PROJECT BECAUSE THE BOARD CIRCULAR 793 DATED 23-6-2000 CLARIFIED TH AT PART OF THE PROJECT WOULD QUALIFY IF SO CERTIFIED BY THE PORT A UTHORITIES. THE CONTAINER HANDLING CRANES ASSEMBLY WAS CERTIFIED TO BE AN INTEGRAL PART OF THE PORT COMPLEX BY THE PORT AUTHORITY. TH IS IS CONTEXTUALLY VERY DIFFERENT FROM PARTS OF THE RUNNING LENGTH OF A HIGHWAY OR IRRIGATION CANAL BEING EXECUTED ON A RATE CONTRACT. THE DEPARTMENTS ARGUMENT THAT THE ASSESSEE DID NOT ACTUALLY OPERATE OR MAINTAIN THE FACILITY IN QUESTION WAS NOT UPHELD BECAUSE THE BEN EFITS OF THE ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 41 SECTION WERE HELD TO BE AVAILABLE TO BOT/BOLT CONTR ACTS BY CBDT CIRCULARS, WHICH WERE ANY WAY BINDING ON THE IT AUT HORITIES. IN THE CASE OF THE PRESENT CASE, IT IS NOT EVEN CLAIMED BY THE ASSESSEE THAT THE WORK WAS CARRIED OUT UNDER A BOT/BOLT CONTRACT, OR THAT IT WAS NOT A WORKS CONTRACT. IT IS FURTHER SUBMITTED THAT THE DISTINCTION BETWEEN BUSINESS OF DEVELOPMENT OPERATION/MAINTENAN CE AND DEVELOPMENT/OPERATION/MAINTENANCE WAS REMOVED WITH THE CHANGE IN LAW EFFECTIVE FROM 1-4-2002, AND THAT THIS WAS E XPLAINED BY THE DECISION OF THE MUMBAI HIGH COURT IN THE CASE OF AB G HEAVY INDUSTRIES IS FALLACIOUS FOR THE FOLLOWING REASONS: THE MUMBAI HIGH COURT DECISION WAS RENDERED IN THE CONTEXT OF A BOLT CONTRACT, WHICH WAS IN ANY CASE CLARIFIED BY THE BOARD CIRCULAR TO QUALIFY FOR THE DEDUCTION UNDER SECTION 80IA. IT WAS NOTICED BY THEIR LORDSH IPS THAT THE SUBSEQUENT CHANGES IN THE LAW EFFECTIVE FROM 1- 4- 2002 MERELY MIRRORED THIS LIBERALISED OUTLOOK. THA T IS NOT THE SAME THING AS SAYING THAT A BUSINESS IN THE NAT URE OF A WORKS CONTRACT QUALIFIED FOR THE DEDUCTION IN SPI TE OF NOT OPERATING/MAINTAINING THE FACILITY. THE DECISION O F THE LARGER BENCH IN THE CASE OF B.T. PATIL WAS NOT UN-W ARE OF THE CHANGE IN LAW EFFECTIVE FROM 1-4-2002 AS WOULD BE EVIDENT FROM PARA 36 OF THE ORDER. THE CHANGE MAKI NG THE CONDITIONS OF DEVELOPMENT/OPERATION/MAINTENANCE NON CUMULATIVE WAS NOT RELEVANT SINCE THE CASE RELATED TO PRE 1-4-2002 PERIOD. IN THE CASE OF B.T. PATIL, THE L ARGER BENCH ENUNCIATED CERTAIN TESTS TO DETERMINE WHETHER THE BUSINESS WAS ONE OF A DEVELOPER OR A MERE CONTRA CTOR. THE BRIEFLY STATED FACTS ARE AS FOLLOWS: THE DISTINCTION BETWEEN CREATION OF PRODUCT VS. REN DERING OF SERVICE (PARA -40), OWNER VS. EXECUTOR OF OWNER S PLAN WITH REFERENCE TO PROJECT SPECIFICATION (PARA-42), VESTING OF PROPERTY, SUBJECT TO RE-TRANSFER IF NEED BE (PARA 4 6) AND NEED FOR INTERPRETATION TO AVOID ABSURD RESULTS (PA RA 50). 27. IN VIEW OF THE TERMS OF THE RELEVANT CONTRACT, IT W AS POSSIBLE TO GIVE A FINDING THAT THE BUSINESS WAS NOT ONE OF DE VELOPMENT PER SE. THEREFORE, THE CHANGES IN LAW AFTER 1-4-2002 WERE N OT EVEN CALLED INTO PLAY IN THE CASE OF B.T. PATIL. IT IS FURTHE R SUBMITTED THAT THE MUMBAI HIGH COURTS DECISION IN THE CASE OF ABG HEA VY INDUSTRIES NOT ONLY RUNS ON DIFFERENT FACTS, IT DOES NOT EVEN REFER TO THE CASE OF B ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 42 T PATIL. FURTHERMORE, THE MUMBAI HIGH COURTS STAN D THAT THE NATURE OF THE BUSINESS SHOULD BE SEEN IN THE CONTEX T OF THE OBLIGATIONS ASSUMED UNDER THE CONTRACT ONLY COMPLEM ENTS, NOT CONTRADICTS THE LARGER BENCHS DISTINCTION BETWEEN A DEVELOPER AND CONTRACTOR SIMPLICITER, AS NOTED HEREINABOVE. IT W OULD BE WRONG AND THEREFORE TO SUGGEST THAT THE CASE OF B.T. PATIL HA S BEEN IMPLIEDLY OVER-RULED BY THE HIGH COURTS DECISION. THE DEP ARTMENTAL REPRESENTATIVE ALSO PLACED RELIANCE ON ANOTHER DECI SION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF INDIAN HUME PIPE CO. LTD., VS. DCIT ITA NO.5172/MUM/2008, DATED 29-7-201 1 FOR ASSESSMENT YEAR 2004-05. THIS DECISION PRONOUNCED AFTER THE PUNE BENCH DECISION IN THE CASE OF LAXMI CIVIL ENGG. CON SIDERS THE TRIBUNAL DECISION OF B.T. PATIL AS WELL AS ITS JUR ISDICTIONAL HIGH COURT DECISION IN THE CASE OF ABG AND GOES ON TO HOLD THA T THE ASSESSEE IS NOT ENTITLED TO THE DEDUCTION UNDER SECTION 80IA (4 ) IN VIEW OF THE EXPLANATION INTRODUCED WITH RETROSPECTIVE EFFECT. 28. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON SUB- SECTION (2) OF SEC.80IA OF THE ACT AND SUBMITTED TH AT THE DEDUCTION UNDER SUB-SECTION (1) WOULD BE AVAILABLE FOR A PERI OD OF 10 CONSECUTIVE ASSESSMENT YEARS OUT OF 15 YEARS BEGIN NING FROM THE YEAR IN WHICH AN UNDERTAKING OR ENTERPRISE DEVELOP S, BEGINS TO OPERATE ANY INFRASTRUCTURE FACILITY OR STARTS PROV IDING TELECOMMUNICATION SYSTEM. THEREFORE, HE IS OF THE VIEW THAT UNLESS OPERATION OF THE INFRASTRUCTURE FACILITY IS ALSO UN DERTAKEN; THE ASSESSEE WOULD NOT BE ELIGIBLE FOR DEDUCTION. IT IS SUBMITTED THAT THIS SECTION PROVIDES FOR AN OPTION TO THE ASSESSEE TO CHOOSE TO CLAIM DEDUCTION FOR ANY 10 YEARS OUT OF 15 YEARS COMMENCI NG FROM THE DATE OF COMMENCEMENT OF THE MAINTENANCE AND OPERATI ON. FOR THAT LIMITED PURPOSE OF FACILITATING AN ASSESSEE WHO BEC OMES ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA(4) IN CHOOSING THE PER IOD OF 10 YEARS, THE SAID PROVISION WAS INTRODUCED. THIS CANNOT BE CONSIDERED AS APPLICABLE TO EVERY ENTERPRISE ELIGIBLE FOR DEDUC TION UNDER SECTION 80IA. THIS WOULD APPLY TO AN ENTERPRISE WHICH REQU IRES CHOOSING THE ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 43 PERIOD OF 10 YEARS DURING WHICH DEDUCTION IS TO BE CLAIMED. ONLY WHEN THE ASSESSEE HAS TO EXERCISE THE CHOICE, THIS SECTION COMES TO OPERATION. OTHER-WISE THIS SECTION WOULD NOT OPERA TE. 29. THE LEARNED DEPARTMENTAL REPRESENTATIVE REFERRED TO THE FINANCE BILL, 1995 AND THE CIRCULAR NO.717 DATED 14 .8.1995 REPORTED IN 215 ITR 70 (STATUTES). THE SAID CIRCULAR EXPLAI NED THAT AN ENTERPRISE WHICH IS ENGAGED IN THE BUSINESS OF DEVE LOPS, OPERATE AND MAINTAIN INFRASTRUCTURE FACILITY ALONE WAS ELIGIBLE FOR DEDUCTION. AN ENTERPRISE WHICH ONLY DEVELOPS INFRASTRUCTURE FACIL ITY WAS NOT ELIGIBLE FOR DEDUCTION UP TO THE ASSESSMENT YEAR 2000-01. TH E PROVISIONS OF SEC.80IA (4A) WERE MADE APPLICABLE ONLY TO THE ENTE RPRISE WHICH DEVELOP, MAINTAIN AND OPERATES INFRASTRUCTURE FACIL ITY. THE ASSESSEE DID NOT CLAIM DEDUCTION UNDER SECTION 80IA (4A) OF THE ACT. THEREFORE, NEITHER THE CIRCULARS ISSUED UP TO THAT DATE NOR TH E PROVISIONS OF THE LAW AS WERE EXISTED UP TO THE ASSESSMENT YEAR 1999- 2000 CAN BE APPLIED FOR THE PURPOSE OF DETERMINING THE ALLOWABI LITY OF DEDUCTION U/S 80IA(4) CLAIMED BY THE ASSESSEE HEREIN. THE LEA RNED DR REFERRED TO THE CIRCULAR REPORTED IN 240 ITR 32 (STATUTES). IN THE SAID CIRCULAR IT IS CLARIFIED BY THE CBDT THAT THE BENEF IT IN THE AMENDED PROVISIONS OF SEC.80IA (4) WOULD EXTEND TO THOSE UN DERTAKINGS WHICH DEVELOP, OPERATE AND BUILD, OPERATE AND TRANSFER. IT IS ONLY A CLARIFICATORY CIRCULAR. AS SUBMITTED EARLIER, SECT ION 80IA (4) AND SECTION 80IA (4A) WERE IN STATUTE. SUB-SECTION (4A ) DEALING WITH THE DEDUCTION IN RESPECT OF BUSINESS OF DEVELOPMENT, OP ERATION, MAINTENANCE WAS DELETED. SUB-SECTION (4) WHICH W AS APPLICABLE TO HOTELS WAS SUBSTITUTED BY ANOTHER PROVISION WHICH A LLOW DEDUCTION TO AN ENTERPRISE WHICH DEVELOPS OR OPERATES AND MAI NTAINS OR DEVELOPS, OPERATES AND MAINTAINS. AT THAT STAGE, A N EXPLANATION WAS NEEDED TO BE PROVIDED TO MENTION THAT EARLIER SUB S ECTION (4A) IS RE- INTRODUCED AS A PART IN SUB SECTION (4) IN A DIFFER ENT SHAPE. THEREFORE, A CLARIFICATION WAS NECESSARY AND THE SA ID CLARIFICATION WAS ISSUED. IT IS ALSO SUBMITTED THAT THE DEVELOPMENT AND RISK ARE NOT UNDERTAKEN BY THE ASSESSEE. ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 44 30. IN THE REJOINDER THE AR SUBMITTED AS FOLLOWS : II) ACCORDING TO DR, THE ASSESSEE SHOULD HAVE BEEN ENGAGED IN DEVELOPMENT AND MAINTENANCE OF INFRASTRUCTURE FACIL ITY. ACCORDING TO HIM A MERE DEVELOPER IS NOT ELIGIBLE F OR DEDUCTION U/S 80IA (4) OF THE I.T ACT. IN THIS REGARD THE L EARNED DR REFERRED TO SUB SECTION (2) OF SEC.80IA (4) AND A LSO SUB CLAUSE (C) OF SEC.80IA(4) (I). IN SO FAR AS SUB CLAUSE ( C ) OF SEC.80IA(4) IS CONCERNED, THE ASSESSEE ALREADY SUBMITTED THAT I T WOULD APPLY ONLY TO THOSE ENTERPRISES CARRYING ON THE BUS INESS OF MAINTAINING AND OPERATING THE INFRASTRUCTURE FACILI TY. THE ASSESSEE ALREADY SUBMITTED IN THE ABOVE MENTIONED PARAGRAPHS THAT ANY ENTERPRISE CARRYING ON EITHER THE BUSINESS OF DEVELOPING OR BUSINESS OF MAINTAINING AND OPERATING OR THE BUSINESS OF DEVELOPING , MAINTAINING AND OPERATING WOULD BE ELIGIBLE FOR DEDUCTION. OUT OF SUCH ENTERPRISES IF ANY ENTERPRISE HAS UNDERTAKEN THE WO RK OF MAINTENANCE AND OPERATION, SUB CLAUSE (C) OF SEC.80 IA WOULD APPLY. THE WORDS USED IN SUB CLAUSE (C) STARTED OR STARTS OPERATING AND MAINTAINING INFRASTRUCTURE FACILITY O N OR AFTER FIRST OF APRIL, 1995 WOULD APPLY ONLY TO THE SECOND TYPE OF ENTERPRISE WHO UNDERTAKES THE WORK OF MAINTAINING AND OPERATION. IT WOULD NOT APPLY TO A PERSON WHO IS E NGAGED IN DEVELOPING INFRASTRUCTURE FACILITY AS THE WORD DEV ELOPED IS NOT USED IN THE SAID SUB CLAUSE. FURTHER, THIS IS ANAL YSED BY VARIOUS COURTS. IT IS HELD CLEARLY THAT SUCH A PRO VISION I.E. CLAUSE (C) WOULD APPLY ONLY TO SUCH ENTERPRISES ENG AGED IN MAINTAINING AND OPERATING THE INFRASTRUCTURE. THE BOMBAY HIGH COURT IN THE CASE OF CIT VS ABG HEAVY INDUSTRI ES LTD. OBSERVED THAT THE REQUIREMENT THAT THE OPERATION AN D MAINTENANCE OF THE INFRASTRUCTURE FACILITY COME AFT ER FIRST OF APRIL, 1995 HAS TO BE HARMONIOUSLY CONSIDERED WITH THE MAIN PROVISION UNDER WHICH DEDUCTION IS AVAILABLE TO THE ASSESSEE ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 45 WHICH DEVELOPS OR OPERATES, MAINTAINS AND DEVELOPS OR OPERATES AND MAINTAINS INFRASTRUCTURE FACILITY. III) THERE IS SIGNIFICANCE FOR CLAUSE-(C) IN SO FAR AS THE ENTERPRISES CARRYING ON BUSINESS OF DEVELOPING AND MAINTAINING AND OPERATING INFRASTRUCTURE FACILITY ARE CONCERNED. AS SUBMITTED IN THE EARLIER PARAGRAPHS, THE DEDUCTION WAS AVAILABL E FOR SUCH UNDERTAKINGS FROM THE ASSESSMENT YEAR 1996-97 ONWAR DS UNDER SUB SECTION (4A) OF SEC.80IA. WHILE INTRODUC ING THE PROVISIONS BY THE FINANCE ACT, 1995, IT IS NECESSAR Y TO EXPLAIN THE PERIOD FOR WHICH OR FROM WHICH THE DEDUCTION IS APPLICABLE. IT IS EXPLAINED THAT SUCH DEDUCTION IS APPLICABLE T O THE ENTERPRISES STARTING OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY ON OR AFTER 01-04-1995. TO BE ELIGIBLE FOR DEDUCTION UNDER SUB SECTION (4A), ANY ENTERPRISE HA S TO COMMENCE ITS OPERATION ON OR AFTER 01-04-1995. THIS CLARIFIED THAT ANY ENTERPRISE COMMENCING ITS OPERATIONS PRIOR TO THE SAID DATE, BUT CONTINUING TO DO THE SAID ACTIVITY FOR TH E ASSESSMENT YEARS 1996-97 AND ONWARDS WOULD NOT BE ELIGIBLE. AS SUBMITTED IN THE EARLIER PARAGRAPHS SUB SECTION (4A ) WAS REMOVED W.E.F. THE ASSESSMENT YEAR 2000-01 BY THE F INANCE ACT, 1999. A NEW SUB SECTION (4) WAS INTRODUCED BY THE SAID FINANCE ACT. SUB SECTION (4) EXTENDED DEDUCTION TO SUCH ENTERPRISES WHICH DEVELOP INFRASTRUCTURE; OR WHICH MAINTAIN AND OPERATE INFRASTRUCTURE FACILITY OR WHICH DEVELO PS, MAINTAINS AND OPERATES AN INFRASTRUCTURE FACILITY. IT IS CLARIFIED BY THE BOARD THAT SUB SECTION (4A) WAS DELETED AND THE DEDUCTION EARLIER AVAILABLE CONTINUES IN LIEU OF SU B SECTION (4) OF SECTION 80IA. THEREFORE, THE CONDITION MENTIONED IN SUB SECTION (4A) THAT AN ENTERPRISE COMMENCING ITS ACTI VITY OF OPERATING, MAINTAINING THE INFRASTRUCTURE FACILITY ON OR AFTER THE FIRST DAY OF APRIL, 1995 WOULD ONLY BE ELIGIBLE FOR DEDUCTION. THEREFORE, IT APPLIES TO THOSE ENTERPRISES WHICH WE RE EARLIER ELIGIBLE FOR DEDUCTION UNDER SUB SECTION (4A) AND W HICH WILL BE ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 46 CONTINUED TO BE ELIGIBLE FOR DEDUCTION UNDER SUB SE CTION (4). SUCH PROVISION HAS NO APPLICATION TO THE CASE OF TH E ASSESSEE, WHICH BECAME ELIGIBLE FOR DEDUCTION UNDER SUB-SECTI ON (4) OF SEC. 80IA OF THE ACT. IV) THEREFORE, SUB CLAUSE (C) COME INTO PLAY ONLY I N RESPECT OF THOSE CONCERNS WHICH CLAIMED DEDUCTION FOR MAINTAIN ING AND DEVELOPING THE INFRASTRUCTURE FACILITY AND NOT FOR THE ASSESSEE WHO ONLY DEVELOPS. V) THE DR RELIED UPON SUB SECTION (2) OF SEC.80IA O F THE I.T. ACT. SUB SECTION (2) IS ALREADY EXTRACTED ABOVE. THE LE ARNED DRS VIEW IS THAT THE DEDUCTION UNDER SUB SECTION (1) W OULD BE AVAILABLE FOR A PERIOD OF 10 CONSECUTIVE ASSESSMEN T YEARS OUT OF 15 YEARS BEGINNING FROM THE YEAR IN WHICH AN UN DERTAKING OR ENTERPRISE DEVELOPS, BEGINS TO OPERATE ANY INFRA STRUCTURE FACILITY OR STARTS PROVIDING TELECOMMUNICATION SYS TEM. THEREFORE, THE LEARNED DR IS OF THE VIEW THAT UNLES S OPERATION OF THE INFRASTRUCTURE FACILITY IS ALSO UNDERTAKEN; THE ASSESSEE WOULD NOT BE ELIGIBLE FOR DEDUCTION. IT IS ALSO ARGUED BY THE LEARNED DR THAT THE COMPUTATION OF DEDUCTION UNDER SUB SECTION (1) CANNOT BE MADE AND THE COMPUTATION PROV ISION WOULD FAIL TO OPERATE. VI) THE DR SUBMITTED THAT THIS SECTION PROVIDES FOR AN OPTION TO THE ASSESSEE TO CHOOSE TO CLAIM DEDUCTION FOR ANY 1 0 YEARS OUT OF 15 YEARS COMMENCING FROM THE DATE OF COMMENCEMEN T OF THE MAINTENANCE AND OPERATION. FOR THAT LIMITED PURPOS E OF FACILITATING AN ASSESSEE WHO BECOMES ELIGIBLE FOR D EDUCTION U/S 80IA(4) IN CHOOSING THE PERIOD OF 10 YEARS, THE SAI D PROVISION WAS INTRODUCED. THIS CANNOT BE CONSIDERED AS APPLI CABLE TO EVERY ENTERPRISE ELIGIBLE FOR DEDUCTION U/S 80IA. THIS WOULD APPLY TO AN ENTERPRISE WHICH REQUIRES CHOOSING THE PERIOD OF 10 YEARS DURING WHICH DEDUCTION IS TO BE CLAIMED. ONL Y WHEN THE ASSESSEE HAS TO EXERCISE THE CHOICE, THIS SECTION C OMES TO ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 47 OPERATION. OTHER-WISE THIS SECTION WOULD NOT OPERA TE. EVEN WITHOUT THIS PROVISION, THE DEDUCTION U/S 80IA(I) CAN BE WORKED OUT. THEREFORE, IT IS ONLY A SUPPLEMENTARY PROVISION FACILITATING THE ASSESSEE IN CHOOSING THE PERIOD FO R WHICH A DEDUCTION UNDER THE SAID SECTION CAN BE CLAIMED. TH EREFORE, THE ARGUMENT OF THE LEARNED DR IS NOT CORRECT IN HI S ARGUMENT. VII) THE DR REFERRED TO THE FINANCE BILL 1995 AND T HE CIRCULAR NO.717 DATED 14.8.1995 REPORTED IN 215 ITR 70 (STAT UTES). THE SAID CIRCULAR EXPLAINED THE PROVISIONS OF SUB SECTI ON (4) AND SUB SECTION (4A) AS THEY EXISTED AT THE RELEVANT PO INT OF TIME. AT THE RELEVANT POINT OF TIME, AN ENTERPRISE WHICH IS ENGAGED IN THE BUSINESS OF DEVELOPS, OPERATE AND MAINTAIN INFR ASTRUCTURE FACILITY ALONE WAS ELIGIBLE FOR DEDUCTION. AN ENTE RPRISE WHICH ONLY DEVELOPS INFRASTRUCTURE FACILITY WAS NOT ELIGI BLE FOR DEDUCTION UP TO THE ASSESSMENT YEAR 2000-01. VIII) THE DR REFERRED TO THE CIRCULAR NO.733 REPORT ED IN 219 ITR 8 (STATUTES). EVEN THE SAID CIRCULAR WAS ISSUED FOR THE PRE- AMENDED PROVISION OF SEC.80-IA(4). THE ASSESSEE IS NOW CONCERNED WITH THE PROVISIONS OF SEC. 80IA(4) AS IN TRODUCED AFRESH BY THE FINANCE ACT 1999 WITH EFFECT FROM 1.. 4.2000. THE EARLIER CIRCULARS WOULD NOT COME TO THE RESCUE OF THE DEPARTMENT AS SUCH CIRCULARS WERE EXPLAINING THE PR OVISIONS OF SEC.80IA(4A) AND NOT SEC.80IA (4), AS THEY WERE EXI STING PRIOR TO 1-4-2000. IX) THE CIRCULAR 717 EXPLAINING THE PROVISIONS OF T HE FINANCE ACT, 1995 AT PARAGRAPH 34.3 MENTIONS ABOUT THE ENTERPRIS ES WHICH DEVELOPS, MAINTAINS AND OPERATES ANY NEW INFRASTRUC TURE FACILITY SUCH AS ROADS, HIGHWAYS, EXPRESS WAYS ETC. IN BOT OR BOOT OR SIMILAR OTHER PLACES. AT THE TIME OF ISSUE OF THE SAID CIRCULAR BY THE BOARD, 80IA(4) WAS APPLICABLE ONLY TO HOTELS AND NOT THE INFRASTRUCTURE FACILITY. THE PROVISIONS OF SEC.80IA(4A) AS MENTIONED ABOVE WERE MADE APPLICABL E ONLY TO ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 48 THE ENTERPRISES WHICH DEVELOPS, MAINTAINS AND OPERA TES INFRASTRUCTURE FACILITY. X) THE ASSESSEE DID NOT CLAIM DEDUCTION U/S 80IA(4A ) OF THE I.T. ACT. THEREFORE, NEITHER THE CIRCULARS ISSUED UP TO THAT DATE NOR THE PROVISIONS OF THE LAW AS WERE EXISTING UP TO TH E ASSESSMENT YEAR 1999-2000 CAN BE APPLIED FOR THE PURPOSE OF DE TERMINING THE ALLOWABILITY OF DEDUCTION U/S 80IA(4) CLAIMED B Y THE ASSESSEE HEREIN. XI) THE DR REFERRED TO THE CIRCULAR REPORTED IN 240 ITR 32 (STATUTES). IN THE SAID CIRCULAR IT IS CLARIFIED B Y THE CBDT THAT THE BENEFIT IN THE AMENDED PROVISIONS OF SEC.80IA(4 ) WOULD EXTEND TO THOSE UNDERTAKINGS WHICH DEVELOP, OPERATE AND BUILD, OPERATE AND TRANSFER. IT IS ONLY A CLARIFIC ATORY CIRCULAR. AS SUBMITTED EARLIER, SEC.80IA(4) AND SEC.80IA (4A) WERE IN STATUTE. SUB SECTION (4A) DEALING WITH THE DEDUCTI ON IN RESPECT OF BUSINESS OF DEVELOPMENT, OPERATION, MAINTENANCE WAS DELETED. SUB SECTION (4) WHICH WAS APPLICABLE TO HOTELS WAS SUBSTITUTED BY ANOTHER PROVISION WHICH ALLOW DEDUCT ION TO AN ENTERPRISE WHICH DEVELOPS OR OPERATES AND MAINTAINS OR DEVELOPS, OPERATES AND MAINTAINS. AT THAT STAGE AN EXPLANATION WAS NEEDED TO BE PROVIDED TO MENTION TH AT EARLIER SUB SECTION (4A) IS RE-INTRODUCED AS A PART IN SUB SECTION (4) IN A DIFFERENT SHAPE. THEREFORE, A CLARIFICATION WAS NECESSARY AND THE SAID CLARIFICATION WAS ISSUED. XII) THE DR ALSO RELIED UPON EXPLANATION BROUGHT I N BY THE FINANCE ACT 2007 AND THE FINANCE ACT 2009 WHICH THE ASSES SEE ALREADY EXPLAINED IN DETAIL IN THE ABOVE PARAGRAPHS . THE ASSESSEE HUMBLY SUBMITS THAT THE SAID EXPLANATION H AVE NO APPLICATION TO THE FACTS OF THE ASSESSEES CASE, AS THE ASSESSEE IS ENGAGED IN THE DEVELOPMENT OF INFRASTRUCTURE FAC ILITY. ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 49 XIII) THE DR ALSO MENTIONED THAT THE DEVELOPMENT AN D RISK ARE NOT UNDERTAKEN BY THE ASSESSEE. THIS IS NOT FACTUALLY TRUE. THE ASSESSEE PLACED BEFORE THE HONOURABLE ITAT, A COPY OF THE AGREEMENT ENTERED INTO. IT CAN BE OBSERVED THAT TH E ASSESSEE TOOK POSSESSION OF THE UNDEVELOPED AREA AND HANDED OVER THE DEVELOPED AREA. IN THE PROCESS, HE HAS UNDERTAKEN EVERY ACTIVITY INCLUDING THE RISKS INVOLVED IN THE PROCES S. IT HAS TO REIMBURSE LOSSES SUFFERED BY ANY ONE INCLUDING THE GOVERNMENT AND THE PEOPLE, IF ANY ONE SUFFERS THE LOSS. IT CAN ALSO BE SEEN THAT ANY LOSS CAUSED BECAUSE OF THE NATURAL CALAMIT IES ALSO HAS TO BE MADE GOOD BY THE ASSESSEE ONLY. IT HAD TO UN DERTAKE THE MAINTENANCE OF THE EXISTING ROAD, WHILE THE PROCESS OF DEVELOPMENT IS ON. IT CAN NEITHER STOP THE TRAFFIC NOR STOP THE WORK. IN THE PROCESS, IF ANY OF THE VEHICLE OR PER SON SUFFERS LOSS BECAUSE OF ANY REASON, IT SHALL BE THE RESPONS IBILITY OF THE ASSESSEE. EVERY LOSS IN THE PROCESS HAS TO BE THAT OF THE ASSESSEE ONLY. THEREFORE, THE LEARNED DR IS NOT CO RRECT IN MENTIONING THAT THE ASSESSEE DOES NOT HAVE ANY RISK . XIV) THE DR ALSO MENTIONED THAT THE ASSESSEE DID NO T INVEST ANY AMOUNT IN THE PROCESS OF THE ACTIVITY. IT IS ALSO M ENTIONED BY THE DR THAT THE GOVERNMENT PAYS MOBILISATION ADVANC E TO THE ASSESSEE. THEREFORE, THE LEARNED DR MENTIONED THAT THE ASSESSEE DID NOT INVEST ANY AMOUNT INITIALLY. THE LEARNED DR IS OF THE VIEW THAT THE ACTIVITY CANNOT BE CONSIDER ED AS DEVELOPMENT AS THE ASSESSEE DID NOT INVEST ITS OWN MONEY IN THE PROCESS. THIS ARGUMENT OF THE LEARNED DR IS AL SO NOT CORRECT. THERE IS NO SUCH MENTION IN THE PROVISION S OF SEC. 80IA(4) THAT THE ASSESSEE SHOULD INVEST ITS OWN MON EY IN THE PROCESS OF DEVELOPMENT. THE ONLY REQUIREMENT IS TH AT THE ENTERPRISE SHOULD BE A COMPANY AND SUCH ENTERPRISE SHOULD BE IN THE BUSINESS OF DEVELOPMENT OF INFRASTRUCTURE FA CILITY. HOW THE FUNDS ARE POOLED FOR THE PURPOSE IS NOT MENTION ED IN THE ACT. THE ASSESSEE HUMBLY SUBMITS THAT THE DEPARTME NTAL ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 50 AUTHORITIES CANNOT INTRODUCE WORDS INTO THE ACT TO GIVE A DIFFERENT MEANING. THEY HAVE TO READ THE PROVISION S AS THEY EXIST IN THE ACT. A PLAIN READING OF THE PROVISION S OF SEC. 80IA (4) DOES NOT INDICATE THAT THE ASSESSEE TO BE ELIGI BLE FOR DEDUCTION SHOULD HAVE INTRODUCED ITS OWN FUNDS. TH EREFORE, THE LEARNED DR IS NOT CORRECT IN THIS REGARD. IN T HE FOLLOWING CASES, VARIOUS COURTS HAVE HELD THAT THE PROVISIONS ALLOWING RELIEF SHOULD BE READ LIBERALLY AND NOTHING CAN BE ADDED TO THE WORDS USED IN THE ACT SO AS TO DISENTITLE AN ASSESS EE FOR THE RELIEF. (1) DECISION OF THE SUPREME COURT IN THE CASE OF CI T VS CLIVE INSURANCE CO. LTD. REPORTED IN 113 ITR 636 (2) DECISION OF THE DELHI HIGH COURT IN THE CASE OF CIT VS VASAVI PRATAP CHAND REPORTED IN 255 ITR 517 (3) DECISION OF THE MADRAS HIGH COURT IN THE CASE O F CIT VS EASTERN CHEMICALS AND MINERALS PVT. LTD. REPORTED I N 192 ITR 423 (4) DECISION OF THE SUPREME COURT IN THE CASE OF C ENTRAL BOARD OF DIRECT TAXES AND OTHERS VS ADITYA V. BIRLA REPORTED IN 170 ITR 137 (5) `DECISION OF THE SUPREME COURT IN THE CASE OF C IT VS VEGETABLE PRODUCTS LTD. REPORTED IN 88 ITR 192 (6) DECISION OF THE SUPREME COURT IN THE CASE OF C IT VS STRAWBOARD MANUFACTURING CO. LTD. REPORTED IN 177 I TR 431 (7) DECISION OF THE SUPREME COURT IN THE CASE OF B ROACH DIST. CO-OP. COTTON SALES GINNING AND PRESSING SOCI ETY LTD. REPORTED IN 177 ITR 418 (8) DECISION OF THE SUPREME COURT IN THE CASE OF BA JAJ TEMPO LTD. VS CIT REPORTED IN 196 ITR 188 (9) DECISION OF THE MADRAS HIGH COURT IN THE CASE O F J.K. ABDUL JABBAR VS CIT REPORTED IN 237 ITR 389. ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 51 (10) DECISION OF THE SUPREME COURT IN THE CASE OF CIT VS SOUTH ARCOT DISTRICT CO-OP. MARKETING SOCIETY LTD. REPORTED IN 176 ITR 117. (11) THE DECISION OF THE SUPREME COURT IN THE CASE OF CIT VS U.P. CO-OPERATIVE FEDERATION LTD. REPORTED IN 176 I TR 435. IN THE FOLLOWING CASES, VARIOUS COURTS HAVE HELD TH AT IT IS NOT OPEN FOR THE DEPARTMENT TO READ WHAT IS NOT THERE E ITHER IN THE DOCUMENTS OR IN THE STATUTORY PROVISION: (1) DECISION OF THE ORISSA HIGH COURT IN THE CASE O F CIT VS ORISSA STATE WAREHOUSING CORPORATION REPORTED IN 20 1 ITR 729 (2) DECISION OF THE DELHI HIGH COURT IN THE CASE OF CIT VS BANSAL CREDITS LTD. REPORTED IN 259 ITR 69 (3) DECISION OF THE SUPREME COURT IN THE CASE OF FEDERATION OF ANDHRA PRADESH CHAMBERS OF COMMERCE LAND INDUSTRY AND OTHERS REPORTED IN 247 ITR 36 (4) DECISION OF THE GAUHATI HIGH COURT IN THE CASE OF CIT VS JHABARMAL AGARWALLA REPORTED IN 195 ITR 351 (5) DECISION OF THE MADRAS HIGH COURT IN THE CASE O F CONTROLLER OF ESTATE DUTY VS SILESHKUMAR R. MEHTA REPORTED IN 181 ITR 10 (6) DECISION OF THE SUPREME COURT IN THE CASE OF CI T VS AJAX PRODUCTS LTD. REPORTED IN 55 ITR 741 (7) DECISION OF THE SUPREME COURT IN THE CASE OF SM T. TARULATA SHYAM AND OTHERS VS CIT REPORTED IN 108 IT R 345 XV) IN THIS REGARD, THE DR REFERRED TO THE DECISION OF THE SUPREME COURT IN NOVOPAN INDIA LIMITED, HYDERABAD (1994 IND LAW SC 1028) WHEREIN THE APEX COURT IN THE MATTER CONNECTE D WITH CENTRAL EXCISE HELD THAT WHEN A QUESTION IS WHETHER A SUBJECT FALLS IN THE NOTIFICATION OR IN THE EXEMPTION CLAUS E THEN IT BEING IN NATURE OF EXCEPTION IS TO BE CONSTRUED STRICTLY AND AGAINST THE SUBJECT BUT ONCE AMBIGUITY OR DOUBT ABOUT APPLI CABILITY IS ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 52 LIFTED AND THE SUBJECT FALLS IN THE NOTIFICATION TH EN FULL PLAY SHOULD BE GIVEN TO IT AND IT CALLS FOR A WIDER AND LIBERAL CONSTRUCTION. IT IS SUBMITTED THAT THE REFERENCE T O THE SAID DECISION IS MISPLACED. THE SAID DECISION IS RENDER ED IN CONNECTION WITH THE CENTRAL EXCISE DUTY. THE ISSUE INVOLVED IS WHETHER A PARTICULAR ITEM MANUFACTURED IS GOVERNED BY THE EXCEPTION OR IS TAXABLE AS PER THE NOTIFICATION. T HE QUESTION IN THE SAID CASE IS TAXABILITY OF THE ITEM MANUFACTURE D. THEREFORE, THE SAID QUESTION IS TO BE CONSTRUED STRICTLY. IN T HE CASE OF THE ASSESSEE, THE QUESTION TO BE CONSIDERED IS WHETHER A PARTICULAR DEDUCTION IS ALLOWABLE FROM THE GROSS TOTAL INCOME DETERMINED. A READING OF THE DECISION OF THE APEX COURT WILL MA KE IT CLEAR THAT THE SAID DECISION HAS NO APPLICATION TO THE FA CTS OF THE ASSESSEES CASE. XVI) THE DR ARGUED THAT THE ASSESSEE DID NEITHER I NVEST NOR UNDERTOOK RISK: THE INCOME-TAX ACT IN SECTION 80-IA SIMPLY STATED T HAT A COMPANY WHICH ENTERED INTO AN AGREEMENT WITH EITHER GOVERNMENT OR A GOVERNMENT ORGANIZATION AND DEVELOP S INFRASTRUCTURE FACILITY IS ELIGIBLE FOR DEDUCTION. THE EXCEPTION PROVIDED IN THE EXPLANATION IS WHEN A SIMPLE WORKS CONTRACT IS ENTERED INTO BY ANY PERSON WITH AN ENTERPRISE CARRY ING ON THE ACTIVITY OF DEVELOPMENT OF INFRASTRUCTURE FACILITY OR WITH THE GOVERNMENT OR GOVERNMENT ORGANIZATION, WHEN THE DEVELOPMENT OF INFRASTRUCTURE IS CARRIED ON BY SUCH GOVERNMENT OR BODY. THERE IS NO SUCH MENTION IN TH E ACT THAT THE ASSESSEE, TO BE ELIGIBLE FOR DEDUCTION, SHOULD HAVE INVESTED HIS OWN FUNDS IN THE DEVELOPMENT ACTIVITY. THE ASS ESSEE MENTIONED THE DEFINITION OF THE WORD DEVELOP AS P ROVIDED BY VARIOUS DICTIONARIES WHICH CLEARLY MENTION THAT A NY PREMISES CAN BE CONSIDERED AS DEVELOPED IF IT CAN BE PUT FOR MORE USEFUL OR PROFITABLE PURPOSES. A PERSON WHO CONVERTS THE EXISTING PREMISES TO A MORE USEFUL AND PROFITABLE ONE, IT HA S TO BE ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 53 CALLED AS DEVELOPMENT OF INFRASTRUCTURE FACILITY. WHEN THERE IS NO SPECIFIC REQUIREMENT IN THE ACT THAT THE ASSE SSEE HAS TO INVEST, THE ENTIRE FUND REQUIRED FOR DEVELOPING INF RASTRUCTURE, THIS VIEW OF THE LEARNED DR IS NOT CORRECT. XVII) WITHOUT PREJUDICE TO THE ABOVE, THE ASSESSEE THE AR SUBMITTED THAT THE ASSESEE HAS INTRODUCED HUGE MONE Y ITS BUSINESS. THIS WOULD MEAN THAT THE APPELLANT INVEST ED ITS OWN FUNDS IN PROCESS OF DEVELOPMENT OF THE INFRASTRUCTU RE FACILITY. THE ASSESSEE HAS TO WAIT FOR A PERIOD OF 56 DAYS/28 DAYS FOR THE PAYMENT AFTER SUBMISSION OF THE BILL. FURTHER, AS SUBMITTED IN THE EARLIER PARAGRAPHS, THE GOVERNMENT OF INDIA OBTAINED THE FINANCE FROM OUTSIDE THE COUNTRY FOR THE PURPOS E OF DEVELOPMENT OF INFRASTRUCTURE FACILITY. XVIII) THE ASSESSEE UTILIZED THE FUNDS EITHER OF I TS OWN OR BORROWED FROM OTHERS FOR THE PURPOSES OF UNDERTAKING THE D EVELOPMENT ACTIVITY. THEREFORE, IT CANNOT BE SAID THAT THE AS SESSEE HAS NOT UTILIZED ITS OWN FUNDS. THE ASSESSEE ALSO UTILIZED ITS OWN TECHNICAL PERSONNEL AND UNDERTOOK RISK IN THE PROCE SS OF THE BUSINESS ACTIVITY. IT IS NOT CORRECT TO MENTION TH AT THE ASSESSEE DID NOT INVEST ITS OWN FUNDS AND DID NOT EMPLOY ITS TECHNICAL PERSONNEL. THE REQUIREMENT OF THE TENDER INCLUDES P OSSESSION OF CAPITAL; CAPABILITY OF OBTAINING LOANS FROM THE BANKS OR FINANCIAL INSTITUTIONS; AND THE AVAILABILITY OF THE TECHNICAL PERSONNEL. THE ASSESSEE WOULD BE A SUCCESSFUL BIDD ER ONLY WHEN SUCH REQUIREMENTS ARE FULFILLED. THEREFORE, THE LEARNED DR IS NOT CORRECT IN THIS REGARD. XIX) THE ASSESSEE UNDERTOOK ALL THE RISKS INVOLVED IN THE ACTIVITY FROM THE COMMENCEMENT DATE TILL THE DATE OF TAKING OVER. THE AGREEMENT ALSO MENTIONS THAT LOSS OR DAMAGE HAPPENS TO THE WORK, OR ANY PART THEREOF OR MATERIALS OR PLANT SHA LL BE THE RESPONSIBILITY OF THE ASSESSEE. IT ALSO MENTIONS THAT THE ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 54 ASSESSEE SHALL BE RESPONSIBLE FOR DEATH OR INJURY T O ANY PERSON OR LOSS OR DAMAGE TO ANY PROPERTY WHICH MAY ARISE I N CONSEQUENCE OF THE EXECUTION AND COMPLETION OF TH E WORKS. THEREFORE, THE ASSESSEE IS LIABLE FOR RISKS. XX) THE DR IS ALSO OF THE VIEW THAT THE MAINTENANCE UNDERTAKEN BY THE ASSESSEE AS PER THE CONTRACT IS ONLY AS A SOR T OF WARRANTEE AND NOT THE MAINTENANCE AS MENTIONED IN SEC.80-IA(4 ) OF THE I.T. ACT. IN THIS REGARD IT IS SUBMITTED THAT THE ASSESSEE IS CLAIMING DEDUCTION AS A PERSON DEVELOPING THE INFRA STRUCTURE FACILITY AND NOT AS A PERSON MAINTAINING SUCH INFRA STRUCTURE FACILITY. FURTHER, THE SAID CLAUSE WAS MENTIONED O NLY TO SHOW THAT THE ASSESSEE HAS UNDERTAKEN A JOB OF DEVELOPIN G THE ENTIRE INFRASTRUCTURE FACILITY AT THE PREMISES ALLOTTED TO IT AND HANDED IT OVER WITH A CONDITION THAT IT SHOULD BE MAINTAIN ED BY THE ASSESSEE FOR A CERTAIN SPECIFIED PERIOD. THIS ONLY INDICATES THAT A COMPOSITE AGREEMENT IS ENTERED INTO FOR DEVELOPME NT OF THE INFRASTRUCTURE FACILITY WITH A CLAUSE TO MAINTAIN T HE SAID INFRASTRUCTURE FACILITY FOR A CERTAIN PERIOD. XXI) THE DR MENTIONED THAT THE ASSESSEE WAS NOT PAI D FOR ANY MAINTENANCE. IT IS TRUE THAT THERE IS NO PAYMENT FOR MAINTENANCE BUT STILL THE ASSESSEE HAS TO UNDERTAKE MAINTENANCE OF THE INFRASTRUCTURE FACILITY FOR A PE RIOD AS MENTIONED IN THE AGREEMENT. THIS WOULD CLEARLY IN DICATE THAT THE ASSESSEE IS A DEVELOPER AND NOT A MERE ENGAGED IN WORKS CONTRACT. IN WORKS CONTRACT, THE PERSONAL UNDERTAK ING THE WORK WOULD NOT BE RESPONSIBLE FOR ANY LOSS SUFFERED DURING THE PERIOD OF WORK; HE WOULD NOT BE RESPONSIBLE FOR MAI NTENANCE OF THE INFRASTRUCTURE FACILITY DURING THE COURSE OF DE VELOPMENT; HE WOULD NOT BE LIABLE FOR MAINTAINING THE WORK AFTERW ARDS ALSO. THE ASSESSEE, ON THE OTHER HAND, IS MADE RESPONSIBL E FOR ALL SUCH ACTIVITIES. ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 55 XXII) THE DR FINALLY MENTIONS THAT IT IS A SIMPLE C ASE OF WORKS CONTRACT AND NOT AN AGREEMENT FOR DEVELOPMENT OF INFRASTRUCTURE FACILITY. HE IS OF THE VIEW THAT N HAI IS THE DEVELOPER AND NOT THE ASSESSEE HEREIN. XXIII) THE AR SUBMITTED THE GOVERNMENT OF INDIA AUT HORIZED THE NHAI TO CALL FOR THE TENDERS FOR THE WORK. THE GOVT . OF INDIA RECEIVED A LOAN FROM OVERSEAS ECONOMIC CO-OPERATION FUND, TOWARDS THE COST OF DEVELOPMENT. ACCORDINGLY, A TEN DER WAS ISSUED BY THE NHAI. SEC. 31 OF THE NHAI ACT EMPO WERS THE CENTRAL GOVERNMENT TO TEMPORARILY DIVEST THE NHAI F ROM DEVELOPMENT BY HANDING IT OVER TO ANY PERSON AUTHOR IZED FOR THE PURPOSE. THE NHAI IS AUTHORIZED BY THE GOVERNM ENT TO ENTRUST THE DUTY OF DEVELOPMENT OF PROJECT TO ANY OTHER ELIGIBLE PERSON. IN THE PROCESS, THE ASSESSEE BECAM E THE SUCCESSFUL BIDDER AND UNDERTOOK THE WORK OF DEVELOP MENT. SEC.31 OF THE NHAI ACT IS REPRODUCED HEREUNDER: IF, AT ANY TIME, THE CENTRAL GOVERNMENT IS OF THE OPINION THAT IN THE PUBLIC INTEREST IT IS NECESSARY OR EXPEDIENT SO TO DO, IT MAY BY ORDER, DIRECT THE AUTHORITY TO ENTRUST THE D EVELOPMENT, MAINTENANCE OR MANAGEMENT OF ANY NATIONAL HIGHWAY O R PART THEREOF WITH EFFECT FROM SUCH DATE AND FOR SUCH PER IOD AND TO SUCH PERSON AS MAY BE SPECIFIED IN THE ORDER AND TH E AUTHORITY SHALL BE BOUND TO COMPLY WITH SUCH DIRECTION. IT CAN BE SEEN FROM THE ABOVE MENTIONED PROVISION T HAT THE ASSESSEE STEPS INTO THE ROLE OF THE NHAI FOR DEVELO PMENT OF THE PROJECT, WHICH THE WORK OF DEVELOPMENT IS ENTRUSTED TO IT. XXIV) THE DR MENTIONED THAT TAX WAS DEDUCTED AT S OURCE BY THE GOVERNMENT UNDER SEC. 194 C OF THE ACT AND THEREFOR E, THE WORK UNDERTAKEN IS ONLY A WORKS CONTRACT AND NOT DEVELOPMENT. IN THIS REGARD THE ASSESSEE SUBMITS T HAT THE PROVISIONS OF SEC. 194 C MAKE IT CLEAR THAT DEDUCTI ON OF TAX HAS TO BE MADE FROM PAYMENTS MADE IN RESPECT OF ANY WO RKS. THE WORK ANY WORK DENOTES THE WORK OF DEVELOPMENT OF ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 56 INFRASTRUCTURE FACILITY ALSO. THEREFORE, THE OBSER VATION OF THE LEARNED DR IS NOT CORRECT. FURTHER IT IS SUBMITTED THAT ALL THE WORKS WERE NOT ENTRUSTED BY THE NHAI ALONE. IT CAN BE SEEN FROM THE LIST AN NEXED THAT SOME OF THE WORKS WERE ENTRUSTED BY THE GOVERNMENT OF KARNATAKA, GOVERNMENT OF ASSAM, RAILWAYS, GOVERNMEN T OF RAJASTHAN, MINISTRY OF ROAD TRANSPORT, GOVERNMENT O F INDIA DIRECTLY AND GOVERNMENT OF GUJARAT DIRECTLY TO THE ASSESSEE. IN VIEW OF THE ABOVE, IT IS NOT CORRECT FOR THE LEA RNED DR TO MENTION THAT NHAI IS THE DEVELOPER AND NOT THE ASSE SSEE. IF THE ARGUMENT OF THE LEARNED DR WERE TO BE CORRECT T HE LEGISLATURE SHOULD HAVE CLEARLY MENTIONED THAT THE AUTHORITY WHICH IS RESPONSIBLE FOR DEVELOPMENT WOULD BE ELIGI BLE FOR DEDUCTION U/S 80-IA (4) OF THE I.T. ACT. SUCH A ME NTION IS NOT THERE IN THE ACT AND ON THE OTHER HAND, IT IS MENT IONED THAT ANY COMPANY IS ELIGIBLE FOR DEDUCTION. THEREFORE, THIS VIEW OF THE LEARNED DR IS NOT CORRECT. XXV) THE LEARNED DR REFERRED TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. N.C. BUDHARAJA & CO., REPORTED IN 204 ITR 412. THE LEARNED CIT DR DISCUSSED THE OBJEC T OF AMENDMENT MADE TO SEC.80IA BY THE FINANCE ACT, 1995 . THE ASSESSEE HUMBLY SUBMITS THAT THE DECISION OF THE SU PREME COURT REFERRED TO BY THE LEARNED DR RELATES TO THE DEDUCTION ALLOWABLE FOR THE ASSESSMENT YEARS 1974-75 TO 1977- 78 AND THE LEARNED DR ALSO DISCUSSED THE AMENDMENT BY THE FINANCE ACT, 1995. THE CLAIM OF THE ASSESSEE IS FOR THE ASS ESSMENT YEAR 2000-01 AND AFTERWARDS. THE JUDGEMENT OF THE SUPRE ME COURT WAS DECIDING THE ISSUES AS PER THE PROVISIONS EXIST ED AT THE RELEVANT POINT OF TIME WHICH ARE NOT APPLICABLE TO THE YEARS UNDER CONSIDERATION. THEREFORE, THE RELIANCE OF TH E DR ON THE SAID DECISION IS MISPLACED. ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 57 XXVI) THE LEARNED DR ALSO REFERRED TO THE CIRCULAR NO.779 DATED 14- 09-1999. THE SAID CIRCULAR WAS ISSUED ONLY TO CLARI FY THAT THE ENTERPRISES WHICH WERE EARLIER ELIGIBLE FOR DEDUCTI ON U/S 80IA (4A) UP TO THE ASSESSMENT YEAR 1999-2000 WOULD CONT INUE TO BE ELIGIBLE FOR DEDUCTION U/S 80IA (4) FOR THE ASSE SSMENT YEAR 2000-01 AND ONWARDS. THIS CLARIFICATION DOES N OT INDICATE THAT THE DEDUCTION U/S 80IA(4) IS ALLOWABLE ONLY IN RESPECT OF THE ENTERPRISES CARRYING ON THE ACTIVITY OF OPERATI NG AND MAINTAINING. THE CIRCULAR NO.794 DATED 09-08-2000 R EFERRED TO BY THE LEARNED DR CLEARLY MENTIONS THAT THE BENEFIT S U/S 80IA(4) WERE EXTENDED TO WATER TREATMENT AND SOLID WASTE MANAGEMENT SYSTEM IN ORDER TO ATTRACT COMMERCIAL EN TERPRISES TO OPERATE SUCH FACILITIES. THIS CIRCULAR ALSO HAS NO APPLICATION FOR THE FACTS OF THE ASSESSEES CASE. XXVII) THE CIRCULAR NO.14 OF 2001 REFERRED TO BY TH E LEARNED DR NOT ON THE POINT. IT ALSO CLARIFIES THE POSITION AS OBT AINING PRIOR TO 1999-2000 AND LATER. IT DOES NOT APPLY TO THE YEARS UNDER CONSIDERATION. XXVIII) THE DR ALSO REFERS TO THE CIRCULAR NO.3 OF 2008 DATED 12-03- 2008. IN THE SAID CIRCULAR IT WAS MADE CLEAR THAT THE BENEFIT U/S 80IA IS ALLOWABLE IN A CASE WHERE A PERSON MAKE S INVESTMENT AND HIMSELF EXECUTES THE DEVELOPMENT WOR K I.E. CARRYING OUT THE CIVIL CONSTRUCTION WORK. IN CONTRA ST TO THIS, A PERSON WHO ENTERS INTO A CONTRACT WITH ANY OTHER PE RSON FOR EXECUTING THE WORKS CONTRACT WILL NOT BE ELIGIBLE F OR THE TAX BENEFITS U/S 80IA. IT IS HUMBLY SUBMITTED THAT THE ASSESSEE MAKES THE INVESTMENT ON ITS OWN IN SO FAR AS THE WO RKS ARE CONCERNED AND ITSELF EXECUTES THE DEVELOPMENT WORK. THE CIRCULAR CLARIFIED THAT THE EXECUTION OF THE CIVIL WORK IS EQUAL TO DEVELOPMENT. THIS MAKES IT VERY CLEAR THAT THE ASS ESSEE IS ELIGIBLE FOR DEDUCTION U/S 80IA OF THE I.T. ACT AS THE ASSESSEE INVESTED ITS OWN FINANCE IN THE PROCESS OF DEVELOPM ENT AND UNDERTAKES THE DEVELOPMENT WORK ON ITS OWN WITH ALL THE RISKS ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 58 INVOLVED. THEREFORE, THE CIRCULAR SUPPORTS THE CLAI M OF THE ASSESSEE THAT IT IS A DEVELOPER. XXIX) THE DR REFERRED VARIOUS CIRCULARS AND MENTION S THAT THE ENTERPRISES WHICH CARRY ON THE ACTIVITY UNDER THE C ONCEPT OF BOT AND BOLT ALONE WILL BE ELIGIBLE FOR DEDUCTION. IN THIS REGARD, THE ASSESSEE HUMBLY SUBMITS THAT THE PROVIS IONS OF SC.80IA(4) MAKES THE MATTERS CLEAR THAT A PERSON WH O DEVELOPS OR OPERATES AND MAINTAINS OR DEVELOPS, OPERATES AND MAINTAINS WOULD BE ELIGIBLE FOR DEDUCTION. THE PROVISION ITSE LF IS VERY CLEAR. IT IS APPLICABLE TO ANY ENTERPRISE CARRYING ON ANY ONE ACTIVITY. THE BOMBAY HIGH COURT IN THE CASE OF ABC INDUSTRIES CLARIFIED THAT ALL THE THREE ACTIVITIES NEED NOT BE DONE AND THE ASSESSEE WOULD BE ELIGIBLE FOR DEDUCTION IF IT CARR IED ON EVEN A SINGLE ACTIVITY OUT OF THE ABOVE THREE ACTIVITIES. THEREFORE, THE PRESUMPTION THAT THE ASSESSEES WHICH CARRY ON BOT/B OLT ALONE ARE ELIGIBLE FOR DEDUCTION IS NOT CORRECT. TH ERE IS NO MENTION IN THE ENABLING SECTIONS THAT AN ASSESSEE T O BE ELIGIBLE FOR DEDUCTION SHOULD HAVE BEEN ENGAGED IN BOT/BOOT/ BOLT SCHEMES. XXX) THE DR MENTIONS THAT THE MEANING OF THE WORD DEVELOPER CAN NOT BE ASCERTAINED FROM THE I.T. ACT. HE RELIED ON THE DECISIONS REPORTED IN 196 ITR 149, 200 ITR 401 AND 155 ITR 54 8 TO MENTION THAT THE INTERPRETATION MUST BE IN CONSONAN CE WITH THE PURPOSE OF THE STATUTE. THE ASSESSEE SUBMITS TH AT THE INTERPRETATION HAS TO BE IN CONSONANCE WITH THE PUR POSE OF THE ACT. THE ASSESSEE ALREADY SUBMITTED THE CHANGES MAD E TO THE PROVISIONS OF THE LAW AND ALSO DISCUSSED VARIOUS AM ENDMENTS BROUGHT IN BY THE LEGISLATURE. IT CAN BE UNDERSTOOD FROM THE ABOVE AND FROM THE READING OF THE PROVISIONS OF SEC .80IA (4)(I) THAT AN ASSESSEE WHO ENTERS INTO AN AGREEMENT WITH GOVERNMENT FOR THE PURPOSE OF DEVELOPMENT OF INFRAS TRUCTURE FACILITY IS ELIGIBLE FOR DEDUCTION. IN SUCH CIRCUMS TANCES, THE MENTION BY THE LEARNED DR THAT THE ENTIRE INFRASTRU CTURE ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 59 FACILITY SHOULD BE INVESTED BY THE ASSESSEE AND THA T IT SHOULD BE MAINTAINED BY THE ASSESSEE CLEARLY SHOWS THAT TH E INTERPRETATION PROVIDED BY THE LEARNED DR IS NOT IN CONSONANCE WITH THE PROVISIONS OF LAW AND, THEREFORE, THE SAID DECISIONS FAVOUR THE ASSESSEE AND NOT THE DEPARTMENT. XXXI) THE DR ALSO REFERRED TO THE OBSERVATIONS MAD E BY THE SPECIAL BENCH OF THE ITAT IN THE CASE OF B.T. PATIL AND SON S. IT IS SUBMITTED THAT THE SAID DECISION IS RECALLED AND T HE OBSERVATIONS MADE CANNOT BE CONSIDERED. FURTHER, T HE BOMBAY HIGH COURT IN THE CASE OF ABG HEAVY INDUSTRI ES HELD THAT THE THREE CONDITIONS MENTIONED IN SEC. 80IA(4) NEED NOT CUMULATIVELY BE FULFILLED. THEREFORE, ANY OBSERVAT ION TO THE CONTRARY BY THE SPECIAL BENCH IS NOT RELEVANT AT PR ESENT. XXXII) IN THE REJOINDER THE LD. AR, COUNTERED THE A RGUMENT OF THE DR WHEREIN THE DR ARGUMENTS ARE MOSTLY TO THE EFFECT THAT THE ASSESSEE IS NOT A DEVELOPER, BUT ONLY A WORKS CONTR ACTOR AND THAT THE ASSESSEES WHO ENGAGE THEMSELVES IN ALL TH E THREE ACTIVITIES ALONE WOULD BE ELIGIBLE FOR DEDUCTION UN DER SEC. 80IA OF THE ACT. IN THE EARLIER PARAGRAPHS, THE ASSESSE ES COUNSEL SUBMITTED IN DETAIL THAT IT IS A DEVELOPER AND NOT ENGAGED IN THE WORKS CONTRACT ALONE AND THAT FOR THE PURPOSE O F BEING ELIGIBLE FOR DEDUCTION UNDER SEC. 80IA OF THE ACT, ONE NEED NOT CARRY ON ALL THE ACTIVITIES OF DEVELOP; OPERATE AND MAINTAIN. 31. FINDINGS: WE HAVE CONSIDERED THE ELABORATE SUBMISSIONS MADE BY BOTH THE PARTIES AND ALSO PERUSED THE MATERIALS AVAILABLE ON RECORD. WE HAVE ALSO GONE THROUGH ALL THE CASE LAWS CITED BY BOTH THE PARTIES. WE FIND THAT THE PROVISIONS OF SECTION 80I A (4) OF THE ACT WHEN INTRODUCED AFRESH BY THE FINANCE ACT, 1999, TH E PROVISIONS UNDER SECTION 80IA (4A) OF THE ACT WERE DELETED FRO M THE ACT. THE DEDUCTION AVAILABLE FOR ANY ENTERPRISE EARLIER UNDE R SECTION 80IA (4A) ARE ALSO MADE AVAILABLE UNDER SECTION 80IA (4) IT SELF. FURTHER, THE VERY FACT THAT THE LEGISLATURE MENTIONED THE WORDS (I) DEVELOPING OR ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 60 (II) OPERATING AND MAINTAINING OR (III) DEVELOPI NG, OPERATING AND MAINTAINING CLEARLY INDICATES THAT ANY ENTERPRISE WHICH CARRIED ON ANY OF THESE THREE ACTIVITIES WOULD BECOME ELIGIBLE FOR DEDUCTION. THEREFORE, THERE IS NO AMBIGUITY IN THE INCOME-TAX ACT. WE FIND THAT WHERE AN ASSESSEE INCURRED EXPENDITURE FOR PURCHA SE OF MATERIALS HIMSELF AND EXECUTES THE DEVELOPMENT WORK I.E., CAR RIES OUT THE CIVIL CONSTRUCTION WORK, HE WILL BE ELIGIBLE FOR TAX BENE FIT UNDER SECTION 80 IA OF THE ACT. IN CONTRAST TO THIS, A ASSESSEE, WH O ENTERS INTO A CONTRACT WITH ANOTHER PERSON INCLUDING GOVERNMENT O R AN UNDERTAKING OR ENTERPRISE REFERRED TO IN SECTION 80 IA OF THE ACT, FOR EXECUTING WORKS CONTRACT, WILL NOT BE ELIGIBLE FOR THE TAX BENEFIT UNDER SECTION 80 IA OF THE ACT. WE FIND THAT THE WORD O WNED IN SUB- CLAUSE (A) OF CLAUSE (1) OF SUB SECTION (4) OF SECT ION 80IA OF THE ACT REFER TO THE ENTERPRISE. BY READING OF THE SECTION, IT IS CLEARS THAT THE ENTERPRISES CARRYING ON DEVELOPMENT OF INFRASTRUCTU RE DEVELOPMENT SHOULD BE OWNED BY THE COMPANY AND NOT THAT THE INF RASTRUCTURE FACILITY SHOULD BE OWNED BY A COMPANY. THE PROVISI ONS ARE MADE APPLICABLE TO THE PERSON TO WHOM SUCH ENTERPRISE BE LONGS TO IS EXPLAINED IN SUB-CLAUSE (A). THEREFORE, THE WORD O WNERSHIP IS ATTRIBUTABLE ONLY TO THE ENTERPRISE CARRYING ON THE BUSINESS WHICH WOULD MEAN THAT ONLY COMPANIES ARE ELIGIBLE FOR DED UCTION UNDER SECTION 80IA (4) AND NOT ANY OTHER PERSON LIKE INDI VIDUAL, HUF, FIRM ETC. 32. WE ALSO FIND THAT ACCORDING TO SUB-CLAUSE (A), CLAU SE (I) OF SUB SECTION (4) OF SECTION 80-IA THE WORD IT DENOTES THE ENTERPRISE CARRYING ON THE BUSINESS. THE WORD IT CANNOT BE RELATED TO THE INFRASTRUCTURE FACILITY, PARTICULARLY IN VIEW OF TH E FACT THAT INFRASTRUCTURE FACILITY INCLUDES RAIL SYSTEM, HIGHW AY PROJECT, WATER TREATMENT SYSTEM, IRRIGATION PROJECT, A PORT, AN AIRPORT OR AN INLAND PORT WHICH CANNOT BE OWNED BY ANY ONE. EVEN OTHERW ISE, THE WORD IT IS USED TO DENOTE AN ENTERPRISE. THEREFORE, T HERE IS NO REQUIREMENT THAT THE ASSESSEE SHOULD HAVE BEEN THE OWNER OF THE INFRASTRUCTURE FACILITY. ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 61 33. THE NEXT QUESTION IS TO BE ANSWERED IS WHETHER THE ASSESSEE IS A DEVELOPER OR MERE WORKS CONTRACTOR. THE REVENUE RELIED ON THE AMENDMENTS BROUGHT IN BY THE FINANCE ACT 2007 AND 2 009 TO MENTION THAT THE ACTIVITY UNDERTAKEN BY THE ASSESS EE IS AKIN TO WORKS CONTRACT AND HE IS NOT ELIGIBLE FOR DEDUCTIO N UNDER SECTION 80IA (4) OF THE ACT. WHETHER THE ASSESSEE IS A DEV ELOPER OR WORKS CONTRACTOR IS PURELY DEPENDS ON THE NATURE OF THE W ORK UNDERTAKEN BY THE ASSESSEE. EACH OF THE WORK UNDERTAKEN HAS T O BE ANALYZED AND A CONCLUSION HAS TO BE DRAWN ABOUT THE NATURE O F THE WORK UNDERTAKEN BY THE ASSESSEE. THE AGREEMENT ENTERED INTO WITH THE GOVERNMENT OR THE GOVERNMENT BODY MAY BE A MERE WOR KS CONTRACT OR FOR DEVELOPMENT OF INFRASTRUCTURE. IT IS TO BE S EEN FROM THE AGREEMENTS ENTERED INTO BY THE ASSESSEE WITH THE GO VERNMENT. WE FIND THAT THE GOVERNMENT HANDED OVER THE POSSESSION OF THE PREMISES OF PROJECTS TO THE ASSESSEE FOR THE DEVELO PMENT OF INFRASTRUCTURE FACILITY. IT IS THE ASSESSEES RESPO NSIBILITY TO DO ALL ACTS TILL THE POSSESSION OF PROPERTY IS HANDED OVER TO T HE GOVERNMENT. THE FIRST PHASE IS TO TAKE OVER THE EXISTING PREMIS ES OF THE PROJECTS AND THEREAFTER DEVELOPING THE SAME INTO INFRASTRUCT URE FACILITY. SECONDLY, THE ASSESSEE SHALL FACILITATE THE PEOPLE TO USE THE AVAILABLE EXISTING FACILITY EVEN WHILE THE PROCESS OF DEVELOP MENT IS IN PROGRESS. ANY LOSS TO THE PUBLIC CAUSED IN THE PROCESS WOULD BE THE RESPONSIBILITY OF THE ASSESSEE. THE ASSESSEE HAS T O DEVELOP THE INFRASTRUCTURE FACILITY. IN THE PROCESS, ALL THE WORKS ARE TO BE EXECUTED BY THE ASSESSEE. IT MAY BE LAYING OF A DR AINAGE SYSTEM; MAY BE CONSTRUCTION OF A PROJECT; PROVISION OF WAY FOR THE CATTLE AND BULLOCK CARTS IN THE VILLAGE; PROVISION FOR TRAFFI C WITHOUT ANY HINDRANCE, THE ASSESSEES DUTY IS TO DEVELOP INFRAS TRUCTURE WHETHER IT INVOLVES CONSTRUCTION OF A PARTICULAR ITEM AS AGREE D TO IN THE AGREEMENT OR NOT. THE AGREEMENT IS NOT FOR A SPECI FIC WORK, IT IS FOR DEVELOPMENT OF FACILITY AS A WHOLE. THE ASSESSEE IS NOT ENTRUSTED WITH ANY SPECIFIC WORK TO BE DONE BY THE ASSESSEE. THE MATERIAL REQUIRED IS TO BE BROUGHT IN BY THE ASSESSEE BY STI CKING TO THE QUALITY AND QUANTITY IRRESPECTIVE OF THE COST OF SUCH MATER IAL. THE ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 62 GOVERNMENT DOES NOT PROVIDE ANY MATERIAL TO THE ASS ESSEE. IT PROVIDES THE WORKS IN PACKAGES AND NOT AS A WORKS C ONTRACT. THE ASSESSEE UTILIZES ITS FUNDS, ITS EXPERTISE, ITS EMP LOYEES AND TAKES THE RESPONSIBILITY OF DEVELOPING THE INFRASTRUCTURE FAC ILITY. THE LOSSES SUFFERED EITHER BY THE GOVT. OR THE PEOPLE IN THE P ROCESS OF SUCH DEVELOPMENT WOULD BE THAT OF THE ASSESSEE. THE ASS ESSEE HANDS OVER THE DEVELOPED INFRASTRUCTURE FACILITY TO THE GOVERN MENT ON COMPLETION OF THE DEVELOPMENT. THEREAFTER, THE ASS ESSEE HAS TO UNDERTAKE MAINTENANCE OF THE SAID INFRASTRUCTURE FO R A PERIOD OF 12 TO 24 MONTHS. DURING THIS PERIOD, IF ANY DAMAGES A RE OCCURRED IT SHALL BE THE RESPONSIBILITY OF THE ASSESSEE. FURTH ER, DURING THIS PERIOD, THE ENTIRE INFRASTRUCTURE SHALL HAVE TO BE MAINTAINED BY THE ASSESSEE ALONE WITHOUT HINDRANCE TO THE REGULAR TRA FFIC. THEREFORE, IT IS CLEAR THAT FROM AN UN-DEVELOPED AREA, INFRASTRUC TURE IS DEVELOPED AND HANDED OVER TO THE GOVERNMENT AND AS EXPLAINED BY THE CBDT VIDE ITS CIRCULAR DATED 18-05-2010, SUCH ACTIVITY I S ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA (4) OF THE ACT. THIS C ANNOT BE CONSIDERED AS A MERE WORKS CONTRACT BUT HAS TO BE C ONSIDERED AS A DEVELOPMENT OF INFRASTRUCTURE FACILITY. THEREFORE, THE ASSESSEE IS A DEVELOPER AND NOT A WORKS CONTRACTOR AS PRESUMED BY THE REVENUE. THE CIRCULAR ISSUED BY THE BOARD, RELIED ON BY LEAR NED COUNSEL FOR THE ASSESSEE, CLEARLY INDICATE THAT THE ASSESSEE IS ELI GIBLE FOR DEDUCTION UNDER SECTION 80IA (4) OF THE ACT. THE DEPARTMENT IS NOT CORRECT IN HOLDING THAT THE ASSESSEE IS A MERE CONTRACTOR OF T HE WORK AND NOT A DEVELOPER. 34. WE ALSO FIND THAT AS PER THE PROVISIONS OF THE SECT ION 80IA OF THE ACT, A PERSON BEING A COMPANY HAS TO ENTER INTO AN AGREEMENT WITH THE GOVERNMENT OR GOVERNMENT UNDERTAKINGS. SU CH AN AGREEMENT IS A CONTRACT AND FOR THE PURPOSE OF THE AGREEMENT A PERSON MAY BE CALLED AS A CONTRACTOR AS HE ENTERED INTO A CONTRACT. BUT THE WORD CONTRACTOR IS USED TO DENOTE A PERSO N ENTERING INTO AN AGREEMENT FOR UNDERTAKING THE DEVELOPMENT OF INFRAS TRUCTURE FACILITY. EVERY AGREEMENT ENTERED INTO IS A CONTRACT. THE W ORD CONTRACTOR IS ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 63 USED TO DENOTE THE PERSON WHO ENTERS INTO SUCH CONT RACT. EVEN A PERSON WHO ENTERS INTO A CONTRACT FOR DEVELOPMENT O F INFRASTRUCTURE FACILITY IS A CONTRACTOR. THEREFORE, THE CONTRACTO R AND THE DEVELOPER CANNOT BE VIEWED DIFFERENTLY. EVERY CONTRACTOR MAY NOT BE A DEVELOPER BUT EVERY DEVELOPER DEVELOPING INFRASTRUC TURE FACILITY ON BEHALF OF THE GOVERNMENT IS A CONTRACTOR. 35. WE FIND THAT THE DECISION RELIED ON BY THE LEARNED COUNSEL FOR THE ASSESSEE IN THE CASE OF CIT VS. LAXMI CIVIL ENG INEERING WORKS [SUPRA] SQUARELY APPLICABLE TO THE ISSUE UNDER DISP UTE WHICH IS IN FAVOUR OF THE ASSESSEE WHEREIN IT WAS HELD THAT MER E DEVELOPMENT OF A INFRASTRUCTURE FACILITY IS AN ELIGIBLE ACTIVITY F OR CLAIMING DEDUCTION UNDER SECTION 80IA OF THE ACT AFTER CONSIDERING THE JUDGEMENT OF THE MUMBAI HIGH COURT IN THE CASE OF ABG HEAVY ENGINEER ING [SUPRA]. THE CASE OF ABG IS NOT THE PURE DEVELOPER WHEREAS, IN THE PRESENT CASE, THE ASSESSEE IS THE PURE DEVELOPER. WE ALSO FIND THAT SECTION 80IA OF THE ACT, INTENDED TO COVER THE ENTITIES CAR RYING OUT DEVELOPING, OPERATING AND MAINTAINING THE INFRASTRU CTURE FACILITY KEEPING IN MIND THE PRESENT BUSINESS MODELS AND INT END TO GRANT THE INCENTIVES TO SUCH ENTITIES. THE CBDT, ON SEVERAL OCCASIONS, CLARIFIED THAT PURE DEVELOPER SHOULD ALSO BE ELIGIBLE TO CLAI M DEDUCTION UNDER SECTION 80IA OF THE ACT, WHICH ULTIMATELY CULMINATE D INTO AMENDMENT UNDER SECTION 80IA OF THE ACT, IN THE FIN ANCE ACT 2001, TO GIVE EFFECT TO THE AFORESAID CIRCULARS ISSUED BY THE CBDT. WE ALSO FIND THAT, TO AVOID MISUSE OF THE AFORESAID AMENDME NT, AN EXPLANATION WAS INSERTED IN SECTION 80IA OF THE ACT , IN THE FINANCE ACT-2007 AND 2009, TO CLARIFY THAT MERE WORKS CONTR ACT WOULD NOT BE ELIGIBLE FOR DEDUCTIONS UNDER SECTION 80IA OF THE A CT. BUT, CERTAINLY, THE EXPLANATION CANNOT BE READ TO DO AWAY WITH THE ELIGIBILITY OF THE DEVELOPER; OTHERWISE, THE PARLIAMENT WOULD HAVE SIM PLY REVERSED THE AMENDMENT MADE IN THE FINANCE ACT, 2001. THUS, THE AFORESAID EXPLANATION WAS INSERTED, CERTAINLY, TO DENY THE TA X HOLIDAY TO THE ENTITIES WHO DOES ONLY MERE WORKS CONTACT OR SUB-CO NTRACT AS DISTINCT FROM THE DEVELOPER. THIS IS CLEAR FROM THE EXPRESS INTENSION ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 64 OF THE PARLIAMENT WHILE INTRODUCING THE EXPLANATION . THE EXPLANATORY MEMORANDUM TO FINANCE ACT 2007 STATES THAT THE PURP OSE OF THE TAX BENEFIT HAS ALL ALONG BEEN TO ENCOURAGE INVESTMENT IN DEVELOPMENT OF INFRASTRUCTURE SECTOR AND NOT FOR THE PERSONS WHO M ERELY EXECUTE THE CIVIL CONSTRUCTION WORK. IT CATEGORICALLY STATES TH AT THE DEDUCTION UNDER SECTION 80IA OF THE ACT IS AVAILABLE TO DEVEL OPERS WHO UNDERTAKES ENTREPRENEURIAL AND INVESTMENT RISK AND NOT FOR THE CONTRACTORS, WHO UNDERTAKES ONLY BUSINESS RISK. WIT HOUT ANY DOUBT, THE LEARNED COUNSEL FOR THE ASSESSEE CLEARLY DEMONS TRATED BEFORE US THAT THE ASSESSEE AT PRESENT HAS UNDERTAKEN HUGE RI SKS IN TERMS OF DEPLOYMENT OF TECHNICAL PERSONNEL, PLANT AND MACHIN ERY, TECHNICAL KNOW-HOW, EXPERTISE AND FINANCIAL RESOURCES. FURTHE R, THE ORDER OF TRIBUNAL IN THE CASE OF B.T.PATIL CITED SUPRA IS PR IOR TO AMENDMENT TO SEC 80IA(4), AFTER THE AMENDMENT THE SECTION 80IA(4 ) READ AS (I) DEVELOPING OR (II) OPERATING AND MAINTAINING OR (II I) DEVELOPING, OPERATING AND MAINTAINING ANY INFRASTRUCTURE FACILI TY, PRIOR TO AMENDMENT THE OR BETWEEN THREE ACTIVITIES WAS NO T THERE, AFTER THE AMENDMENT OR HAS BEEN INSERTED W.E.F. 1-4-2002 B Y FINANCE ACT 2001. THEREFORE, IN OUR CONSIDERED VIEW, THE ASSES SEE SHOULD NOT BE DENIED THE DEDUCTION UNDER SECTION 80IA OF THE ACT AS THE CONTRACTS INVOLVES, DEVELOPMENT, OPERATING, MAINTENANCE, FI NANCIAL INVOLVEMENT, AND DEFECT CORRECTION AND LIABILITY PE RIOD, THEN SUCH CONTRACTS CANNOT BE CALLED AS SIMPLE WORKS CONTRACT . IN OUR OPINION THE CONTRACTS WHICH CONTAIN ABOVE FEATURES TO BE SE GREGATED AND ON THIS DEDUCTION U/S. 80-IA HAS TO BE GRANTED AND THE OTHER AGREEMENTS WHICH ARE PURE WORKS CONTRACTS HIT BY TH E EXPLANATION SECTION 80IA(13), THOSE WORK ARE NOT ENTITLE FOR DE DUCTION U/S 80IA OF THE ACT. THE PROFIT FROM SUCH CONTRACTS WHICH INVOL VES DEVELOPMENT, OPERATING, MAINTENANCE, FINANCIAL INVOLVEMENT, AND DEFECT CORRECTION AND LIABILITY PERIOD IS TO BE COMPUTED BY ASSESSING OFFICER ON PRO-RATA BASIS OF TURNOVER. THE ASSESSING OFFICER IS DIRECTE D TO EXAMINE AND GRANT DEDUCTION ON ELIGIBLE TURNOVER AS DIRECTED AB OVE. IT IS NEEDLESS TO SAY THAT IN SIMILAR CIRCUMSTANCES, SIMILAR VIEW HAS BEEN TAKEN BY THE CHENNAI BENCH OF THE TRIBUNAL AND DEDUCTION U/S . 80IA WAS ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 65 GRANTED IN THE CASE OF M/S. CHETTINAD LIGNITE TRANS PORT SERVICES (P) LTD., IN ITA NO. 2287/MDS/06 ORDER DATED 27 TH JULY, 2007 FOR THE ASSESSMENT YEAR 2004-05. LATER IN ITA NO. 1179/MDS /08 VIDE ORDER DATED 26 TH FEBRUARY, 2010 THE TRIBUNAL HAS TAKEN THE SAME VIE W BY INTER-ALIA HOLDING AS FOLLOWS: 7. MOREOVER, THE REASONS FOR INTRODUCING THE EXPLANATION WERE CLARIFIED AS PROVIDING A TAX BENEF IT BECAUSE MODERNISATION REQUIRES A MASSIVE EXPANSION AND QUALITATIVE IMPROVEMENT IN INFRASTRUCTURES LIKE EXPRESSWAYS, HIGHWAYS, AIRPORTS, PORTS AND RAPID UR BAN RAIL TRANSPORT SYSTEMS. FOR THAT PURPOSE, PRIVATE SECTOR PARTICIPATION BY WAY OF INVESTMENT IN DEVELOPMENT O F THE INFRASTRUCTURE SECTOR AND NOT FOR THE PERSONS WHO M ERELY EXECUTE THE CIVIL CONSTRUCTION WORK OR ANY OTHER WO RK CONTRACT HAS BEEN ENCOURAGED BY GIVING TAX BENEFITS . THUS THE PROVISIONS OF SECTION 80IA SHALL NOT APPLY TO A PERSON WHO EXECUTES A WORKS CONTRACT ENTERED INTO W ITH THE UNDERTAKING OR ENTERPRISE REFERRED TO IN THE SE CTION BUT WHERE A PERSON MAKES THE INVESTMENT AND HIMSELF EXECUTES THE DEVELOPMENT WORK, HE CARRIES OUT THE C IVIL CONSTRUCTION WORK, HE WILL BE ELIGIBLE FOR THE TAX BENEFIT UNDER SECTION 80IA. 36. THE ABOVE ORDER WAS FOLLOWED IN SUBSEQUENT ASSESSME NT YEARS 2007-2008 & 2008-09 IN ITA NOS. 1312 & 1313/MDS/201 1 VIDE ORDER DATED 18.11.2011 IN THE CASE OF THE SAME ASSE SSEE. FURTHER, IN SIMILAR CIRCUMSTANCES, THIS TRIBUNAL IN THE CASE O F M/S. GVPR ENGINEERS LTD. HYDERABAD IN ITA NO. 347/H/08 & OTHE RS VIDE ORDER DATED 29 TH FEBRUARY 2012 HAS TAKEN SIMILAR VIEW AND GRANTED DEDUCTION UNDER SECTION 80IA OF THE ACT. 37. FURTHER, WE MAKE IT CLEAR THAT WHERE THE ASSESSEE HAS CARRIED OUT THE DEVELOPMENT OF INFRASTRUCTURE WORK IN CONSO RTIUM AND NOT AS A SUB-CONTRACTOR, THEN ALSO THE ASSESSEE IS ENTITLE D FOR DEDUCTION U/S 80IA OF THE ACT. THE SAME IS APPLICABLE IN CASE OF WORK ALLOTTED BY GOVERNMENT CORPORATION/GOVERNMENT BODIES. ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 66 38. FURTHER IN THE CASE OF R.R. CONSTRUCTIONS, THE CHEN NAI BENCH OF THE TRIBUNAL IN ITS ORDER DATED 3.10.2011 IN I.T .A. NO. 2061/MDS/2010 FOR ASSESSMENT YEAR 2007-08 HELD AS F OLLOWS: 3. WE HAVE HEARD RIVAL SUBMISSIONS AND HAVE CAREFULLY PERUSED THE ENTIRE RECORD. THE FIRST ISSU E OF THE APPEAL IS REGARDING CLAIM OF DEDUCTION UNDER SECTIO N 80IA(4) OF THE ACT. THE CASE OF THE REVENUE IS THAT THE ASSESSEE IS A WORKS CONTRACTOR AND NOT A DEVELOP ER AS STIPULATED UNDER SECTION 80IA(4) OF THE ACT. THE SE CTION 80IA(4) APPLIES TO ANY ENTERPRISE, WHICH CARRIES ON THE BUSINESS OF (I) DEVELOPING OR (II) OPERATING AND MA INTAINING OR (III) DEVELOPING, OPERATING AND MAINTAINING ANY INFRASTRUCTURE FACILITIES, WHICH FULFIL ALL THE ABO VE CONDITIONS. THERE CANNOT BE ANY QUESTION OF PROVIDI NG A CONDITION FOR SUCH AN ENTERPRISE TO START OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY ON OR AFTER 01.04.1995. FROM THE ASSESSMENT YEAR 2000-01, DEDUCTION IS AVAILABLE IF THE ASSESSEE IS CARRYING OUT THE BUSINESS OF ANY ONE OF THE ABOVE MENTIONED THREE TY PES OF ACTIVITIES. WHEN AN ASSESSEE IS ONLY DEVELOPING AN INFRASTRUCTURE FACILITY PROJECT AND IS NOT MAINTAIN ING NOR OPERATING IT, OBVIOUSLY SUCH AN ASSESSEE WILL BE PA ID FOR THE COST INCURRED BY IT; OTHERWISE, HOW WILL THE PE RSON, WHO DEVELOPS THE INFRASTRUCTURE FACILITY PROJECT, R EALIZE ITS COST? IF THE INFRASTRUCTURE FACILITY, JUST AFTER IT S DEVELOPMENT, IS TRANSFERRED TO THE GOVERNMENT, NATU RALLY THE COST WOULD BE PAID BY THE GOVERNMENT. THEREFORE , MERELY BECAUSE THE TRANSFEREE HAD PAID FOR THE DEVELOPMENT OF INFRASTRUCTURE FACILITY CARRIED OUT BY THE ASSESSEE, IT CANNOT BE SAID THAT THE ASSESSEE DID N OT DEVELOP THE INFRASTRUCTURE FACILITY. IF THE INTERPR ETATION DONE BY THE ASSESSING OFFICER IS ACCEPTED, NO ENTER PRISE CARRYING ON THE BUSINESS OF ONLY DEVELOPING HE INFRASTRUCTURE FACILITY WOULD BE ENTITLED TO DEDUCT ION UNDER SECTION 80IA(4), WHICH IS NOT THE INTENTION OF THE LAW. AN ENTERPRISE, WHO DEVELOP THE INFRASTRUCTURE FACILITY IS NOT PAID BY THE GOVERNMENT, THE ENTIRE COST OF DEVELOPM ENT WOULD BE A LOSS IN THE HANDS OF THE DEVELOPER AS HE IS NOT OPERATING THE INFRASTRUCTURE FACILITY. THE LEGISLAT URE HAS PROVIDED THAT THE INCOME OF THE DEVELOPER OF THE INFRASTRUCTURE PROJECT WOULD BE ELIGIBLE FOR DEDUCT ION, IT PRESUPPOSES THAT THERE CAN BE INCOME TO DEVELOPER I .E. TO THE PERSON WHO IS CARRYING ON THE ACTIVITY OF ONLY DEVELOPMENT INFRASTRUCTURE FACILITY. OSTENSIBLY, A DEVELOPER WOULD HAVE INCOME ONLY IF HE IS PAID FOR THE DEVELOPMENT OF INFRASTRUCTURE FACILITY, FOR THE SIM PLE ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 67 REASON THAT HE IS NOT HAVING THE RIGHT/AUTHORIZATIO N TO OPERATE THE INFRASTRUCTURE FACILITY AND TO COLLECT TOLL THERE FROM, HAS NO OTHER SOURCE OF RECOUPMENT OF HIS COST OF DEVELOPMENT. WHILE FILING THE RETURN, THE ASSESSEE HAD MADE CLAIM UNDER SECTION 80IA(4) OF THE ACT. 4. THE ASSESSEE HAS ALSO PRODUCED ALL SIX AGREEMEN TS REGARDING SIX PROJECTS UNDERTAKEN BEFORE THE ASSESS ING OFFICER, WHOSE COPIES ARE AVAILABLE BEFORE US ALSO. IT IS A FACT THAT EVEN AFTER TAKING A CONTRACT FROM THE GOVERNMENT, IF THE ASSESSEE DEVELOPS INFRASTRUCTUR E FACILITIES, IT WOULD BE REGARDED AS A DEVELOPER A ND NOT AS A WORKS CONTRACTOR. THE ASSESSEE FIRM HAS CARRIED ON ENTIRE CONSTRUCTION/DEVELOPMENT OF THE INFRASTRUCTU RE FACILITIES AND SATISFY ALL THE CONDITIONS OF SECTIO N 80IA(4)(I)(A). IT IS UNDENIABLE FACT THAT THE ASSES SEE HAS TAKEN DEVELOPMENT OF INFRASTRUCTURE FACILITY AGREEM ENT FROM THE STATE GOVERNMENT/LOCAL AUTHORITY. A CONTRA CTOR WHO DEVELOPS THE INFRASTRUCTURE FACILITY BECOMES A DEVELOPER TO CLAIM EXEMPTION UNDER SECTION 80IA(4). THE HONBLE BOMBAY BENCH OF ITAT WHILE DECIDING THE CAS E OF PATEL ENGINEERING LTD. VS. DCIT IN ITA NO. 1221/MUM/2004 HAS GONE TO THE EXTENT OF HOLDING THA T THE ASSESSEE, A CIVIL CONTRACTOR, HAVING EXECUTED A PART OF CONTRACTS OF IRRIGATION AND WATER SUPPLY ON BUILD AND TRANSFER BASIS AND HANDED OVER THEM TO CONTRACTEE GOVERNMENTS, WAS ELIGIBLE FOR DEDUCTION UNDER SECTI ON 80IA(4). 5. WE HAVE ALSO TAKEN A SIMILAR VIEW IN ITA NO. 554/MEDS/2010 IN THE CASE OF EAST COAST CONSTRUCTIO NS & INDUSTRIES LTD V. DCIT VIDE ORDER DATED 13.09.201 1 AND RELEVANT PARAS FROM 9 TO 14 ARE REPRODUCED HEREUNDE R: 9. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE CAN SAFELY SAY THAT THE BENEFIT OF SECTION 80IA IS AVAILABLE ONLY TO A DEVELOPER WHO CARRIES ON BUSINESS OF DEVELOPING OF INFRASTRUCTURE FACILITY . A PERSON WHO ENTERS INTO CONTRACT WITH ANOTHER PERSON FOR EXECUTING WORKS CONTRACTS IS NOT ELIGIBLE FOR SUCH A BENEFIT. EXPLANATION TO SECTION 80IA WAS INSERTED BY FINANCE ACT, 2007 WITH RETROSPECTIVE EFFECT FROM 1.4.2000 WHICH HAS FURTHER BEEN AMENDED BY FINANCE (NO. 2) ACT, 2009 WITH RETROSPECTIVE EFFECT FROM 1.4.2000. THE AMENDMENT IN THIS EXPLANATION WAS NECESSITATED DUE TO CONTRARY JUDICIAL DECISION ON THIS ISSUE. THUS, WE CAN UNEQUIVOCALLY NOW SAY THAT ANY ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 68 UNDERTAKING OR ENTERPRISE WHICH EXECUTES THE INFRASTRUCTURE DEVELOPMENT PROJECT, AS REFERRED TO IN SUB-SECTION(4) AS A WORKS CONTRACT AWARDED BY ANY PERSON INCLUDING THE CENTRAL OR STATE GOVERNMENT, IS NOT ELIGIBLE FOR TAX BENEFIT U/S 80IA(4). HAVING SAID THAT, NOW WE EXAMINE THE FACTS OF THIS CASE. THE ASSESSEE-COMPANY WAS GIVEN THIS BENEFIT IN ASSESSMENT YEAR 2003-04 BY THE DEPARTMENT ON IDENTICAL FACTS AFTER CONSIDERING THE EXPLANATION AND AMENDMENT THERETO. TO TRACE THE HISTORY OF THIS DEDUCTION, WE FIND THAT ORIGINALLY, IN THE PROVISION OF SECTION 80IA, THERE WAS NO MENTION OF ANY DEVELOPMENT OF INFRASTRUCTURE FACILITY. IT IS ONLY WITH EFFECT FROM 1.4.2000, TH IS SECTION WAS DIVIDED INTO TWO PORTIONS 80IA AND 80IB. SECTION 80IA(4) PRESCRIBES ABOUT THE DEDUCTION AVAILABLE TO A DEVELOPER WHO DEVELOPS INFRASTRUCTURE FACILITIES. IN VIEW OF THE AMENDMENT INSERTED BY THE FINANCE ACT, 2007, WITH RETROSPECTIVE EFFECT FROM 1.4.2000, THE DEDUCTION U/S 80IA IS AVAILABLE TO THOSE ASSESSEES WHO ARE INVESTING AND DEVELOPING INFRASTRUCTURE FACILITY AND NOT TO PERSONS WHO SIMPLY EXECUTES WORKS- CONTRACTS. EXPLANATION IN QUESTION, AS IT STANDS TODAY, READS AS UNDER: EXPLANATION - FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT NOTHING CONTAINED IN THIS SECTION(I.E. 80IA) SHALL APPLY TO A PERSON WHO EXECUTES A WORKS CONTRACT ENTERED INTO WITH THE UNDERTAKING OR ENTERPRISE, AS THE CASE MAY BE. IN CONTRAST TO THIS, A PERSON WHO ENTERS INTO A CONTRACT WITH ANOTHER PERSON (I.E., UNDERTAKING OR ENTERPRISE REFERRED TO IN SECTION 80-IA) FOR EXECUT ING WORKS CONTRACT, WILL NOT BE ELIGIBLE FOR TAX BENEFI T UNDER SECTION 80- IA. 10. WE HAVE FOUND THAT THE ASSESSEE-COMPANY IS A WORKS CONTRACTOR, WHO HAS ENTERED INTO AGREEMENT WITH THE LOCAL BODIES TO EXECUTE CERTAIN PART OF TH E WORK AWARDED TO IT THROUGH CONTRACT FOR INFRASTRUCTURE FACILITY. IT IS TRUE THAT WHERE A PERSON WHO MAKES INFRASTRUCTURE AND HIMSELF EXECUTES DEVELOPMENT WORK AND CARRIES OUT CIVIL WORK WILL BE ELIGIBLE FOR TAX BENEFIT U/S 80IA OF T HE ACT. IN CONTRAST TO THIS, A PERSON WHO ENTERS INTO A ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 69 CONTRACT WITH ANOTHER PERSON FOR EXECUTING WORKS CONTRACT, WILL NOT BE ELIGIBLE FOR TAX BENEFIT U/S 80IA. IT WAS CLARIFIED BY THE CIRCULAR NO. 3 OF 200 8 DATED 12.3.2008 THAT THE PROVISIONS OF SECTION 80IA SHALL NOT APPLY TO A PERSON WHO EXECUTES ONLY WORK CONTRACTS AND ONLY THOSE WHO MAKE THE DEVELOPMENT WORK WILL BE ELIGIBLE FOR TAX BENEFIT U/S 80IA OF THE ACT. BE THAT AS IT MAY, WHEN WE APPLY THIS PROVISION IN ITS LETTERS AND SPIRIT, WE FIND THAT THIS ASSESSEE IS VERILY ELIGIBLE FOR DEDUCTION U/S 80IA, AS THE ASSESSEE-COMPANY FULFILS ALL THE RELEVANT CONDITIONS. THE FACTS OF T HIS CASE GO TO PROVE THAT THE ASSESSEE IS A DEVELOPER OF INFRASTRUCTURE FACILITIES. THE REASONS FOR OUR ABOVE CONCLUSION ARE GIVEN IN THE FOLLOWING PARAS. FIRSTLY, THE ASSESSEE-COMPANY NOT ONLY DESIGNS BUT ALSO CREATES NEW PRODUCTS. THE ASSESSEE HAD UNDERTAKEN FOUR PROJECTS DURING THE RELEVANT YEAR AND EXECUTED, CONSTRUCTED, DELIVERED AND MAINTAINED BY IT. AS PER THE DEFINITION OF ADVANCED LAW LEXICON [PLACED AT PAGE 533 OF THE PAPER BOOK] DEVELOPER MEANS A PERSON ENGAGED IN DEVELOPMENT OR OPERATION OR MAINTENANCE OF SPECIAL ECONOMIC ZONE, AND ALSO INCLUDES ANY PERSON AUTHORIZED FOR SUCH PURPOSE BY ANY SUCH DEVELOPER. THE WORKS CONTRACT MEANS AN AGREEMENT IN WRITING FOR THE EXECUTION OF ANY WORK RELATING TO CONSTRUCTION, REPAIR, OR MAINTENANCE OF ANY BUILDING OR SUPERSTRUCTURE, DAM, WEIR, CANAL, RESERVOIR, TANK, LAKE, ROAD, WELL, BRIDGE, CULVERT, FACTORY, WORKSHOP, POWERHOUSE, TRANSFORMERS OR SUCH OTHER WORKS OF THE STATE GOVERNMENT OR PUBLIC UNDERTAKINGS AS THE STATE GOVERNMENT MAY BE BY NOTIFICATION, SPECIFY IN THIS BEHALF AT ANY O F ITS STAGES ENTERED INTO BY THE STATE GOVERNMENT OR BY AN OFFICIAL OF THE STATE GOVERNMENT OR PUBLIC UNDERTAKING AND INCLUDES AN AGREEMENT FOR THE SUPPLY OF GOODS OR MATERIAL AND ALL OTHER MATTERS RELATING TO EXECUTION OF ANY OF THE SAID WORKS. THE CASE OF ACIT VS INDWELL LIANINGS PVT. LTD (SUPRA), ON WHICH THE ASSESSING OFFICER HAS PLACED RELIANCE IS ALSO RELEVANT AND WE EXTRACT CERTAIN RELEVANT PORTION OF THIS DECISION FOR READY REFERENCE: VIDE FINANCE ACT, 2007, AN EXPLANATION WAS INSERTED WITH RETROSPECTIVE EFFECT FROM APRIL, 2000 AFTER SUB-SECTION (13) OF SECTION 80- IA, WHICH READS AS UNDER : ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 70 'FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT NOTHING CONTAINED IN THIS SECTION SHALL APPLY TO A PERSON WHO EXECUTES A WORKS CONTRACT ENTERED INTO WITH THE UNDERTAKING OR ENTERPRISE, AS THE CAS E MAY BE.' ACCORDING TO ATTORNEY'S POCKET DICTIONARY, IN RELATION TO A CORPORATION OR BUSINESS, THE TERM 'UNDERTAKING' DENOTES ITS WHOLE ENTERPRISE AND THE WORD 'ENTERPRISE' CONNOTES ALL THE RELATED ACTIVITI ES PERFORMED EITHER THROUGH UNIFIED OPERATION OR COMMON CONTROL BY ANY PERSON OR PERSONS FOR A COMMON BUSINESS PURPOSE. THE MENS LEGIS WITH REFERENCE TO DEVELOPER OF INFRASTRUCTURE FACILITY CAN BE GATHERED FROM THE MEMORANDUM EXPLAINING THE PROVISIONS IN THE FINANCE BILL, 2007, REPORTED IN [2007] 289 ITR (ST. ) 292 AT PAGE 312, WHICH READS AS UNDER : 'SECTION 80-IA, INTER ALIA, PROVIDES FOR A TEN-YEAR TAX BENEFIT TO AN ENTERPRISE OR AN UNDERTAKING ENGAGED IN DEVELOPMENT OF INFRASTRUCTURE FACILITIES , INDUSTRIAL PARKS AND SPECIAL ECONOMIC ZONES. THE TAX BENEFIT WAS INTRODUCED FOR THE REASON THAT INDUSTRIAL MODERNIZATION REQUIRES A PASSIVE EXPANSION OF, AND QUALITATIVE IMPROVEMENT IN, INFRASTRUCTURE (VIZ., EXPRESSWAYS, HIGHWAYS, AIRPORTS, PORTS AND RAPID URBAN RAIL TRANSPORT SYSTEMS) WHICH WAS LACKING IN OUR COUNTRY. THE PURPOSE OF THE TAX BENEFIT HAS ALL ALONG BEEN FOR ENCOURAGING PRIVATE SECTOR PARTICIPATION BY WAY OF INVESTMENT IN DEVELOPMENT OF THE INFRASTRUCTURE SECTOR AND NOT FOR THE PERSONS WHO MERELY EXECUTE THE CIVIL CONSTRUCTION WORK OR ANY OTHER WORKS CONTRACT. ACCORDINGLY, IT IS PROPOSED TO CLARIFY THAT THE PROVISIONS OF SECTION 80-IA SHALL NOT APPLY TO A PERSON WHO EXECUTES A WORKS CONTRACT ENTERED INTO WITH THE UNDERTAKING OR ENTERPRISE REFERRED TO IN THE SAID SECTION. THUS, IN A CASE WHERE A PERSON MAKES THE INVESTMENT AND HIMSELF EXECUTES THE DEVELOPMENT WORK, I.E., CARRIES OUT THE CIVIL CONSTRUCTION WORK, HE WILL BE ELIGIBLE FOR TAX BENE FIT UNDER SECTION 80- LA. IN CONTRAST TO THIS, A PERSON ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 71 WHO ENTERS INTO A CONTRACT WITH ANOTHER PERSON (I.E., UNDERTAKING OR ENTERPRISE REFERRED TO IN SECTION 80-IA) FOR EXECUTING WORKS CONTRACT, WILL NOT BE ELIGIBLE FOR TAX BENEFIT UNDER SECTION 80- I A. THIS AMENDMENT WILL TAKE RETROSPECTIVE EFFECT FROM APRIL I, 2000 AND WILL ACCORDINGLY APPLY IN RELATIO N TO THE ASSESSMENT YEAR 2000-01 AND SUBSEQUENT YEARS.' IT IS MADE ABUNDANTLY CLEAR THAT THE PRESCRIPTION OF SECTION 80- IA SHALL NOT APPLY TO A PERSON WHO EXECUTES WORK CONTRACTS ENTERED INTO WITH AN UNDERTAKING OR ENTERPRISE. THUS, IN A CASE WHERE A PERSON WHO MAKES INVESTMENT AND HIMSELF EXECUTES DEVELOPMENT WORKS AND CARRIES OUT CIVIL WORKS, WILL BE ELIGIBLE FOR TAX BENEFIT UNDER SECTI ON 80- IA OF THE ACT. IN CONTRAST TO THIS, A PERSON WH O ENTERS INTO A CONTRACT WITH ANOTHER PERSON FOR EXECUTING WORKS CONTRACT WILL NOT BE ELIGIBLE FOR T HE TAX BENEFIT UNDER SECTION 80-IA OF THE ACT. IN THE PRESENT CASE, WE FIND THAT THE ASSESSEE WAS DOING ONLY CONTRACT WORKS OF IN SITU CEMENT LINING FOR WATER SUPPLY PROJECT OF THE GUJARAT WATER SUPPLY AND SEWERAGE BOARD. AS SUCH, THE BENEFIT OF SECTION 80-IA CANNOT BE EXTENDED TO THE ASSESSEE. THE DECISIONS RELIED UPON BY THE ASSESSEE WERE RENDERED PRIOR TO THE AMENDMENT AND AS SUCH NOT RELEVANT FOR DECIDING THIS ISSUE. WE, THEREFORE, RESTORE THE ORDER OF THE ASSESSING OFFICER AND REVERSE THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS). 11. TO FURTHER ELABORATE THE DISCUSSION ON THIS IS SUE, PARAS 5 & 6 OF THE DECISION OF ITAT PUNE BENCH REND ERED IN THE CASE OF LAXMI CIVIL ENGG. P. LTD VS ADDL. CI T, ORDER DATED 8.6.2011 ARE BEING EXTRACTED HEREIN BELOW: 5. WE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE. THE CONTENTIOUS ISSUES BEFOR E US ARE (I) WHETHER THE CONTRACTOR IS SYNONYMOUS WITH THE DEVELOPER WITHIN THE MEANING OF SECTION 80IA (4)(I) OF THE ACT; (II) WHETHER THE CONDITION PLACED IN CLAUSE (C) IS APPLICABLE TO THE CASE OF A DEVELOPER, WHO IS NOT CARRYING ON BUSINESS OF OPERATING AND MAINTAINING THE INFRASTRUCTURAL FACILITIES. IN OUR OPINION, THE ANSWER TO THESE ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 72 QUESTION ARE PROVIDED BY THE JUDGMENT OF THE BOMBAY HIGH COURT IN THE CASE OF ABG HEAVY ENGG LTD (SUPRA). IN THIS REGARD, WE PERUSED THE ABOVE CITED PARA-22 OF THE SAID JUDGMENT AND FOR THE SAKE OF COMPLETENESS, THE SAID PARAGRAPH IS REPRODUCED AS UNDER:- '22. THE SUBMISSION WHICH WAS URGED ON BEHALF OF THE REVENUE IS THAT CLAUSE (III) OF SUB-SECTION (4A ) OF SECTION 80-LA, ONE OF THE CONDITIONS IMPOSED WAS THAT THE ENTERPRISE MUST START OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY ON OR AFTER 1ST APRIL, 1995. THE SAME REQUIREMENT IS EMBODIED IN SUB CLAUSE (1) OF SUB-CLAUSE (4) OF THE AMENDED PROVISIONS. IT WAS URGED THAT SINCE THE ASSESSEE WAS NOT OPERATING AND MAINTAINING THE FACILITY, HE DID NOT FULFIL THE CONDITION. THE SUBMISSION IS FALLACIOUS BOTH IN FACT AND IN LAW. ' THAT THE ASSESSEE WAS MAINTAINING THE FACILITY IS NOT IN DISPUTE. THE FACILITY WAS COMMENCED AFTER 1S T APRIL, 1995. THEREFORE, THE REQUIREMENT WAS MET IN FACT. MOREOVER, AS A MATTER OF LAW, WHAT THE CONDITION ESSENTIALLY MEANS IS THAT THE INFRASTRUCTURE FACILITY SHOULD HAVE BEEN OPERATIONA L AFTER 1ST APRIL, 1995. AFTER SECTION 80IA WAS AMENDED BY THE FINANCE ACT, 2001, THE SECTION APPLIES TO AN ENTERPRISE CARRYING ON THE BUSINESS O F (I) DEVELOPING; OR (II) OPERATING AND MAINTAINING; OR (III) DEVELOPING, OPERATING AND MAINTAINING ANY INFRASTRUCTURE FACILITY' WHICH FULFILS CERTAIN CONDITIONS. THOSE CONDITIONS ARE (I) OWNERSHIP OF T HE ENTERPRISES BY A COMPANY REGISTERED IN INDIA OR BY A CONSORTIUMS; (II) AN AGREEMENT WITH THE CENTRAL O R STATE GOVERNMENT, LOCAL AUTHORITY OR STATUTORY BODY ; AND (III) THE START OF OPERATION AND MAINTENANCE OF THE INFRASTRUCTURE FACILITY SHOULD COMMENCE AFTER 1 ST APRIL, 1995. THE REQUIREMENT THAT OPERATION AND MAINTENANCE OF THE INFRASTRUCTURE FACILITY SHOULD COMMENCE AFTER 1ST APRIL, 1995 HAS TO BE HARMONIOUSLY CONSTRUED WITH THE MAIN PROVISION UNDER WHICH DEDUCTION IS AVAILABLE TO AN ASSESSEE WHO DEVELOPS OR OPERATES AND MAINTAINS, OR DEVELOPS, OPERATES AND MAINTAINS AN INFRASTRUCTURE FACILITY'. A HARMONIOUS READING OF THE PROVISIONS IN ITS ENTIRETY WOULD LEAD TO THE CONCLUSION THAT THE ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 73 DEDUCTION IS AVAILABLE TO AN ENTERPRISE WHICH (I) DEVELOPS, OR OPERATES AND MAINTAINS; OR (III) DEVELOPS, MAINTAIN AND OPERATES THAT INFRASTRUCTURE FACILITY. HOWEVER, THE COMMENCEMENT OF THE OPERATION AND MAINTENANCE: OF THE INFRASTRUCTURE FACILITY SHOULD BE AFTER 1' APRIL, 1995. IN THE PRE SENT CASE THE ASSESSEE CLEARLY FULFILLED THIS CONDITION '. BEFORE THE AMENDMENT THAT WAS BROUGHT ABOUT BY PARLIAMENT BY FINANCE ACT, 2001 WE HAVE ALREADY NOTED THAT THE CONSISTENT LINE OF CIRCULARS OF THE BOARD POSTULATED THE SAME POSITION. THE AMENDMENT MADE BY PARLIAMENT TO S. 80-IA(4) OF THE ACT, SET THE MATTER BEYOND ANY CONTROVERSY BY STIPULATING THAT THE THREE CONDITIONS FOR DEVELOPMENT, OPERATION AND MAINTENANCE WERE NOT INTENDED TO BE CUMULATIVE IN NATURE 6. THE ABOVE JUDGMENT OF THE HON'BLE HIGH COURT IS DELIVERED IN THE CASE OF ABG HEAVY ENGG LTD (SUPRA), WHO IS A CONTRACTOR FOR THE INP TRUST AND THAT CONTACTOR, ASSESSEE IS FOUND TO BE AN ELIGIBLE DEVELOPER FOR MAKING CLAIM OF DEDUCTION U/S SECTION 80IA (4) OF THE ACT. FROM THE ABOVE, IT IS EVIDENT THAT THE PERSON WHO ONLY DEVELOPS THE INFRASTRUCTURE DO NOT HAVE THE OCCASION TO OPERATE AND MAINTAIN THE INFRASTRUCTURE. IT IS FURTHER EVIDENT THAT THE HARMONIOUS READING IS NECESSARY AND MANDATORY IN VIEW OF HIGH COURT'S JUDGMENT IN THE CASE OF AN ENTERPRISE CARRYING ON BUSINESS OR DEVELOPING WHICH IS THE CASE OF THE ASSESSEE, ALL THE CONDITIONS REFERRED TO CLAUSE (I) OF SECTION 80IA (4) SHOULD R EFER TO THE CONDITIONS AS APPLICABLE TO THE DEVELOPER. I N OTHER WORDS, THE DEVELOPER WHO IS ONLY DEVELOPING THE INFRASTRUCTURE FACILITIES SINCE HE DOES NOT OPERATE AND MAINTAIN INFRASTRUCTURAL FACILITIES, CANNOT BE EXPECTED TO FULFIL THE CONDITION AT SUB CLAUSE ( C) WHICH IS AN IMPOSSIBILITY AND THE REQUIREMENTS TO FULFIL THE SAID CONDITION SHALL AMOUNT TO ABSURDITY AND THEREFORE UNCALLED FOR. THEREFORE, WE FIND REQUIREMENT OF HARMONIOUS READING OF SUB-CLAUSE (C) VIS--VIS OF CLAUSE (I) O F SECTION 80IA (4) OF THE ACT. THUS, THE DISCUSSION I N HIGH COURT'S DECISION IN PARAGRAPH-22 EXTRACTED ABOVE, IS DIRECTLY APPLICABLE TO THE FACTS OF THE C ASE AND EVENTUALLY IS ENTITLED FOR THE DEDUCTION UNDER SECTION 80IA (4) OF THE ACT. ACCORDINGLY, THE MODIF IED ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 74 GROUND, WHICH IS COMMON IN ALL THE FOUR APPEALS IS ALLOWED IN FAVOUR OF THE ASSESSEE. 12. LET US REMIND OURSELVES THAT THE HON'BLE SUPREM E COURT IN THE CASE OF BAJAJ TEMPO LTD VS CIT, 196 IT R 188, HAS ORDAINED THAT TAXING STATUTE GRANTING INCENTIVE S FOR PROMOTING GROWTH AND DEVELOPMENT SHOULD BE LIBERALL Y CONSTRUED. 13. NOW, THE QUESTION ARISES AS TO WHETHER THE TERM CONTRACTOR IS NOT ESSENTIALLY CONTRADICTORY TO TH E TERM DEVELOPER. IN FACT, IN EVERY DEVELOPMENT THE TERM DEVELOPER WILL DEFINITELY BE A WORKS CONTRACTOR BUT EVERY WORKS CONTRACTOR MAY NOT BE A DEVELOPER. A DEVEL OPER IS A SPECIFIC KIND OF WORKS CONTRACTOR TO BE ELIGIBLE FOR DEDUCTION U/S 80IA(4) WHO FULFILS ALL THE CONDITION S NAMELY, IF THE ASSESSEE DEVELOPS THE INFRASTRUCTURE FACILITY IF IT OPERATES THE INFRASTRUCTURE FACILITY AND IF I T MAINTAINS THE INFRASTRUCTURE FACILITY OR TO PUT IT IN SIMPLER TERMS, THE HARMONIOUS READING OF THE PROVISIONS IN ITS ENTIRET Y WOULD LEAD TO THE CONCLUSION THAT THIS DEDUCTION IS AVAIL ABLE TO AN ENTERPRISE WHO DEVELOPS OR OPERATES AND ALSO MAINTAINS; OR DEVELOPS, MAINTAINS AND OPERATES THAT INFRASTRUCTURE FACILITY. THE PROVISION FOR GIVING T HE IMPUGNED INCENTIVES HAS BEEN EXAMINED, RE-EXAMINED, MODIFIED AND AMENDED AFTER GIVING CONSCIOUS AND DELIBERATE DISCUSSIONS BY THE CONCERNED LAW MAKERS. TO OUR GREAT CHAGRIN EVEN AFTER THIS CONSCIOUS EXERCI SE AN ENTITY WHO EXECUTES THE WORKS CONTRACT ENTERED INTO BETWEEN LOCAL AUTHORITY/CENTRAL OR STATE GOVERNMENT AND MAKES A DEVELOPMENT OF AN INFRASTRUCTURE HAS NOT BE EN EXCLUDED FROM THE SCOPE OF THIS PROVISION. AND RIGH TLY SO, BECAUSE WHAT INFRASTRUCTURE IS REQUIRED IN PUBLIC D OMAIN IS THE OUTLOOK/DUTY OF A LOCAL AUTHORITY OR OF A CENTRAL/STATE GOVERNMENT. WHEN A CERTAIN INFRASTRUC TURE IS NEEDED, THE CONCERNED AUTHORITIES HAVE A BROADER PICTURE IN THEIR MIND AIMING AT ACQUIRING CERTAIN F ACILITY FOR WHICH INFRASTRUCTURE DEVELOPMENT IS REQUIRED. SO, T O SAY, WHEN ANY ASSESSEE/ENTERPRISE AGREES UNDER A CONTRAC T TO DEVELOP SUCH AN INFRASTRUCTURE FACILITY, IT CANNOT STRAIGHT AWAY BE DUBBED AS NOT THE BRAINCHILD OF THAT ENTERP RISE, BUT ONLY OF THE AUTHORITY IN QUESTION. THEREFORE, A GAIN THIS PROVISION IN SO FAR AS THE CONDITIONS REQUIRED TO B E FULFILLED TO BE ELIGIBLE FOR THIS INCENTIVE HAD TO BE PROVIDE D BY THE JURIDICAL FORUMS DEALING WITH THIS ISSUE. AFTER IN- DEPTH DELIBERATIONS, DISCUSSIONS AND EXAMINATION OF THESE PROVISIONS, FINALLY, IT HAS BEEN RESOLVED THAT IF A N ENTERPRISE EVEN AFTER ENTERING INTO A CONTRACT WITH A LOCAL ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 75 AUTHORITY OR THE GOVERNMENTS, MAY BE CENTRAL OR STA TE, IN CASE IT CONSTRUCTS THE INFRASTRUCTURE FACILITY, OPE RATES IT AND ALSO MAINTAINS THE SAME, IT WOULD BE ELIGIBLE F OR THIS DEDUCTION. 14. NOW, LET US EXAMINE THE FACTS OF THE GIVEN CASE . IT IS AN UNDENIABLE FACT THAT THE ASSESSEE IS ENGAGED IN THE CIVIL CONSTRUCTION WORK LIKE CONSTRUCTION OF FLYOVE R, BRIDGE UNDERPASS, SEWERAGE, WATER SUPPLY ETC. FOR VARIOUS LOCAL BODIES, RAILWAYS, CENTRAL/STATE GOVERNMENTS. IN FAC T, AS PER THE TERMS OF AGREEMENT, EVEN THE INITIAL PROPOS ALS FORMULATED BY THE DEPARTMENT WHICH ARE STATED TO BE TENTATIVE, THE ASSESSEE HAS THE LIBERTY TO MAKE DIF FERENT PROPOSALS WITHOUT DETRIMENTAL TO THE GENERAL FEATUR ES OF THE DEPARTMENTAL PROPOSAL, LIKE ROAD LEVEL/BOTTOM O F DECK LEVEL, MFL, SILL LEVEL, LINEAR WATER WAY, WIDTH OF THE BRIDGE ETC. RIGHT FROM THE DRAWINGS TO THE WORK OF CONSTRUCTION HAS BEEN DONE BY THIS ASSESSEE AND HAS BORNE THE COST ITSELF. THE COMPANY HAS CONSTRUCTED, DELIVERED AND MAINTAINED AND SECURITY IS ALSO MAINT AINED THEREAFTER. SO, THIS IS A CASE OF TRANSFER OF PROPE RTY IN CHATTEL AND NOT A CONTRACT OF SERVICE. A DEVELOPER AS PER THE ADVANCED LAW LEXICON MEANS A PERSON ENGAGED IN DEVELOPMENT OR OPERATION OR MAINTENANCE OF SPECIAL ECONOMIC ZONE, AND ALSO INCLUDES ANY PERSON AUTHORI ZED FOR SUCH PURPOSE BY ANY SUCH DEVELOPER. IN THE CAS E OF ACIT VS BHARAT UDYOG LTD, F BENCH OF ITAT MUMBAI, HAS CONCLUDED THAT ANY ASSESSEE WHO IS ENGAGED IN DEVELOPING THE INFRASTRUCTURE FACILITY AND ALSO OPE RATING AND MAINTAINING THE SAME, IS ENTITLED TO THE BENEFI T OF DEDUCTION U/S 80IA(4). A COPY OF THIS DECISION IS E NCLOSED AT PAGE 139 OF THE PAPER BOOK. IN THE CASE OF PATEL ENGINEERING LTD VS DY. CIT, 84 TTJ (MUMBAI) 646 [CO PY ENCLOSED AT PAGE NO. 145 OF THE PAPER BOOK], IT HAS BEEN HELD THAT A PERSON, WHO ENTERS INTO A CONTRACT WITH ANOTHER PERSON WILL BE TREATED AS A CONTRACTOR UNDOUBTEDLY; AND THAT ASSESSEE HAVING ENTERED INTO AN AGREEMENT WITH THE GOVERNMENT OF MAHARASHTRA AND AL SO WITH APSEB FOR DEVELOPMENT OF THE INFRASTRUCTURE PR OJECTS, IS OBVIOUSLY A CONTRACTOR BUT DOES NOT DEROGATE TH E ASSESSEE FROM BEING A DEVELOPER AS WELL. THE TERM CONTRACTOR IS NOT NECESSARILY CONTRADICTORY TO TH E TERM DEVELOPER. ON THE OTHER HAND, RATHER SECTION 80IA (4) ITSELF PROVIDES THAT ASSESSEE SHOULD DEVELOP THE INFRASTRU CTURE FACILITY AS PER THE AGREEMENT WITH THE CENTRAL GOVERNMENT, STATE GOVERNMENT OR A LOCAL AUTHORITY. SO, ENTERING INTO A LAWFUL AGREEMENT AND THEREBY BECOMI NG A CONTRACTOR SHOULD IN NO WAY BE A BAR TO THE ONE BEI NG A ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 76 DEVELOPER. THE ASSESSEE HAS DEVELOPED INFRASTRUCT URE FACILITY AS PER THE AGREEMENT WITH MAHARASHTRA GOVERNMENT/APSEB, THEREFORE, MERELY BECAUSE IN THE AGREEMENT FOR DEVELOPMENT OF INFRASTRUCTURE FACILIT Y THE ASSESSEE IS REFERRED TO AS A CONTRACTOR OR BECAUSE SOME BASIC SPECIFICATIONS ARE LAID DOWN, IT DOES NOT DET RACT THE ASSESSEE FROM THE POSITION OF BEING A DEVELOPER; NOR WILL IT DEBAR THE ASSESSEE FROM CLAIMING DEDUCTION U/S 80IA(4). THE FACTS OF THE PRESENT CASE ARE EXACTLY IDENTICAL TO THE FACTS OF THAT CASE RENDERED BY ITAT MUMBAI B ENCH IN WHICH UNDER IDENTICAL FACTS AND CIRCUMSTANCES, T HE ASSESSEE HAS BEEN HELD TO BE ELIGIBLE FOR DEDUCTION U/S 80IA(4). SECTION 80IA(4)(I)(B) REQUIRES DEVELOPMENT OF INFRASTRUCTURE FACILITY AND TRANSFER THEREOF AS PER AGREEMENT AND IT CANNOT BE DISPUTED IN VIEW OF THE MATERIAL ON RECORD THAT THE ASSESSEE HAS TRANSFERRE D THE INFRASTRUCTURE FACILITY DEVELOPED BY IT BY HANDING OVER THE POSSESSION THEREOF TO THE CONCERNED AUTHORITY AS RE QUIRED BY THE AGREEMENT. THE HANDING OVER OF THE POSSESSIO N OF DEVELOPED INFRASTRUCTURE FACILITY/PROJECT IS THE TR ANSFER OF THE INFRASTRUCTURE FACILITY/PROJECT BY THE ASSESSEE TO THE AUTHORITY. THE HANDING OVER OF THE INFRASTRUCTURE FACILITY/PROJECT BY THE DEVELOPER TO THE GOVERNMENT OR AUTHORITY TAKES PLACE AFTER RECOUPMENT OF THE DEVEL OPERS COSTS WHETHER IT BE BT OR BOT OR BOOT BECAUSE IN BOT AND BOOT THIS RECOUPMENT IS BY WAY OF COLLE CTION OF TOLL THERE FROM WHEREAS IN BT IT IS BY WAY OF PERIODICAL PAYMENT BY THE GOVERNMENT/AUTHORITY. THE LAND INVOL VED IN INFRASTRUCTURE FACILITY/PROJECT ALWAYS BELONGS T O THE GOVERNMENT/LOCAL AUTHORITY ETC., WHETHER IT BE THE CASE OF BOT OR BOOT AND IT IS HANDED OVER BY THE GOVERNMENT/AUTHORITY TO THE DEVELOPER FOR DEVELOPME NT OF INFRASTRUCTURE FACILITY/PROJECT. THE SAME HAS BEEN THE POSITION IN THE GIVEN CASE AS WELL. SO, DEDUCTION U /S 80IA(4) IS ALSO AVAILABLE TO THIS ASSESSEE WHICH HA S UNDERTAKEN WORK OF A MERE DEVELOPER. RATHER, THE STATUTORY PROVISION AS CONTAINED IN SECTION 80IA WH ICH PROVIDES FOR DEDUCTION OF INFRASTRUCTURE FACILITY N O WAY PROVIDES THAT ENTIRE INFRASTRUCTURE FACILITY PROJEC T HAS TO BE DEVELOPED BY ONE ENTERPRISE. THUS, AS PER SECTION 8 0IA THE ASSESSEE SHOULD DEVELOP THE INFRASTRUCTURE FACI LITY AS PER THE AGREEMENT WITH THE CENTRAL/STATE GOVERNMENT/LOCAL AUTHORITY. ENTERING INTO A LAWFUL AGREEMENT AND THEREBY BECOMING SHOULD, IN NO WAY BE A BAR TO THE ONE BEING A DEVELOPER. IN THIS REGARD, AS WE HAVE ALREADY STATED, THE DECISION OF ACIT VS BHARAT UDYOG LTD, 118 ITD 336 AND PATEL ENGINEERING LTD VS DY. CIT, 84 TTJ 646, ARE RELEVANT. AS PER CIRCULAR NO. ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 77 4/2010[F.NO. 178/14/2010-ITA-I] DATED 18.5.2010, WIDENING OF EXISTING ROADS CONSTITUTES CREATION OF NEW INFRASTRUCTURE FACILITY FOR THE PURPOSE OF SECTION 80IA(4)(I) . THE ASSESSEE IS NOT REQUIRED TO DEVELOP THE ENTIRE ROAD IN ORDER TO QUALIFY FOR DEDUCTION U/S 80IA AS HAS BEEN HELD BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS ABG HEAVY INDUSTRIES LTD, 322 ITR 323. THE NEWLY INSERTED EXPLANATION 2 TO SECTION 80IA VIDE FINANCE ACT, 2007, DOES NOT APPLY TO A WORKS CONTRACT ENTERED IN TO BY THE GOVERNMENT AND THE ENTERPRISE. IT APPLIES TO A WORK CONTRACT ENTERED INTO BETWEEN THE ENTERPRISE AND OT HER PARTY THE SUB-CONTRACTOR. THE AMENDMENT AIMS AT DENYING DEDUCTION TO THE SUB CONTRACTOR WHO EXECUTE S A WORK CONTRACT WITH THE ENTERPRISE AS HELD BY THE IT AT, JAIPUR A BENCH IN THE CASE OF OM METAL INFRA PROJ ECTS LTD VS CIT-I, JAIPUR, IN I.T.A. NO. 722 & 723/JP/2008 D ATED 31.12.2008. THE RELIANCE BY THE LD. CIT(A) ON THE D ECISION OF ITAT, CHENNAI BENCH IN THE CASE OF ACIT VS INDWE LL LIANINGS PVT. LTD, 313 ITR(AT) 118, HAS BEEN ENLARG ED IN ITS FINDING BY THE ITAT, MUMBAI F BENCH IN ITS DE CISION RENDERED IN THE CASE OF ACIT VS BHARAT UDYOG LTD , BY HOLDING THAT SUCH A DEDUCTION IS ONLY TO BE DENIED TO A SUB-CONTRACTOR AND NOT A MINI CONTRACTOR. SIMILAR V IEW HAS BEEN TAKEN BY THE ITAT CHENNAI BENCH IN THE CASE OF ACIT VS SMT. C. RAJINI (SUPRA) IN WHICH BOTH OF US CONSTITUTED THE BENCH. IN THIS DECISION THE DEFINIT ION AND DIFFERENCE BETWEEN WORKS CONTRACTOR AND A DEVELOPER HAS BEEN EXAMINED IN DETAIL. THE MAIN THRUST OF THE DEC ISION IS THAT A DEVELOPER NEED NOT BE THE OWNER OF THE LAND ON WHICH DEVELOPMENT IS MADE. ALTHOUGH THAT DECISION W AS RENDERED IN THE CONTEXT OF A DEVELOPER OF BUILDINGS AND THE DEDUCTION WAS IN RESPECT OF 80IB(10), BUT THE DEFIN ITION OF DEVELOPER GIVEN IN THAT CASE IS ALSO RELEVANT FOR THIS PURPOSE. MOREOVER, WE ARE IN AGREEMENT THAT IN INCE NTIVE PROVISIONS, THE CONSTRUCTION SHOULD BE LIBERALLY GI VEN AS HELD BY THE HON'BLE SUPREME COURT RENDERED IN THE C ASE OF BAJAJ TEMPO LTD VS CIT, 196 ITR 188. THUS, WHEN THE ASSESSEE MAKES INVESTMENT AND HIMSELF EXECUTES DEVELOPMENT WORK AND CARRIES OUT CIVIL WORKS, HE IS ELIGIBLE FOR TAX BENEFIT U/S 80IA OF THE ACT. ACCOR DINGLY, WITH THE FOREGOING DISCUSSION, WE HOLD THAT THE ASS ESSEE IS ENTITLED TO DEDUCTION U/S 80IA(4) OF THE ACT, AN D THEREFORE, WE ORDER TO DELETE THE ADDITION MADE IN THIS RESPECT. 6. THEREFORE, BY FOLLOWING THE ABOVE ARGUMENTS AND REASONING, WE CONFIRM THE FINDINGS OF THE LD. CIT(A ) AND DO ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 78 NOT FIND ANY VALID MERIT IN THE REVENUES APPEAL. ACCORDINGLY, THE APPEAL STANDS DISMISSED. 39. IN VIEW OF THE ABOVE DISCUSSION, WE ARE INCLINED TO PARTLY ALLOW THE GROUND RELATING TO CLAIMING OF DEDUCTION U/S. 8 0IA.OF THE ACT IN ALL THESE APPEALS. 40. THE NEXT GROUND IN ITA NO. 1171/HYD/2010 IS WITH R EGARD TO DISALLOWANCE OF INTEREST. BRIEF FACTS OF THE ISSUE ARE THAT ASSESSEE HAS MADE AN INVESTMENT IN SUBSIDIARIES AS UNDER: (1) IT SERVE (GLOBAL) (INC) - RS. 46,44,000 (2) SUSHEE HI TECH DEVELOPERS - RS. 58,20,364 (3) ZVS RATNA SUSHEE JV RS. 2,39,390 -------------------- TOTAL RS. 1,07,03,754 ============= 41. THE ASSESSING OFFICER NOTED THAT THE ASSESSEE HAD NOT ADMITTED ANY INTEREST INCOME ON THE LOANS SO ADVANC ED, CONTENDING THAT THOSE WERE INTEREST FREE. ON THE OTHER HAND, THE ASSESSEE HAD DEBITED INTEREST LIABILITY OF RS. 26,30,685 ON BORR OWED FUNDS. EVEN THOUGH THE ASSESSEE WAS REQUIRED TO EXPLAIN AS TO W HY THE INTEREST EXPENDITURE ATTRIBUTABLE TO THE LOANS GIVEN TO SUBS IDIARIES, FREE OF INTEREST, SHOULD NOT BE DISALLOWED, NO EXPLANATION WAS FURNISHED BY THE ASSESSEE. SINCE THE INVESTMENTS WERE OPINED AS MADE WITHOUT ANY BENEFIT, DESPITE THE FACT THAT THE ASSESSEE HAD MADE BORROWINGS AND INCURRED INTEREST EXPENSES, THE ASSESSING OFFIC ER REFERRED TO THE DECISIONS IN THE CASE OF CIT VS. V.I. BABY & CO. (2 54 ITR 248 (KER), AS ALSO CIT VS. H.R. SUGAR FACTORY P. LTD. (187 ITR 36 3) (ALL.) AND DISALLOWED INTEREST ATTRIBUTABLE TO INVESTMENTS OF RS. 13,37,969. ON APPEAL THE CIT(A) CONFIRMED THE ACTION OF THE ASSES SING OFFICER. 42. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE. THE LEARNED AR RELIED ON THE JUDGEMENT OF SUPREME COURT IN THE CAS E OF SA BUILDERS VS. CIT (288 ITR 1) WHEREIN HELD THAT WHEN THE AMOU NT ADVANCED TO THE SISTER CONCERNS FREE OF INTEREST ON ACCOUNT OF COMMERCIAL EXPEDIENCY, INTEREST ON SUCH BORROWINGS IS ALLOWABL E AS BUSINESS EXPENDITURE. HOWEVER, IN THE PRESENT CASE THE ASSE SSEE IS NOT ABLE TO ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 79 EXPLAIN WHAT WERE THE BUSINESS ADVANTAGES ASSESSEE DERIVED FROM THESE INTEREST FREE ADVANCES TO SISTER CONCERNS AND ALSO NOT ABLE TO EXPLAIN WHETHER THE AMOUNT ADVANCED TO SISTER CONCE RN WAS ACTUALLY USED FOR THE BUSINESS PURPOSES OR NOT. IN THESE CI RCUMSTANCES, IT IS NOT POSSIBLE TO US TO BLINDLY FOLLOW THE JUDGEMENT OF SUPREME COURT TO ALLOW THE CLAIM OF THE ASSESSEE. IN OUR OPINION , AS THE ASSESSEE HAS NOT SHOWN THE COMMERCIAL EXPEDIENCY, WE ARE INC LINED TO CONFIRM THE ORDERS OF THE LOWER AUTHORITIES AND REJECT THE GROUND TAKEN BY THE ASSESSEE. 43. THE NEXT GROUND IN ITA NO. 1171 IS WITH REGARD TO C ONFIRMING THE ACTION OF THE ASSESSING OFFICER IN APPLYING THE PROVISIONS OF SECTION 40A(3) OF THE IT ACT. IT WAS FOUND BY THE ASSESSING OFFICER THAT THE ASSESSEE MADE A CASH PAYMENT OF RS. 3,53,5 70 ON VARIOUS DATES IN EXCESS OF RS. 20,000. ACCORDINGLY, THE AS SESSING OFFICER INVOKED THE PROVISIONS OF SECTION 40A(3) DISALLOWIN G 20% OF THE ABOVE PAYMENT WHICH WORKS OUT AT RS. 70,714. THE CIT(A) CONFIRMED THE DISALLOWANCE AS THE ASSESSEE HAS NOT SHOWN ANY REAS ONABLE CAUSE FOR MAKING CASH PAYMENT IN EXCEEDING RS. 20,000. A GAINST THE ASSESSEE IS IN APPEAL BEFORE US. 44. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. EVEN BEFORE THE ASSESSEE COULD NOT SHOW AN Y REASONABLE CAUSE FOR MAKING THE CASH PAYMENT EXCEEDING RS. 20, 000. THE ASSESSEE ALSO NOT BROUGHT ON RECORD ANY EXCEPTIONS TO MAKE CASH PAYMENTS AS PROVIDED IN RULE 6DD OF IT RULES, 1962. IN THESE CIRCUMSTANCES, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) AND THE SAME IS CONFIRMED ON THIS ISSUE. 45. THE NEXT GROUND IN ITA NO. 269/HYD/09 IS WITH REGAR D TO DISALLOWANCE OF PROPERTY TAX PAID BY THE COMPANY, T HOUGH THE PROPERTY TAX PAID ON THE PROPERTY WHICH WAS PROVIDE D AS A COLLATERAL SECURITY TO THE STATE BANK OF INDIA FOR OBTAINING T HE LOAN AND IT WAS NECESSARY FOR THE ASSESSEE TO INCUR SUCH EXPENDITUR E SO AS TO RETAIN ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 80 THE SECURITY PROVIDED BY SHRI K. ANIL REDDY AND SHR I RAMAKRISHNA REDDY. 46. WE HAVE HEARD BOTH PARTIES AND PERUSED THE MATERIAL ON RECORD. ADMITTEDLY, THE PROPERTY ON WHICH THE PROP ERTY TAX WAS PAID WAS NOT OWNED BY THE ASSESSEE. THE LIABILITY OF PA YMENT OF PROPERTY TAX ON THE PROPERTY IS ON THE OWNER OF THE PROPERTY AND NOT ON ANY OTHER PERSON. IN VIEW OF THIS, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A) AND THE SAME IS CONFIRMED. 47. THE NEXT GROUND IN ITA NO. 269/HYD/09 IS WITH REGAR D TO DISALLOWANCE OF EXPENDITURE OF RS. 1,89,250 INCURRE D ON INCREASING THE SHARE CAPITAL. ALTERNATIVELY, THE ASSESSEE CLA IMED TO ALLOW THIS EXPENDITURE AS A DEDUCTION U/S. 35D OF THE IT ACT. 48. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE. THIS ISSUE IS SQUARELY COVERED AGAINST THE ASSESSEE BY THE JUDGEM ENT OF THE SUPREME COURT IN THE CASE OF BROOKE BOND INDIA LTD. VS. CIT, 225 ITR 798 (SC) WHEREIN HELD THAT EXPENDITURE INCURRED BY A COMPANY IN CONNECTION WITH THE ISSUE OF SHARES WITH A VIEW TO INCREASE ITS SHARE CAPITAL, IS DIRECTLY RELATED TO THE EXPANSION OF THE CAPITAL BASE OF THE COMPANY, AND IS CAPITAL EXPENDITURE, EVEN TH OUGH IT MAY INCIDENTALLY HELP IN THE BUSINESS OF THE COMPANY AN D IN THE PROFIT MAKING. IN VIEW OF THIS JUDGEMENT, WE DISMISS THE GROUND TAKEN BY THE ASSESSEE. 49. IN THE RESULT, THE APPEALS OF THE ASSESSEE ARE PART LY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH MARCH, 2012. SD/- (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED THE 16 TH MARCH, 2012 ITA NO. 1171/HYD/2010 & ORS M/S. SUSHEE HITECH CONSTRUCTIONS PVT. LTD. ================================= 81 COPY FORWARDED TO: 1. M/S. SUSHEE HI TECH CONSTRUCTIONS PVT. LTD., PLO T NO. 246/A, MLA COLONY, ROAD NO. 12, BANJARA HILLS, HYDERABAD-5 00 034. 2. M/S. SUSHEE HI TECH CONSTRUCTIONS PVT. LTD., C/O . SRI S. RAMA RAO, ADVOCATE, SHRIYA'S ELEGANCE, D. NO. 3-6-643, S T. NO. 9, HIMAYATNAGAR, HYDERABAD 2. DY. COMMISSIONER OF INCOME-TAX, CIRCLE-3(2), HYD ERABAD. 3. THE CIT(A)-IV, HYDERABAD. 4. THE CIT-III, HYDERABAD 5. THE DR B BENCH, ITAT, HYDERABAD TPRAO
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