ARSS HCIL Consortium, Bhubaneswar V. ACIT, Circle-2(1), Bhubaneswar, Bhubaneswar

ITA 120/CTK/2013

• Counselvise Citation: [2014] 140 COUNSELVISE.COM (IT) 81454 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 7 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 17-10-2014
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Next Hearing Date: 15-10-2014
• Assessment Year: 2008-2009
• Appeal Filed On: 22-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: K AJAY KUMAR
• Assessee Lawyers: K K AGARWAL
• Keywords: Retrospective amendment
• Section: 194C; 263

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH , CUTTACK BEFORE S/SHRI S.V.MEHROTRA (AM) AND GEORGE MATHAN (JM) I.T.A. NO. 120/CTK/2013 ASSESSMENT YEAR: 2008-09 ARSS HCIL CONSORTIUM PLOT NO.38, SECTOR-A, ZONE-D, MANCHESWAR INDUSTRIAL ESTATE, BHUBANESWAR PA NO.AAOFA 4560 D VS ACIT, CIRCLE - 2( 1), BHUBANESWAR. APPELLANT RESPONDENT FOR THE APPELLANT: SHRI K.K.AGARWAL FOR THE RESPONDENT: SHRI K.AJAY KUMAR DATE OF HEARING: 15/10/.2014 DATE OF PRONOUNCEMENT: 17 /10/2014 ORDER PER S.V.MEHROTRA, AM THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAIN ST ORDER DATED 10.12.2012 OF LD CIT(A), CUTTACK FOR THE ASSESSMENT YEAR 2008-09. 2. GROUNDS RAISED BY THE ASSESSEE READ AS UNDER: 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ORDER PASSED BY THE LD. CIT(A) IS ARBITRARY, EXCESSIVE AND BAD IS LAW. 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) IS ERRED IN CONFIRMING THE DISALLOWANCE MADE BY THE LD. A.O. AM OUNTING TO RS.59,399/- WITH REGARD TO THE DEDUCTION CLAIMED BY THE APPELLANT U/S 80IA (4) OF THE INCOME TAX ACT' 1961. 3. ON THE FACTS AND CIRCUMSTANCES, THE LD. CIT (A) IS NOT JUSTIFIED IN NOT ACCEPTING THE RATIO OF THE DECISION OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF SPECIAL CIVIL APPLICATION NO. 7926 OF 2 006 FOR AVANI EXPORTS 2 AND OTHERS VS. COMMISSIONER OF INCOME TAX, RAJKOT & OTHERS, WITH REGARD TO THE RETROSPECTIVE AMENDMENTS WHICH IS FOU ND THAT THE SAME SHOULD NOT BE DETRIMENTAL TO THE ASSESSEE. 4. ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE LD. CIT(A) OUGHT NOT TO HAVE CONFIRMED THE ORDER OF THE LD. A.O. WITHOUT CO NSIDERING THE GENUINE AND LEGITIMATE CLAIM OF DEDUCTION U/S 80IA( 4) OF THE APPELLANT. 3. THE ASSESSING OFFICER DENIED THE DEDUCTION OF R S.59,399/- CLAIMED BY THE ASSESSEE UNDER SECTION 80-IA BEING 100% OF THE INCOME DERIVE D FROM RECEIPT ON ACCOUNT OF INFRASTRUCTURAL DEVELOPMENT IN VIEW OF EXPLANATION INSERTED BELOW SECTION 80IA OBSERVING AS UNDER: THE ASSESSEE IS A JOINT VENTURE ENTITY ENGAGED IN THE BUSINESS OF WORK CONTRACT. IT ITS RETURN FOR THE ASSESSMENT YEAR THE ASSESSEE HAS SHO WED RS. 1,188/- AS ITS INCOME AFTER CLAIMING DEDUCTION U/S 80IA FOR RS. 59,399/-. HOWEVER, THE EXPLANATION BELOW SECTION 80IA SAYS T HAT ' FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED TH AT NOTHING CONTAINED IN THIS SECTION SHALL APPLY IN RELATION TO A BUSINESS REFER RED TO IN SUB-SECTION(4) WHICH IS IN THE NATURE OF A WORK CONTRACT AWARDED BY ANY PERSON (INCLUDING THE CENTRAL AND STATE GOVERNMENT) AND EXECUTED BY THE UNDERTAKING O R ENTERPRISE REFERRED TO IN SUB-SECTION (I). THE SAID PROVISION CLEARLY SUGGESTS THAT IF AN UNDERTAKING OR ENTERPRISE(ASSESSEE) IS INVOLVED IN THE BUSINESS OF WORK CONTRACT AWARDED BY ANY PERSON INCLUDING CENTRAL AND STATE GOVERNMENT, THEN IT WIL L NOT BE ELIGIBLE FOR DEDUCTION U/S 80IA. IN OTHER WORDS, A PERSON WHO ENTERS INTO A CO NTRACT WITH ANOTHER PERSON FOR EXECUTING WORKS CONTACT WILL NOT BE ELIGIBLE FOR TA X BENEFITS U/S 80IA OF THE INCOME TAX ACT, 1961, EVEN IF THE WORK ITSELF IS IN THE NATURE OF INFRASTRUCTURAL DEVELOPMENT. TO GET THE BENEFIT OF THAT SECTION, THE PERSON SHOULD EXEC UTE THE WORKS HIMSELF DEVOTING HIS OWN RESOURCES AND BEARING ALL THE BUSINESS RISKS IN VOLVED RATHER THAN DO THE WORK AT SOMEBODY'S BEHALF MERELY IN A CONTRACTUAL BASIS. IN THE INSTANT CASE IT IS FOUND THAT THE ASSESSEE IS EXECUTING WORK FOR A, PRINCIPAL ON A CO NTRACTUAL BASIS RATHER THAN WORKING ON ITS OWN THEREFORE, THE CLAIM OF THE ASSESSEE U/S 80IA IS DISALLOWED AND ADDED TO THE TOTAL INCOME. 4. LD CIT (A) CONFIRMED THE ACTION OF THE AO, INTE R ALIA, OBSERVING AS UNDER: 3 I HAVE CAREFULLY GONE THROUGH THE WRITTEN SUBMISS ION AND CONTENTS HAVE BEEN ANALYSED VIS-A-VIS THE FACTS OF THE CASE. THE OBJECTION IS PURELY LEGAL/TECHNICAL WHICH CAN BE SUMARISED AS UNDER. (A) THE NEWLY INSERTED EXPLANATION BELOW SEC.80(1A) (13) IS CONTRARY TO THE MAIN PROVISION OF THE ACT AND THE EXPLANATION CANNOT OVE R RIDE A MAIN SECTION OF THE ACT. THEREFORE, THE EXPLANATION IS ULTRA VIRES. A/R CITED THE CASE OF S. SUNDARAM PILLAI 8T OTHERS REPORTED IN AIR 1985 (SC) 582. (B)THE EXPLANATION HAS BEEN MADE RETROSPECTIVE IN O PERATION W.E.F. 01.04.2000. A SIMILAR RETROSPECTIVE AMENDMENT IN THE PROVISO NO .3 8 L 4 OF SEC.80HHC WAS QUASHED BY GUJRAT HIGH COURT IN THE CASE OF AVA NI EXPORTS & OTHERS VS. CIT. THEREFORE, AN AMENDMENT IS TO BE APPLIED RETRO SPECTIVELY ONLY WHEN IT IS BENEFICIAL TO THE ASSESSEE. 4. THE CONTENTIONS OF THE APPELLANT REGARDING THE A MENDMENT AND ITS RETROSPECTIVE OPERATION BEING ILLEGAL IN AS MUCH AS IT IS ULTRA VIRES, CANNOT BE JUDGED BY ME BECAUSE THIS JUDGEMENT PERTAINING T O AN AMENDMENT OF STATUTE IS BEYOND MY JURISDICTION. AS PER THE STAND ING AMENDED STATUTE (READ WITH EXPLANATION WITH RETROSPECTIVE EFFECT FROM 01.04.20 00), I FIND NO MISTAKE IN THE ACTION OF THE A.O. THE APPEAL STANDS DISMISSED. 5. BEING AGGRIEVED BY THE ORDER OF LD CIT(A), ASSES SEE IS IN APPEAL BEFORE US. 6. AT THE OUTSET, LD COUNSEL FOR THE ASSESSEE SUBMI TTED THAT THIS ISSUE IS COVERED BY THE DECISION OF ITAT CUTTACK IN THE CASE OF ARSS INFRAS TRUCTURE PROJECTS LTD VS. ACIT (ITA NOS.142 & 143/CTK/2010 AND OTHERS, ORDER DATED 13.6.2013. 7. LD CIT (DR) SUBMITTED THAT THE ASSESSEE HAD CL ASSIFIED ITSELF AS CIVIL CONTRACTOR AND NOT DEVELOPER UNDER THE CATEGORY OF BUILDER. IN THIS REGARD LD D.R. FILED BEFORE US COPY OF ITR -5 (INCOME TAX RETURN) FOR A.Y. 2009-2010 FILED BY THE ASSESSEE TO DEMONSTRATE THAT IN THE COLUMN MEANT FOR NATURE OF BUSINESS, ASSESSEE HAS S HOWN CODE 0501-CIVIL CONTRACTOR AND NOT CODE 0403 MEANT FOR BUILDER-PROPERTY DEVELOPERS AS PER ITR -5 8. WE HAVE CONSIDERED THE SUBMISSIONS OF BOTH PARTI ES AND PERUSED THE RECORD OF THE CASE. AS PER THE AOS ORDER, THE ASSESSEE, IN THE RELEVAN T ASSESSMENT YEAR, WAS CARRYING ON THE BUSINESS IN THE JOINT VENTURE OF WORK CONTRACT. THE TRIBUNAL IN THE CASE OF ARSS INFRASTRUCTURE PROJECTS LTD VS.ACIT(SUPRA) HAS HELD AS UNDER: NOW COMING TO THE MERITS OF THE DEDUCTION U/S. 80I A(4) OF THE ACT. A PERUSAL OF THE PROVISIONS OF SECTION 80IA(4) OF THE ACT SHOWS THAT IN THE EXPLANATION INFRASTRUCTURE FACILITY' HAS BEEN SPECIFIED TO MEAN A ROAD INCLUDING A TOLL ROAD, A 4 BRIDGE OR A RAIL SYSTEM.' ADMITTEDLY, THE AS SESSEE IS DOING THE BUSINESS OF DEVELOPMENT OF RAILWAY TRACKS AND BRIDGES THEREO F AS ALSO ROADS. IF, WE ARE TO ACCEPT THE CONTENTION OF THE LD. CIT THAT THE PROVI SIONS OF SECTION 80IA(4) OF THE ACT AFTER THE SUBSTITUTION OF. THE EXPLANATION TO S ECTION 80IA OF THE ACT WAS INTRODUCED WAS ONLY FOR THE PURPOSE OF GIVING THE B ENEFIT TO BOT CONTRACTS THEN, THE EXPLANATION TO SECTION 80IA(4) OF THE ACT BECOM ES OTIOSE. THIS IS AS EXPLANATION TO SECTION 80IA(4) OF THE ACT SPECIFICA LLY PROVIDES FOR THE ROAD TO INCLUDE A TOLL ROAD, A BRIDGE OR A RAIL SYSTEM. BOT CONTRACT IN RESPECT OF THE RAILWAY SYSTEM CAN NEVER EXIST. FURTHER, A PERUS AL OF THE PROVISIONS OF SECTION 80IA OF THE ACT SHOWS THAT THE TERM 'WORKS CONTRACT ' IS NOT DEFINED IN THE SAID SECTION. HOWEVER, THE TERMS 'WORKS' AND 'CONTRA CT' IS DEFINED IN THE PROVISIONS OF SECTION 194C OF THE ACT. IF A PARTICULAR WORD OR TERM IS NOT DEFINED IN THE SPECIFIC SECTION THEN, ONE COULD GO TO OTHER SECTIO NS IN THE SAID ACT WHERE THE DEFINITION WOULD BE AVAILABLE TO DRAW A MEANING TO THE SAID TERMS. IN THE PROVISIONS OF SECTION 194C OF THE ACT, WORK HAS BEE N GIVEN AN INCLUSIVE DEFINITION BUT IN THE SUBSEQUENT PORTION IT HAS EXCLUDED TH E MANUFACTURING ON SUPPLYING A PRODUCT ACCORDING TO REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY USING MATERIAL PURCHASED FROM A PERSON OTHER THAN SUCH CU STOMER. AS HAS BEEN SPECIFIED BY THE LD. AR, THE ASSESSEE IS DOING CONT RACT WORK BUT THAT WORK IS ACCORDING TO THE REQUIREMENT AND SPECIFICATION OF T HE CUSTOMER AND THE SAME HAS BEEN DONE BY USING MATERIALS PURCHASE FROM THIRD PA RTIES OTHER THAN THE CUSTOMERS. THUS, THOUGH THE ASSESSEE IS DOING A WOR KS CONTRACT THE SAME WOULD NOT FALL WITHIN THE MEANING OF THE WORD 'WORKS CONT RACT' FOR THE PURPOSE OF THE ACT DUE TO THE EXCLUSION PROVIDED IN THE MEANING OF 'WORK' IN SECTION 194C OF THE ACT. THE ISSUE RAISED BY THE LD. CIT THAT THE ASSE SSEE IS NOT DOING THE DEVELOPMENT WORK BUT IS ONLY DOING THE CONTRACT ALS O DOES NOT STAND TO TEST AS THE ASSESSEE ADMITTEDLY IS DEVELOPING THE ROADS AND RAILWAY LINES AND THE BRIDGES THEREOF. DEVELOPMENT ENCOMPASSES WITHIN ITSELF CONT RACT WORK. THE AGREEMENT BETWEEN THE ASSESSEE AND THE CUSTOMER BEING THE GOV ERNMENT IS FOR THE DEVELOPMENT OF THE INFRASTRUCTURE FACILITY BEING RO ADS AND RAIL SYSTEMS AND BRIDGES BY PARTICIPATING IN THE TENDERS. UNDER TH ESE CIRCUMSTANCES,, WE ARE OF THE VIEW THAT THE AO WAS RIGHT IN LAW IN GRANTING T HE ASSESSEE THE BENEFIT OF DEDUCTION U/S. 80IA(4) OF THE ACT. ON THIS GROUND ALSO, WE ARE OF THE VIEW THAT THE LD. CIT'S ORDER PASSED U/S. 263 OF THE ACT IS U NSUSTAINABLE AND IS LIABLE TO BE QUASHED AND WE DO SO. HERE, WE MAY SPECIFICALLY MEN TION THAT IN VIEW OF THE FACT THAT THE EXPLANATION TO SECTION 80IA(4) OF THE ACT WHICH HAS BEEN SUBSTITUTED BY THE FINANCE, ACT, 2009 WITH RETROSPECTIVE EFFECT OF 01.04.2000 IS ATTEMPTING TO TAKE AWAY THE STATUTORY BENEFIT GRANTED TO THE ASSESSEE U/S. 80IA(4) OF THE ACT WITHOUT MAKING ANY AMENDMENT TO THE EXPLANATIO N TO SECTION 80IA(4) OF THE ACT, THE SAID EXPLANATION SUBSTITUTED BY THE FI NANCE ACT, 2009 W.E.F. 01.04.2000 BEING AN HINDRANCE TO THE STATUTORY DEDU CTION AVAILABLE TO THE ASSESSEE UNDER THE PROVISIONS OF SECTION 80IA(4), T HE SAID EXPLANATION WOULD HAVE TO STAND DOWN IN VIEW OF THE DECISION OF THE H ON'BLE SUPREME COURT IN THE CASE OF S. SUNDARAM PILLAI, REFERRED TO SUPRA. CONS EQUENTLY, ON TIJTHIS GROUND ALSO THE ORDER PASSED U/S. 263 OF THE ACT BY THE LD . CIT FOR AY 2006-07 AND 2007-08 STANDS QUASHED. APPEALS OF THE ASSESSEE ARE ALLOWED. 5 9. THE ASSESSMENT YEAR INVOLVED IN THE PRESENT APPE AL IS ASSESSMENT YEAR 2008-09. THEREFORE, THE ASSESSEES CASE IS SQUARELY COVERED BY THE AFORESAID DECISION AND, THEREFORE, RESPECTFULLY FOLLOWING THE SAME, WE ALLOW ASSESSEE S APPEALS. 10. IN THE RESULT, APPEAL FILED BY THE ASSESSE IS A LLOWED. PRONOUNCED IN THE OPEN COURT ON 17 TH OCTOBER, 2014. SD/- SD/- ( GEORGE MATHAN) (S.V.MEHROTRA) JUDICIAL MEMBER ACCOUNTANT MEMBER DATED, CUTTACK 17 /10/2014 B.K.PARIDA, SR. PS COPY OF THE ORDER FORWARDED TO: 1. THE APPELLANT: ARSS HCIL CONSORTIUM PLOT NO.38, SE CTOR-A, ZONE-D, MANCHESWAR INDUSTRIAL ESTATE,BHUBANESWAR 2. THE RESPONDENT: ACIT, CIRCLE-2(1),RAJASWA VIHAR, 3. BHUBANESWAR 4. THE CIT, 5. THE CIT(A), 6. DR, CUTTACK BENCH 7. GUARD FILE. TRUE COPY// BY ORDER ASST. REGISTRAR, ITAT, CUTTACK