Pratibha Cons. Engg. Contractors(I) P.Ltd., Kolhapur V. ACIT, Cir. 2, Kolhapur

ITA 118/PUN/2008

• Counselvise Citation: 11824514 RSA 2008
• Duration Of Justice: 3 year(s) 8 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 27-09-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 28-07-2011
• Assessment Year: 2003-2004
• Appeal Filed On: 16-01-2008
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: S K AMBASTHA

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI I C SUDHIR, JUDICIAL MEMBER AND SHRI G.S. PANNU, ACCOUNTANT MEMBER S.NO ITA NO ASSTT. YEAR 1 118/PN/08 2003-04 2 119/PN/08 2004-05 3 932/PN/08 2005-06 4 278/PN/10 2006-07 M/S PRATIBHA CONSTRUCTION & ENGINEERS (I) P. LTD., .. APPELLANT BLOCK NO 2, SHILPA APARTMENTS, 261-E TARABAI PARK, KOLHAPUR VS. ASSTT. COMMISSIONER OF INCOME-TAX, .. RESPONDENT CIR. 2, KOLHAPUR APPELLANT BY: SHRI M K KULKARNI RESPONDENT BY: SHRI S K AM BASTHA ORDER PER G.S. PANNU, AM THE CAPTIONED APPEALS RELATE TO SAME ASSESSEE AND INVOLVE A COMMON ISSUE AND, THEREFORE, THEY WERE HEARD TOGETHER AND A CONSOLIDATED ORDER IS BEING PASSED FOR THE SAKE OF CONVENIENCE AND BREVITY. 2. THE CAPTIONED FOUR APPEALS ARISE OUT OF SEPARATE OR DERS OF THE COMMISSIONER OF INCOME-TAX (APPEALS) KOLHAPUR WHICH IN TURN HAVE ARISEN FROM THE ORDERS OF THE ASSESSING OFFICER PASSED UNDER SECTION 14 3(3) OF THE INCOME- TAX ACT, 1961 (IN SHORT THE ACT), PERTAINING TO THE ASSESSMENT YEARS 2003-04 TO 2006-07. 3. IN ALL THESE APPEALS THE SOLITARY DISPUTE REVOLVES AR OUND THE CLAIM OF THE ASSESSEE FOR DEDUCTION UNDER SECTION 80IA OF THE ACT, WHICH HAS SINCE BEEN DISALLOWED BY THE LOWER AUTHORITIES. ALTHOUGH THE ASSESSE E HAS RAISED MULTIPLE GROUNDS OF APPEAL AND ALSO ADDITIONAL GROUNDS OF APP EAL, HOWEVER, THE 2 ASSESSEE HAS CONCISED THE GROUNDS IN THE FORM OF A MODIFIED GROUND OF APPEAL, WHICH READS AS UNDER: 1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E AND IN LAW, THE LD AUTHORITIES BELOW WERE NOT JUSTIFIED IN REJECTING THE CLAIM OF DEDUCT ION OF THE APPELLANT COMPANY U/S 80IA HOLDING THAT THE APPELLANT WAS A CONTRACTOR AND ALS O HOLDING THAT ALL THE THREE CONDITIONS EMBODIED IN S. 80IA(4)(I) WERE REQUIRED TO BE SIMUL TANEOUSLY FULFILLED WHEN HONBLE BOMBAY HIGH COURT IN ITS SUBSEQUENT JUDGMENT PRONOU NCED ON 15.2.2010 IN THE CASE OF ABG HEAVY ENGG. LTD. (SUPRA) HELD THAT THE AMENDED PROVISIONS EFFECTIVE FROM 1.4.2002 THE PARLIAMENT DID NOT INTEND THAT SUCH CONDITIONS SHOULD BE SIMULTANEOUSLY FULFILLED. IT ALSO HELD THAT THE THIRD CONDITION ALSO WAS REQUIRE D TO BE HARMONIOUSLY CONSTRUED. SINCE THE LD CIT (A) HELD THAT THE APPELLANT COMPANY HAS FULFILLED FIRST TWO CONDITIONS AND FAILED TO FULFILL THE THIRD CONDITION FOR DENIAL OF DEDUCT ION U/S 80IA OF THE ACT, IT WAS NOT ACCORDING TO JURISDICTIONAL HIGH COURT JUDGMENT (SUPRA) AND T HEREFORE, DEDUCTION BE ALLOWED TO THE APPELLANT COMPANY . 4. THE LEARNED COUNSEL FOR THE ASSESSEE, AT THE OUTSET, SUBMITTED THAT THE OBJECTION RAISED BY THE REVENUE TO THE ASSESSEES CLAIM FO R DEDUCTION UNDER SECTION 80IA(4) OF THE ACT HAS SINCE BEEN SETTLED BY THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V ABG HEAVY ENG INEERING LTD. REPORTED IN 37 DTR 233 (BOM). PRIMARILY, THE OBJECTION OF THE D EPARTMENT IS THAT THE ASSESSEE IS NOT A DEVELOPER WITHIN THE MEANING OF SECTIO N 80IA, BUT IS MERELY A CONTRACTOR EMPLOYED BY THE RESPECTIVE GOVERNMENT TO WORK A PRE-IDENTIFIED WORK. ON THIS ASPECT, THE LEARNED COUNSEL POINTED OUT THAT THE HONBLE BOMBAY HIGH COURT IN THE CASE OF ABG HEAVY ENGG. LTD., (SUPR A) HAS CONSIDERED THE AMENDMENT MADE TO SECTION 80IA(4) WITH EFFECT FROM 1.4 .2002 AND IN TERMS THEREOF EVEN A CONTRACTOR EMPLOYED BY THE GOVERNMEN T OR GOVERNMENT UNDERTAKINGS ARE ENTITLED FOR DEDUCTION UNDER SECTION 80 IA(4) OF THE ACT. THE LEARNED COUNSEL POINTED OUT THAT THE ASSESSEE BEING A CO NTRACTOR-CUM-DEVELOPER IS ELIGIBLE FOR DEDUCTION IN THAT CAPACITY EVEN IF THE ASSESSEE HAS NOTHING TO DO WITH OPERATING AND MAINTAINING THE INFRASTRUCTURE BUI LT BY IT IN TERMS OF A CONTRACT. IT WAS, THEREFORE, SUBMITTED THAT THE ASSESSEE QUALIFIE S FOR DEDUCTION IN VIEW OF SECTION 80IA(4)(I) AND THE SAME IS INDEPENDENT OF THE CO NDITION AT SUB-CLAUSE (C) OF SECTION 80IA(4)(I) AND IN SUPPORT OF THIS LOGIC, R ELIANCE IS SPECIFICALLY PLACED ON THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN TH E CASE OF ABG HEAVY ENGG. LTD. (SUPRA). 3 5. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPR ESENTATIVE, APPEARING FOR THE REVENUE, HAS REFERRED TO THE ORDERS OF THE AU THORITIES BELOW, IN PARTICULAR THE ASSESSMENT ORDER TO POINT OUT THAT THE ASSESSEE WAS IN THE BUSINESS OF CIVIL CONSTRUCTION AND ACTED ONLY AS A CONTRACTOR. IT IS SUBMITT ED THAT THE ONLY INCOME ARISING IS PROFIT OUT OF A CONTRACT, WHEREAS FOR A D EVELOPER ENVISAGED UNDER SECTION 80IA, THE INCOME SHOULD ARISE FROM THE ASSET BEI NG DEVELOPED AFTER BRINGING IT INTO EXISTENCE. HE POINTED OUT THAT SO F AR AS A CONTRACTOR IS CONCERNED, ENTITLEMENT TO INCOME IS PAYMENT FROM THE PRINCIPAL EM PLOYER AND HAS NOTHING TO DO WITH THE ASSET PER SE OR ITS EXPLOITATION. THE ASSE SSEE IS A CONTRACTOR EMPLOYED BY THE RESPECTIVE GOVERNMENT TO UNDERTAKE A P RE-IDENTIFIED WORK AND CANNOT BE CALLED A DEVELOPER OF A INFRASTRUCTURE FA CILITY IN TERMS OF SECTION 80IA(4) OF THE ACT. IN PARTICULAR, REFERENCE HAS BEEN I NVITED TO PARA 16.13 OF THE ASSESSMENT ORDER FOR THE ASSESSMENT YEAR 2004-05, WHICH SUMM ARIZES THE STAND OF THE REVENUE AS UNDER: COMING TO THE CLAIM OF THE PRESENT ASSESSEE, IN RE AL TERMS THE ASSESSEE IS A CONTRACTOR EMPLOYED BY THE RESPECTIVE GOVERNMENT TO UNDERTAKE A PRE-IDENTIFIED WORK. THEREFORE, IF IN PROPER SENSE OF THE TERM, ANYONE CAN BE SAID TO BE DEVELOPER IS THE GOVERNMENT ITSELF WHICH IS DEVELOPING THE ASSET AND HAD INHERENT RIGH T OF OPERATING AND MAINTAINING THE SAME. THE ASSESSEE IS ONLY ONE CONTRACTOR EMPLOYED TO UNDERTAKE THE CONSTRUCTION WORK AND THEREFORE IT HAD NO RIGHT OF THE TYPE WHICH A D EVELOPER NORMALLY HAS. IF THE LOGIC GIVEN BY THE ASSESSEE IS EXTENDED, THEN ALL HE SUB CONTRA CTORS CAN ALSO SIMILARLY BE TERMED AS DEVELOPERS. BECAUSE INITIALLY THEY APPLY THEIR LABO UR AND RESOURCES AND THEREAFTER THEY ARE PAID BY THE CONTRACTOR. THE LOGIC GIVEN BY THE ASSESSEE TO ADVANCE ITS CLAIM OF BEING DEVELOPER OF INFRASTRUCTURE FACILITY IS, THEREFORE, UNACCEPTABLE AND REJECTED. THE ASSESSEE IS ONLY A CONTRACTOR. THE RESPECTIVE GOVERNMENT WHI CH HAS GIVEN THEM THE CONTRACT IS THE DEVELOPER OF THE PROJECT. ASSESSEE ALSO DOES NOT S ATISFY CONDITION MENTIONED IN CLAUSE C OF SECTION 80IA(4) AND NON-COMPLIANCE WITH THIS MANDATORY PROVISION BY THE ASSESSEE DISENTITLES IT FOR ANY DEDUCTION U/S 80IA. ACCORDIN GLY, ASSESSEES CLAIM U/S 80IA OF THE ACT TO THE EXTENT OF RS 41,48,000/- IS REJECTED . 6. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSIONS, PE RUSED THE ORDERS OF THE AUTHORITIES BELOW AS ALSO THE AUTHORITIES CITED AT B AR. THE CRUX OF THE CONTROVERSY REVOLVES AROUND SECTION 80IA(4)(I) WHICH REA DS AS UNDER: 801A(4)(I): ANY ENTERPRISE CARRYING ON THE BUSINES S OF (I) DEVELOPING OR (II) OPERATING AND MAINTAINING OR (III) DEVELOPING, OPERATING AND MAIN TAINING ANY INFRASTRUCTURE FACILITY WHICH FULFILS ALL THE FOLLOWING CONDITIONS, NAMELY:- (A) IT IS OWNED BY A COMPANY REGISTERED IN INDIA OR BY A CONSORTIUM OF SUCH COMPANIES OR BY AN AUTHORITY OR A BOARD OR A CORPORATION OR ANY OTHER BODY ESTABLISHED OR CONSTITUTED UNDER ANY CENTRAL OR STATE ACT; 4 (B) IT HAS ENTERED INTO AN AGREEMENT WITH THE CENTR AL GOVERNMENT OR A STATE GOVERNMENT OR A LOCAL AUTHORITY OR ANY OTHER STATUT ORY BODY FOR (I) DEVELOPING OR 9II) OPERATING AND MAINTAINING OR (III) DEVELOPING, OPER ATING AND MAINTAINING NEW INFRASTRUCTURE FACILITY; (C) IT HAS STARTED OR STARTS OPERATING AND MAINTAIN ING THE INFRASTRUCTURE FACILITY ON OR AFTER THE 1 ST DAY OF APRIL, 1995: PROVIDED THAT WHERE AN INFRASTRUCTURE FACILITY IS T RANSFERRED ON OR AFTER THE 1 ST DAY OF APRIL, 1999 BY AN ENTERPRISE WHICH DEVELOPED SUCH I NFRASTRUCTURE FACILITY (HEREAFTER REFERRED TO IN THIS SECTION AS THE TRANSFEROR ENTER PRISE) TO ANOTHER ENTERPRISE (HEREAFTER IN THIS SECTION REFERRED TO AS THE TRANSFEREE ENTER PRISE) FOR THE PURPOSE OF OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY ON ITS BEHALF IN ACCORDANCE WITH THE AGREEMENT WITH THE CENTRAL GOVERNMENT, STATE GOVER NMENT, LOCAL AUTHORITY OR STATUTORY BODY, THE PROVISIONS OF THIS SECTION SHAL L APPLY TO THE TRANSFEREE ENTERPRISE AS IF IT WERE THE ENTERPRISE TO WHICH THIS CLAUSE A PPLIES AND THE DEDUCTION FROM PROFITS AND GAINS WOULD BE AVAILABLE TO SUCH TRANSFEREE ENT ERPRISE FOR THE UNEXPIRED PERIOD DURING WHICH THE TRANSFEROR ENTERPRISE WOULD HAVE B EEN ENTITLED TO THE DEDUCTION, IF THE TRANSFER HAD NOT TAKEN PLACE. THE CLAIM OF THE REVENUE IS THAT THE ASSESSEE HAS ACTED ON LY AS A CONTRACTOR WHO HAS BEEN AWARDED A WORK BY A GOVERNMENT AGENCY AND , THEREFORE, IT CANNOT BE SEEN AS CARRYING ON THE BUSINESS OF DEVELOPING AS ENV ISAGED UNDER SECTION 80IA(4) OF THE ACT. IN SUPPORT, THE CLAIM OF THE REVEN UE IS THAT THE ASSESSEE IS NEITHER OPERATING AND MAINTAINING INFRASTRUCTURE FACIL ITY AND NOR HAS THE RIGHT TO UNDERTAKE THE OPERATION AND MAINTENANCE AND, THEREFO RE, IT DOES NOT QUALIFY FOR THE DEDUCTION. THE ARGUMENT IS FURTHER SUPPORTED BY SUB -CLAUSE (C) OF SECTION 80IA(4)(I) WHICH ENVISAGES THAT THE ASSESSEE IS TO START OP ERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY ON OR AFTER 1 .4.1995. 7. TO OUR MIND, THE CONTROVERSY RAISED BY THE REVENUE HAS BEEN SQUARELY ADDRESSED BY THE JUDGMENT OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF ABG HEAVY ENGG. LTD. (SUPRA) AND THE FOLLOWING PORTI ON OF THE JUDGMENT IS WORTHY OF NOTICE: 22 THE SUBMISSION WHICH WAS URGED ON BEHALF OF THE REVENUE IS THAT UNDER CLAUSE (III) OF SUB-SECTION (4) OF SECTION 80IA, ONE OF TH E CONDITIONS IMPOSED WAS THAT THE ENTERPRISE MUST START OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY ON OR AFTER 1 ST APRIL, 1995. THE SAME REQUIREMENT IS EMBODIED IN SU B-CLAUSE (1)OF SUB-CLAUSE (4) OF THE AMENDED PROVISIONS. IT WAS URGED THAT SINCE THE ASS ESSEE WAS NOT OPERATING AND MAINTAINING THE FACILITY, HE DID NOT FULFILL THE CO NDITION. THE SUBMISSION IS FALLACIOUS BOTH IN FACT AND IN LAW. THAT THE ASSESSEE WAS MAINTAINING THE FACILITY IS N OT IN DISPUTE. THE FACILITY WAS COMMENCED AFTER 1 ST 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 OPERATIONAL AFTER 1 ST APRIL, 1995. AFTER SECTION 80-IA WAS AMENDED BY 5 THE FINANCE ACT, 2001, THE SECTION APPLIES TO AN EN TERPRISE CARRYING ON THE BUSINESS OF (1) DEVELOPING; OR (II) OPERATING AND MAINTAINING; OR ( III) DEVELOPING, OPERATING AND MAINTAINING ANY INFRASTRUCTURE FACILITY WHICH FULFI LLS CERTAIN CONDITIONS. THOSE CONDITIONS ARE (1) OWNERSHIP OF THE ENTERPRISES BY A COMPANY R EGISTERED IN INDIA OR BY A CONSORTIUMS; (II) AN AGREEMENT WITH THE CENTRAL OR STATE GOVERNMENT, LOCAL AUTHORITY OR STATUTORY BODY; AND (III) THE START OF OPERATION AN D MAINTENANCE OF THE INFRASTRUCTURE FACILITY SHOULD COMMENCE AFTER 1 ST APRIL, 1995. THE REQUIREMENT THAT OPERATION AND MAINTENANCE OF THE INFRASTRUCTURE FACILITY SHOULD C OMMENCE AFTER 1 ST APRIL, 1995 HAS TO BE HARMONIOUSLY CONSTRUED WITH THE MAIN PROVISION UNDE R 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 ENTIR ETY WOULD LEAD TO THE CONCLUSION THAT THE DEDUCTION IS AVAILABLE TO AN ENTERPRISE WHICH ( I) DEVELOPS; OR OPERATES AND MAINTAINS; OR (III) DEVELOPS, MAINTAINS AND OPERATES THAT INFR ASTRUCTURE FACILITY. HOWEVER, THE COMMENCEMENT OF THE OPERATION AND MAINTENANCE OF TH E INFRASTRUCTURE FACILITY SHOULD BE AFTER 1 ST APRIL, 1995. IN THE PRESENT CASE THE ASSESSEE CLEA RLY FULFILLED THIS CONDITION. BEFORE THE AMENDMENT THAT WAS BROUGHT ABOUT BY PARL IAMENT BY FINANCE ACT, 2001 WE HAVE ALREADY NOTED THAT THE CONSISTENT LINE OF CIRC ULAR 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 THRE E CONDITIONS FOR DEVELOPMENT, OPERATION AND MAINTENANCE WERE NOT INTENDED TO BE C UMULATIVE IN NATURE. (UNDERLINED FOR EMPHASIS BY US) 8. NOTABLY, EVEN IN THE CASE BEFORE THE HIGH COURT, THE ASSESSEE ACTED AS A CONTRACTOR FOR GOVERNMENT AGENCY AND WAS HELD ELIGIBLE FOR THE PURPOSES OF CLAIM OF DEDUCTION UNDER SECTION 80IA(4) OF THE ACT. AS PER T HE LEGAL POSITION OPINED BY THE HONBLE HIGH COURT, IT IS EVIDENT THAT AN ASSESSEE WHO ONLY DEVELOPS INFRASTRUCTURE FACILITY (EVEN AS A CONTRACTOR) BUT DOES N OT HAVE AN OCCASION TO OPERATE AND MAINTAIN IS ALSO ELIGIBLE FOR CLAIM OF DED UCTION UNDER SECTION 80IA(4) OF THE ACT AND THE HONBLE HIGH COURT HAS EXPLAINED T HAT QUA SUCH A PERSON THE CONDITION STATED IN SUB-CLAUSE (C) OF SECTION 80IA(4)(I) H AS TO BE READ HARMONIOUSLY WITH THE MAIN PROVISION UNDER WHICH DEDUCT ION IS AVAILABLE TO AN ASSESSEE, WHO DEVELOPS; OR OPERATES AND MAINTAINS; OR DE VELOPS, MAINTAINS AND OPERATES AN INFRASTRUCTURE FACILITY. IN OTHER WORDS, AS O PINED BY THE HONBLE HIGH COURT, A DEVELOPER WHO ONLY DEVELOPS (I.E. CONSTRUCTS) AN INFRASTRUCTURE FACILITY AND IS NOT ENVISAGED TO OPERATE AND MAINTAIN SUCH FACIL ITY, CANNOT BE EXPECTED TO FULFIL THE CONDITION IN CLAUSE (C) OF SECTION 80IA(4) SINCE IT WOULD BE AN IMPOSSIBILITY. THEREFORE, IN VIEW OF THE CONSTRUCTION P LACED BY THE HONBLE BOMBAY HIGH COURT ON THE REQUIREMENTS OF CLAUSE (C) OF SECTION 80IA(4)(I), REQUIRING IT TO BE HARMONIOUSLY READ WITH THE MAIN CL AUSE OF SECTION 80IA(4)(I), WE 6 FIND THAT THE OBJECTION RAISED BY THE REVENUE IN THE PRESENT CASE IS DEVOID OF MERITS. THE REASONING ENUNCIATED BY THE HONBLE BOMBAY HIGH COURT AS EXTRACTED ABOVE FULLY ANSWERS THE CONTROVERSY RAISED BY T HE REVENUE IN THE PRESENT CASE AND, THEREFORE, WE FIND THAT THE ASSESSEE H AS TO SUCCEED IN THIS APPEAL IN THE PRESENT CASE. ACCORDINGLY, THE GROUND OF APPEAL RAISED BEFORE US AND WHICH IS COMMON IN ALL THE YEARS IS ADJUDICATED IN FA VOUR OF THE ASSESSEE. 9. RESULTANTLY, THE CAPTIONED APPEALS OF THE ASSESSEE ARE ALLOWED. DECISION PRONOUNCED IN THE OPEN COURT ON THIS 27 TH DAY OF SEPTEMBER, 2011. SD/- SD/- (I C SUDHIR) JUDICIAL MEMBER (G.S. PANNU) ACCOUNTANT MEMBER PUNE: DATED: 27 TH SEPTEMBER, 2011 B COPY OF THE ORDER IS FORWARDED TO : 1. APPELLANT 2. RESPONDENT 3. THE CIT (A), KOLHAPUR 4. THE CIT-I/II, KOLHAPUR 4. THE D.R, A BENCH, PUNE 5. GUARD FILE TRUE COPY BY ORDER ASSISTANT REGISTRAR, ITAT, PUNE BENCHES, PUNE