M/s Taher Ali Industries & Projects (P) Limited, Hyderabad V. ACIT, Circle-2(3), Hyderabad

ITA 129/HYD/2013

• Counselvise Citation: [2013] 140 COUNSELVISE.COM (IT) 69760 (ITAT-HYDERABAD)
• Duration Of Justice: 6 month(s) 25 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 30-08-2013
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2003-2004
• Appeal Filed On: 04-02-2013
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M H NAIK
• Assessee Lawyers: K C DEVADAS
• Keywords: Reopening of assessment; Depreciation; Transfer pricing; Audit objection; International transaction; Retrospective amendment; Difference of opinion; Corroborative evidences; Reason to believe; Change of opinion; Revenue expenditure
• Section: 40A(3); 143(3); 80IB; 147; 54; 139

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER S. NO. ITA NO. & A.Y. APPELLANT RESPONDENT 1. ITA NO. 129/HYD/2013 A.Y. 2003-04 M/S. TAHER ALI INDUSTRIES & PROJECTS (P) LTD., HYDERABAD PAN: AABCT4110E THE ACIT CIRCLE-2(3) HYDERABAD 2. ITA NO. 130/HYD/2013 A.Y. 2004-05 3. ITA NO. 104/HYD/2013 A.Y. 2003-04 THE DCIT CIRCLE-2(3) HYDERABAD M/S. TAHER ALI INDUSTRIES & PROJECTS (P) LTD., HYDERABAD 4. CO NO. 15/HYD/2013 IN ITA NO. 104/H/2013 A.Y. 2003-04 M/S. TAHER ALI INDUSTRIES & PROJECTS (P) LTD., HYDERABAD THE DCIT CIRCLE-2(3) HYDERABAD 5. ITA NO. 105/HYD/2013 A.Y. 2004-05 THE DCIT CIRCLE-2(3) HYDERABAD M/S. TAHER ALI INDUSTRIES & PROJECTS (P) LTD., HYDERABAD 6. CO NO. 16/HYD/2013 IN ITA NO. 105/H/2013 A.Y. 2004-05 M/S. TAHER ALI INDUSTRIES & PROJECTS (P) LTD., HYDERABAD THE DCIT CIRCLE-2(3) HYDERABAD 7. ITA NO. 1425/HYD/2012 A.Y. 2004-05 M/S. TAHER ALI INDUSTRIES & PROJECTS (P) LTD., HYDERABAD THE DCIT CIRCLE-2(2) HYDERABAD 8. ITA NO. 1426/HYD/2012 A.Y. 2008-09 9. ITA NO. 1427/HYD/2012 A.Y. 2009-10 10. ITA NO. 1483/HYD/2012 A.Y. 2004-05 THE ACIT CIRCLE-2(3) HYDERABAD M/S. TAHER ALI INDUSTRIES & PROJECTS (P) LTD., HYDERABAD 11. CO NO. 153/HYD/2012 IN ITA NO. 1483/H/2012 A.Y. 2004-05 M/S. TAHER ALI INDUSTRIES & PROJECTS (P) LTD., HYDERABAD THE ACIT CIRCLE-2(3) HYDERABAD 12. ITA NO. 1484/HYD/2012 A.Y. 2005-06 THE ACIT CIRCLE-2(3) HYDERABAD M/S. TAHER ALI INDUSTRIES & PROJECTS (P) LTD., HYDERABAD 13. CO NO. 154/HYD/2012 IN ITA NO. 1484/H/2012 A.Y. 2005-06 M/S. TAHER ALI INDUSTRIES & PROJECTS (P) LTD., HYDERABAD THE ACIT CIRCLE-2(3) HYDERABAD 14. ITA NO. 1485/HYD/2012 A.Y. 2006-07 THE ACIT CIRCLE-2(3) HYDERABAD M/S. TAHER ALI INDUSTRIES & PROJECTS (P) LTD., HYDERABAD 15. CO NO. 155/HYD/2012 IN ITA NO. 1485/H/2012 A.Y. 2006-07 M/S. TAHER ALI INDUSTRIES & PROJECTS (P) LTD., HYDERABAD THE ACIT CIRCLE-2(3) HYDERABAD 16. ITA NO. 1486/HYD/2012 A.Y. 2007-08 THE ACIT CIRCLE-2(3) HYDERABAD M/S. TAHER ALI INDUSTRIES & PROJECTS (P) LTD., HYDERABAD 17. CO NO. 156/HYD/2012 IN ITA NO. 1486/H/2012 A.Y. 2007-08 M/S. TAHER ALI INDUSTRIES & PROJECTS (P) LTD., HYDERABAD THE ACIT CIRCLE-2(3) HYDERABAD ITA. NO. 129/HYD/2013 & ORS. M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 2 18. ITA NO. 1487/HYD/2012 A.Y. 2008-09 THE ACIT CIRCLE-2(3) HYDERABAD M/S. TAHER ALI INDUSTRIES & PROJECTS (P) LTD., HYDERABAD 19. CO NO. 157/HYD/2012 IN ITA NO. 1487/H/2012 A.Y. 2008-09 M/S. TAHER ALI INDUSTRIES & PROJECTS (P) LTD., HYDERABAD THE ACIT CIRCLE-2(3) HYDERABAD 20. ITA NO. 1488/HYD/2012 A.Y. 2009-10 THE ACIT CIRCLE-2(3) HYDERABAD M/S. TAHER ALI INDUSTRIES & PROJECTS (P) LTD., HYDERABAD 21. CO NO. 158/HYD/2012 IN ITA NO. 1488/H/2012 A.Y. 2009-10 M/S. TAHER ALI INDUSTRIES & PROJECTS (P) LTD., HYDERABAD THE ACIT CIRCLE-2(3) HYDERABAD ASSESSEE BY: SRI K.C. DEVADAS REVENUE BY: SRI M.H. NAIK DATE OF HEARING: 2 0.06.2013 DATE OF PRONOUNCEMENT: 3 0.0 8 . 201 3 O R D E R PER CHANDRA POOJARI, AM: THE ABOVE APPEALS BOTH BY THE ASSESSEE AND THE REV ENUE AND THE CROSS OBJECTIONS (COS) BY THE ASSESSEE ARE DIRECTED AGAINST DIFFERENT ORDERS OF THE CIT(A) FOR ASSESSME NT YEARS 2003- 04 TO 2009-10. SINCE THE ISSUES ARISING FROM THESE APPEALS AND COS ARE COMMON IN NATURE AND BELONG TO THE SAME ASS ESSEE, ALL THESE APPEALS AND COS ARE CLUBBED TOGETHER, HEARD T OGETHER AND ARE BEING DISPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. ITA NO. 1425/HYD/2012 A.Y. 2004-05 BY ASSESSEE: 2. THE CRUX OF THE GROUNDS RAISED BY THE ASSESSEE IN T HIS APPEAL IS WITH REGARD TO REOPENING OF ASSESSMENT AN D THEREAFTER SUSTAINING ADDITION BY THE CIT(A) IN RESPECT OF COM MISSION TOWARDS SUBCONTRACT AT 1% ON THE BASIS OF AUDIT OBJ ECTION. 3. THE LEARNED AR SUBMITTED THAT THE ORIGINAL ASSESSME NT IN THIS CASE WAS COMPLETED U/S. 143(3) ON 15.12.2006. THEREAFTER NOTICE FOR RE-ASSESSMENT U/S. 148 WAS SERVED ON THE ASSESSEE ITA. NO. 129/HYD/2013 & ORS. M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 3 ON 25.12.2011 ON THE BASIS OF AUDIT OBJECTION. HE ALSO SUBMITTED THAT THE ASSESSMENT WAS REOPENED TO CONSI DER THE AMOUNT OF COMMISSION AT 1% OF ON WORK EXECUTED BY T HE SUBCONTRACTOR ON CONTRACT RECEIPT OF RS. 17,55,72,2 85, WHICH WORKED OUT AT RS. 17,55,753. FURTHER, HE SUBMITTED THAT THERE IS NO FRESH MATERIAL FOR REOPENING THE ASSESSMENT. THE ASSESSING OFFICER (AO) REOPENED THE ASSESSMENT ONLY ON THE BASIS OF MATERIALS WHAT HE HAS CONSIDERED WHILE PAS SING THE ORIGINAL ASSESSMENT ORDER U/S. 143(3) OF INCOME-TAX ACT, 1961. ACCORDING TO THE AR, THERE IS NO FAILURE ON THE PAR T OF THE ASSESSEE TO FURNISH ALL MATERIAL FACTS NECESSARY FO R THE PURPOSE OF ASSESSMENT. HE RELIED ON THE JUDGEMENT OF SUPRE ME COURT IN THE CASE OF GKN DRIVESHAFT (I) LTD. VS. ITO (259 IT R 19). HE ALSO SUBMITTED THAT AUDIT OBJECTION CANNOT BE A REASON F OR REOPENING OF ASSESSMENT. FOR THIS PURPOSE, HE RELIED ON THE FOLLOWING JUDGEMENTS: (A) INDIAN AND EASTERN NEWSPAPER SOCIETY VS. CIT (119 I TR 996) (SC) FOR THE PROPOSITION THAT OPINION OF INTER NAL AUDIT PARTY ON A POINT OF LAW DOES NOT CONSTITUTE 'INFORM ATION' FOR THE PURPOSE OF SECTION 147(B) OF THE IT ACT. T HAT PART ALONE OF THE NOTE OF AN AUDIT PARTY WHICH MENTIONS THE LAW WHICH ESCAPED THE NOTICE OF THE ITO CONSTITUTE 'INFORMATION'. (B) SURESH C. PARIKH VS. ITO (353 ITR 505) (GUJ) WHEREI N WHILE ALLOWING THE PETITION, THE HIGH COURT HELD TH AT A PERUSAL OF THE REASONS RECORDED INDICATED THAT THE SOLE GROUND ON WHICH ASSESSMENT WAS SOUGHT TO BE REOPENE D WAS THAT THE ASSESSEE HAD BEEN ALLOWED EXEMPTION O F RS. 4,15,000 FOR THE PURCHASE OF A RESIDENTIAL HOUSE WH ILE COMPUTING HIS INCOME, AND THAT, IN SUPPORT OF SUCH PURCHASE HE HAD PRODUCED RECEIPTS SHOWING DEPOSIT O F THE ITA. NO. 129/HYD/2013 & ORS. M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 4 AMOUNT WITH TWO DIFFERENT PARTIES. ACCORDING TO THE INCOME-TAX OFFICER, SINCE THE RECEIPTS FILED COULD NOT PROVE THE INVESTMENT MADE FOR PURCHASE OF FLAT, AND ALSO NO EVIDENCE LIKE PURCHASE DEED, ETC., WERE OBTAINABLE ON RECORD, THIS AMOUNTED TO FAILURE ON THE PART OF THE ASSESSEE TO DISCLOSE FULLY AND TRULY ALL MATERIAL F ACTS. A PERUSAL OF THE PRESCRIBED RETURN FORM AS EXISTING A T THE RELEVANT TIME AND THE NOTES THERETO INDICATED THAT THERE WAS NO REQUIREMENT OF PRODUCING ANY DOCUMENT LIKE PURCHASE DEED, ETC. THE ASSESSEE WAS REQUIRED TO ST ATE MATERIAL FACTS IN RESPECT OF THE CLAIM FOR EXEMPTIO N UNDER SECTION 54 OF THE ACT WHICH HE HAD DULY STATED. HEN CE, MERELY BECAUSE THE ASSESSING OFFICER WHO HAD SOUGHT TO REOPEN THE ASSESSMENT FOUND THE PROOF SUBMITTED BY THE ASSESSEE AT THE TIME OF ASSESSMENT PROCEEDINGS TO B E NOT SUFFICIENT FOR THE PURPOSE OF ADMITTING THE CLAIM, IT COULD NOT BE SAID THAT THERE WAS ANY FAILURE ON THE PART OF THE ASSESSEE SO AS TO INVOKE THE PROVISIONS OF SECTION 147 OF THE ACT. THE NOTICE UNDER SECTION 148 OF THE ACT, THEREFORE, COULD NOT BE SUSTAINED. (C) GUJARAT FLUROCHEMICALS LTD. VS. ACIT (353 ITR 398) (GUJ) WHEREIN THE HIGH COURT WHILE ALLOWING THE PETITION, H ELD THAT IT WAS CONTENDED ON BEHALF OF THE ASSESSEE THA T THE ASSESSING OFFICER HELD NO INDEPENDENT BELIEF THAT I NCOME CHARGEABLE TO TAX HAD ESCAPED ASSESSMENT. HE SUBMIT TED THAT THE ASSESSING OFFICER WAS UNDER COMPULSION BY THE AUDIT PARTY TO ISSUE NOTICE FOR REOPENING OF ASSESS MENT THOUGH SHE HERSELF HELD A FIRM BELIEF THAT NO INCOM E HAD ESCAPED ASSESSMENT. THE ASSESSING OFFICER IN HER AF FIDAVIT DID NOT DENY THIS. IN THE AFFIDAVIT WHAT WAS VAGUEL Y STATED WAS THAT THE DEPARTMENT WAS APPREHENSIVE ABOUT THE SOURCE OF INFORMATION ON THE BASIS OF WHICH SUCH AVERMENTS WERE ITA. NO. 129/HYD/2013 & ORS. M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 5 MADE. INTER-DEPARTMENTAL CORRESPONDENCE WAS STRICTL Y CONFIDENTIAL. ON A DIRECTION FROM THE COURT THE REV ENUE MADE A CANDID STATEMENT THAT THE FILE CONTAINING EX CHANGES BETWEEN THE ASSESSING OFFICER AND THE AUDIT PARTY W AS NOT TRACEABLE. THE REVENUE NOT HAVING EITHER DENIED THE CLEAR AVERMENTS OF THE ASSESSEE MADE IN THE PETITION ON O ATH NOR HAVING PRODUCED THE ORIGINAL FILES TO DEMONSTRATE T HE INDEPENDENT FORMATION OF OPINION BY THE ASSESSING O FFICER THOUGH SUFFICIENT TIME WAS MADE AVAILABLE, THE ISSU E STOOD FIRMLY CONCLUDED IN FAVOUR OF THE ASSESSEE. THE REASSESSMENT NOTICE WAS NOT VALID. (D) ROSE SERVICED APARTMENTS PVT. LTD. & ANR. VS. DCIT (348 ITR 452) (DEL) WHEREIN HELD THAT AN ASSESSMENT CANN OT BE REOPENED ON A MERE CHANGE OF OPINION; WHERE THERE I S NO ALLEGATION THAT THERE WAS FAILURE ON THE PART OF TH E ASSESSEE TO DISCLOSE TRUE AND FULL FACTS, NOTICE IS SUED U/S. 148 AFTER EXPIRY OF FOUR YEARS WAS NOT VALID. 4. THE DR RELIED ON THE ORDERS OF THE LOWER AUTHORITIE S. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. IN THE PRESENT CASE ORIGINAL ASSESSMENT WAS COMPLETED U/S. 143(3) OF THE ACT ON 15.12.2006. TH E RE- ASSESSMENT NOTICE U/S. 148 WAS ISSUED TO THE ASSESS EE VIDE NOTICE DATED 25.2.2011 AND ASSESSMENT WAS COMPLETED ON 21.11.2011. SECTION 147 OF THE ACT READS AS FOLLOW S: 'INCOME ESCAPING ASSESSMENT 147. IF THE ASSESSING OFFICER,[HAS REASON TO BELIEVE] THAT ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR, HE MAY, SUBJECT TO THE PROVISIONS OF SECTIONS 148 TO 153, ASSESS OR REASSESS SUCH INCOME AND ALSO ANY OTHER INCOME CHARGEABLE TO TAX WHICH HAS ITA. NO. 129/HYD/2013 & ORS. M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 6 ESCAPED ASSESSMENT AND WHICH COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION, OR RECOMPUTE THE LOSS OR THE DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE, AS THE CASE MAY BE, FOR THE ASSESSMENT YEAR CONCERNED (HEREAFTER IN THIS SECTION AND IN SECTIONS 148 TO 153 REFERRED TO AS THE RELEVANT ASSESSMENT YEAR): PROVIDED THAT WHERE AN ASSESSMENT UNDER SUB- SECTION (3) OF SECTION 143 OR THIS SECTION HAS BEEN MADE FOR THE RELEVANT ASSESSMENT YEAR, NO ACTION SHALL BE TAKEN UNDER THIS SECTION AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS ANY INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF THE FAILURE ON THE PART OF THE ASSESSEE TO MAKE A RETURN UNDER SECTION 139 OR IN RESPONSE TO A NOTICE ISSUED UNDER SUB-SECTION (1) OF SECTION 142 OR SECTION 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSARY FOR HIS ASSESSMENT FOR THAT ASSESSMENT YEAR: PROVIDED FURTHER THAT NOTHING CONTAINED IN THE FIRST PROVISO SHALL APPLY IN A CASE WHERE ANY INCOME IN RELATION TO ANY ASSET (INCLUDING FINANCIAL INTEREST IN ANY ENTITY) LOCATED OUTSIDE INDIA, CHARGEABLE TO TAX, HAS ESCAPED ASSESSMENT FOR ANY ASSESSMENT YEAR:] PROVIDED FURTHER THAT THE ASSESSING OFFICER MAY ASSESS OR REASSESS SUCH INCOME, OTHER THAN THE INCOME INVOLVING MATTERS WHICH ARE THE SUBJECT MATTER OF ANY APPEAL, REFERENCE OR REVISION, WHICH IS CHARGEABLE TO TAX AND HAS ESCAPED ASSESSMENT.] EXPLANATION 1: PRODUCTION BEFORE THE ASSESSING OFFICER OF ACCOUNT BOOKS OR OTHER EVIDENCE FROM WHICH MATERIAL EVIDENCE COULD WITH DUE DILIGENCE HAVE BEEN DISCOVERED BY THE ASSESSING OFFICER WILL NOT NECESSARILY AMOUNT TO DISCLOSURE WITHIN THE MEANING OF THE FOREGOING PROVISO. EXPLANATION 2: FOR THE PURPOSES OF THIS SECTION, THE FOLLOWING SHALL ALSO BE DEEMED TO BE CASES WHERE INCOME CHARGEABLE TO TAX HAS ESCAPED ASSESSMENT, NAMELY:- ITA. NO. 129/HYD/2013 & ORS. M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 7 (A) WHERE NO RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE ALTHOUGH HIS TOTAL INCOME OR THE TOTAL INCOME OF ANY OTHER PERSON IN RESPECT OF WHICH HE IS ASSESSABLE UNDER THIS ACT DURING THE PREVIOUS YEAR EXCEEDED THE MAXIMUM AMOUNT WHICH IS NOT CHARGEABLE TO INCOME-TAX; (B) WHERE A RETURN OF INCOME HAS BEEN FURNISHED BY THE ASSESSEE BUT NO ASSESSMENT HAS BEEN MADE AND IT IS NOTICED BY THE ASSESSING OFFICER THAT THE ASSESSEE HAS UNDERSTATED THE INCOME OR HAS CLAIMED EXCESSIVE LOSS, DEDUCTION, ALLOWANCE OR RELIEF IN THE RETURN; (BA) WHERE THE ASSESSEE HAS FAILED TO FURNISH A REPORT IN RESPECT OF ANY INTERNATIONAL TRANSACTION WHICH HE WAS SO REQUIRED UNDER SECTION 92E;] (C) WHERE AN ASSESSMENT HAS BEEN MADE, BUT- (I) INCOME CHARGEABLE TO TAX HAS BEEN UNDER ASSESSED; OR (II) SUCH INCOME HAS BEEN ASSESSED AT TOO IOWA RATE; OR (III) SUCH INCOME HAS BEEN MADE THE SUBJECT OF EXCESSIVE RELIEF UNDER THIS ACT; OR (D) WHERE A PERSON IS FOUND TO HAVE ANY ASSET (INCLUDING FINANCIAL INTEREST IN ANY ENTITY) LOCATED OUTSIDE INDIA.] (IV) EXCESSIVE LOSS OR DEPRECIATION ALLOWANCE OR ANY OTHER ALLOWANCE UNDER THIS ACT HAS BEEN COMPUTED]. EXPLANATION 3 : FOR THE PURPOSE OF ASSESSMENT OR REASSESSMENT UNDER THIS SECTION, THE ASSESSING OFFICER MAY ASSESS OR REASSESS THE INCOME IN RESPECT OF ANY ISSUE, WHICH HAS ESCAPED ASSESSMENT, AND SUCH ISSUE COMES TO HIS NOTICE SUBSEQUENTLY IN THE COURSE OF THE PROCEEDINGS UNDER THIS SECTION, NOTWITHSTANDING THAT THE REASONS FOR SUCH ISSUE HAVE NOT BEEN INCLUDED IN ITA. NO. 129/HYD/2013 & ORS. M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 8 THE REASONS RECORDED UNDER SUB-SECTION (2) OF SECTION 148.] EXPLANATION 4: FOR THE REMOVAL OF DOUBTS, IT IS HEREBY CLARIFIED THAT THE PROVISIONS OF THIS SECTION , AS AMENDED, BY THE FINANCE ACT, 2012, SHALL ALSO BE APPLICABLE FOR ANY ASSESSMENT YEAR BEGINNING ON OR BEFORE THE 1ST DAY OF APRIL, 2012.]' 6. SECTION 149 PRESCRIBES TIME LIMIT FOR ISSUE OF NOTI CE WHICH READS AS FOLLOWS: 'TIME LIMIT FOR NOTICE. [(1) NO NOTICE UNDER SECTION 148 SHALL BE ISSUED FO R THE RELEVANT ASSESSMENT YEAR,- (A) IF FOUR YEARS HAVE ELAPSED FROM THE END OF THE RELEVANT ASSESSMENT YEAR, UNLESS THE CASE FALLS UNDER CLAUSE (B); (B) IF FOUR YEARS, BUT NOT MORE THAN SIX YEARS, HAVE ELAPSED FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS THE INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT AMOUNTS TO OR IS LIKELY TO AMOUNT TO ONE LAKH RUPEES OR MORE FOR THAT YEAR.] (C) IF FOUR YEARS, BUT NOT MORE THAN SIXTEEN YEARS, HAVE ELAPSED FROM THE END OF THE RELEVANT ASSESSMENT YEAR UNLESS THE INCOME IN RELATION TO ANY ASSET (INCLUDING FINANCIAL INTEREST IN ANY ENTITY) LOCATED OUTSIDE INDIA, CHARGEABLE TO TAX, HAS ESCAPED ASSESSMENT.] EXPLANATION: IN DETERMINING INCOME CHARGEABLE TO TAX WHICH HAS ESCAPED ASSESSMENT FOR THE PURPOSES OF THIS SUB-SECTION, THE PROVISIONS OF EXPLANATION 2 OF SECTION 147 SHALL APPLY AS THEY APPLY FOR THE PURPOSES OF THAT SECTION.] (2) THE PROVISIONS OF SUB-SECTION (1) AS TO THE ISS UE OF NOTICE SHALL BE SUBJECT TO THE PROVISIONS OF SECTIO N 151. (3) IF THE PERSON ON WHOM A NOTICE UNDER SECTION 14 8 IS TO BE SERVED IS A PERSON TREATED AS THE AGENT OF A NON-RESIDENT UNDER SECTION 163 AND THE ASSESSMENT, REASSESSMENT OR RECOMPUTATION TO BE MADE IN ITA. NO. 129/HYD/2013 & ORS. M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 9 ,PURSUANCE OF THE NOTICE IS TO BE MADE ON HIM AS TH E AGENT OF SUCH NON-RESIDENT, THE NOTICE SHALL NOT BE ISSUED AFTER THE EXPIRY OF A PERIOD OF [TWO YEARS] FROM THE END OF THE RELEVANT ASSESSMENT YEAR. EXPLANATION.- FOR THE REMOVAL OF DOUBTS, IT IS HEREBY CLARIFIED THAT THE PROVISIONS OF SUB-SECTIONS (1) A ND (3), AS AMENDED BY THE FINANCE ACT, 2012, SHALL ALS O BE APPLICABLE FOR ANY ASSESSMENT YEAR BEGINNING ON OR BEFORE THE 1ST DAY OF APRIL, 2012.]' 7. BEING SO, A PERIOD OF FOUR YEARS FROM THE END OF RE LEVANT ASSESSMENT YEAR IS NORMALLY THE PERIOD DURING WHICH THE AO CAN ISSUE A NOTICE UNLESS THE CASE FALLS UNDER CLAU SES (B) AND (C) OF SECTION 149 OF THE ACT WHICH GIVES EXTENDED PERI OD OF 6 YEARS FROM THE END OF THE RELEVANT ASSESSMENT YEAR. NOW THE ARGUMENT OF THE AR BEFORE US IS THAT THE DEPARTMENT HAS NO MATERIAL TO SHOW THAT THE INCOME WHICH IS SAID TO H AVE BEEN ESCAPED IS ON ACCOUNT OF FAILURE ON THE PART OF THE ASSESSEE SO AS TO REOPEN THE ASSESSMENT WHEN THE ORIGINAL ASSES SMENT WAS COMPLETED U/S. 143(3) OF THE ACT. PROVISIONS OF SE CTION 147 PRESCRIBED THAT NO ACTION SHOULD BE TAKEN U/S. 147 AFTER THE EXPIRY OF FOUR YEARS FROM THE END OF THE RELEVANT A SSESSMENT YEAR, UNLESS INCOME CHARGEABLE TO TAX HAS ESCAPED A SSESSMENT FOR SUCH ASSESSMENT YEAR BY REASON OF FAILURE ON TH E PART OF THE ASSESSEE TO MAKE A RETURN U/S. 139 OR IN RESPONSE T O NOTICE ISSUED UNDER SUBSECTION (1) OF SECTION 147 OR SECTI ON 148 OR TO DISCLOSE FULLY AND TRULY ALL MATERIAL FACTS NECESSA RY FOR ITS ASSESSMENT FOR THAT ASSESSMENT YEAR. THE DR WAS NO T ABLE TO POINT OUT APPLICABILITY OF THESE PROVISIONS TO ASSE SSEE'S CASE. UNLESS THESE CONDITIONS ARE FULFILLED ASSESSMENT CA NNOT BE HELD TO BE VALID. BEING SO, IN OUR OPINION, INITIATION OF RE-ASSESSMENT PROCEEDINGS FOR THE ASSESSMENT YEAR 2004-05 BY MEAN S OF NOTICE U/S. 148 DATED 25.2.2011 AFTER A PERIOD OF M ORE THAN 4 YEARS IS CLEARLY BARRED BY TIME LIMIT. BEING SO, W E ARE NOT IN A ITA. NO. 129/HYD/2013 & ORS. M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 10 POSITION TO UPHOLD THE REOPENING OF ASSESSMENT. AC CORDINGLY, RE-ASSESSMENT ORDER IS QUASHED. 8. THE OTHER GROUNDS IN THIS APPEAL RAISED BY THE ASSE SSEE ON MERIT ARE DISMISSED AS INFRUCTUOUS, AS WE HAVE A LREADY ADJUDICATED THE APPEAL ON LEGAL ISSUE. 9. IN THE RESULT ASSESSEE'S APPEAL IN ITA NO. 1425/HYD / 2012 IS ALLOWED. ITA NO. 1426/HYD/2012 A.Y. 2008-09 BY ASSESSEE AND ITA NO. 1427/HYD/2012 A.Y. 2009-10 BY ASSESSEE: 10. THE FIRST COMMON GROUND IN THESE APPEALS IS WITH RE GARD TO DISALLOWANCE OF DEPRECIATION ON PLANT AND MACHIN ERY. BRIEF FACTS OF THE ISSUE ARE THAT THE ASSESSEE RAISED THI S GROUND AS GROUND NO. 3 BEFORE THE CIT(A) WHICH READS AS FOLLO WS: '3. THE AO HAS ERRED IN DISALLOWING THE DEPRECIATIO N ON MACHINERY WHICH WAS ACQUIRED BY THE ASSESSEE UNDER FINANCE LEASE FROM M/S. IVRCL LTD., WITHOUT GOING INTO THE DETAILS OF THE LEASE AGREEMENT, AGREEMENT FOR MOBILISATION ADVANCE AND OTHER RELATED TRANSACTIONS. IN OTHER WORDS WITHOUT GOING INTO THE MERITS OF THE CASE AND LEGALITY OF SAME. MOREOVER, THERE IS NO DISPUTE WITH M/S. IVRCL LTD., WITH REGARD TO THE ACQUISITION OF THE ASSETS IN OTH ER WORDS THERE IS NO DISPUTE WITH REGARD TO THE LEASED ASSETS WITH M/S. IVRCL LTD., AS THE SAME IS STILL BEING UNDER THE USE BY THE ASSESSEE AND NO LEASE IS BEING PAID SUBSEQUENT TO THE EXPIRY OF LEASE PERIOD EVEN THOUGH THE LEASED ASSETS IS BEING HELD BY THE ASSESSEE AND M/S. IVRCL LTD., HAS NO RIGHT OVER THE LEASED ASSETS AFTER THE EXPIRY OF LEASE PERIOD WHIC H IMPLIES THAT THE OWNERSHIP IS WITH THE ASSESSEE AFT ER THE EXPIRY OF LEASE PERIOD AND THE ASSESSEE IS ELIG IBLE FOR DEPRECIATION U/S. 32 OF THE IT ACT, 1961.' 11. THIS GROUND WAS NOT ADJUDICATED BY THE CIT(A). THE AR SUBMITTED THAT WHEN THE ISSUE WAS NOT ADJUDICATED B Y THE CIT(A), IT IS DEEMED TO HAVE BEEN DISMISSED BY THE CIT(A). FOR ITA. NO. 129/HYD/2013 & ORS. M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 11 THIS PROPOSITION, THE AR RELIED ON THE JUDGEMENT OF GUJARAT HIGH COURT IN THE CASE OF CIT VS. STEEL CAST CORPORATION (107 ITR 683) WHEREIN IT WAS HELD AS UNDER: 'HELD, IT MUST BE FOUND OUT WHAT IS THE SUBJECT- MATTER OF THE APPEAL AND THAT CAN BE DETERMINED ONL Y BY FINDING OUT WHAT THE AAC EXPRESSLY OR IMPLIEDLY DECIDED. IMPLIED DECISION MEANS THAT THOUGH A POINT MIGHT HAVE BEEN RAISED BEFORE THE AAC, IN HIS FINAL ORDER THE AAC MIGHT NOT HAVE DEALT WITH THAT POINT AND THEREBY IMPLIEDLY REJECTED IT. THAT IS AN IMPLI ED DECISION OF THE AAC AND A PARTY MAY BE AGGRIEVED BY AN EXPRESS DECISION OF THE AAC OR BY AN IMPLIED DECISION OF THE AAC. THE SUBJECT-MATTER OF APPEAL BEFORE THE TRIBUNAL CAN ONLY BE THE DECISION EXPRES S OR IMPLIED OF THE AAC AND THE JURISDICTION OF THE TRIBUNAL IS RESTRICTED TO THE SUBJECT-MATTER OF APP EAL. IN THE INSTANT CASE, THE GRIEVANCE OF THE ASSESSEE BEFORE THE TRIBUNAL WAS THAT, THOUGH THE QUESTION O F RELIEF UNDER S. 80J AND 80J(3) WAS ORALLY URGED BEFORE THE AAC IN THE COURSE OF ARGUMENTS, THE AAC IN HIS ORDER HAD NOT DEALT WITH THIS POINT AND HAD NOT GRANTED ANY RELIEF. IF IN FACT SUCH A CONTENTION WA S ORALLY URGED, THE TRIBUNAL, IN THE FIRST INSTANCE, SHOULD HAVE FOUND OUT WHETHER FACTUALLY THE GROUND OF APPEAL BEFORE IT WAS CORRECT OR NOT, NAMELY, WHETHER SUCH AN ORAL CONTENTION HAD OR HAD NOT BEEN RAISED BEFORE THE AAC. IF SUCH ORAL CONTENTION HAD BEEN RAISED BEFORE THE AAC, THEN THE GRIEVANCE OF T HE ASSESSEE THAT THE AAC HAD NOT DEALT WITH THIS CONTENTION ORALLY URGED BEFORE THE AAC AT THE TIME OF THE APPEAL FORMED THE SUBJECT-MATTER OF THE APPEAL BEFORE THE TRIBUNAL AND THE TRIBUNAL HAD THE JURISDICTION TO DEAL WITH THE QUESTION. IN THE EXER CISE OF THAT JURISDICTION IT WAS OPEN TO THE TRIBUNAL TO REMAND THE MATTER BACK EITHER TO THE ITO OR TO THE AAC TO ASCERTAIN THE FACTS REGARDING ITS CLAIM FOR RELIEF UNDER S. 80J. THE RECORD OF THE TRIBUNAL NEE D NOT SHOW AND IS NOT LIKELY TO CONTAIN WHETHER IN FA CT THIS CONTENTION WAS ORALLY URGED BEFORE THE AAC BY THE ASSESSEE. THEREFORE, THE TRIBUNAL SHOULD FIRST ASCERTAIN FOR ITSELF WHETHER SUCH A CONTENTION HAD IN FACT BEEN URGED BEFORE THE AAC. IF IT COMES TO THE CONCLUSION THAT IT WAS NOT URGED BY THE ASSESSEE BEFORE THE AAC, THEN THE GRIEVANCE THAT THE AAC DID NOT TAKE ITS CONTENTION REGARDING S. 80J INTO ACCOU NT CANNOT FORM THE SUBJECT-MATTER OF THE APPEAL BEFORE ITA. NO. 129/HYD/2013 & ORS. M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 12 THE TRIBUNAL AND IT IS NOT OPEN TO THE TRIBUNAL TO ALLOW THE ASSESSEE TO RAISE THE SAME PLEA BEFORE TH E TRIBUNAL FOR THE FIRST TIME. THE TRIBUNAL HAS FAILE D TO CONSIDER AND DECIDE THE QUESTION WHETHER THE POINT REGARDING RELIEF UNDER S. 80J WAS URGED BEFORE THE AAC OR NOT AND IT WILL BE OPEN TO THE TRIBUNAL TO DISPOSE OF THE APPEAL UNDER S. 260, SUB-SO (1), IN THE LIGHT OF THE OBSERVATIONS MADE BY COURT AFTER DETERMINING THE QUESTION WHICH OUGHT TO HAVE BEEN DECIDED FIRST.' 12. ON THE OTHER HAND, THE LEARNED DR SUBMITTED THAT TH E ISSUE IS COVERED AGAINST THE ASSESSEE BY THE TRIBUN AL ORDER IN ASSESSEES OWN CASE IN ITA NOS. 720/HYD/07 AND 843/ HYD/08 FOR A.YS. 2006-07, 2003-04 AND 2004-05 DATED 21.1.2 011 WHEREIN THE CLAIM OF THE ASSESSEE WAS REJECTED. 13. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. ADMITTEDLY, THIS ISSUE IS COVERED AGAIN ST THE ASSESSEE BY EARLIER ORDER OF THE TRIBUNAL (CITED SU PRA). HOWEVER, THE AR SUBMITTED BEFORE US THAT THE FACTS IN THESE TWO ASSESSMENT YEARS ARE ENTIRELY DIFFERENT AS COMPARED TO THE EARLIER ASSESSMENT YEARS AND IN THE ASSESSMENT YEAR S UNDER CONSIDERATION THE ASSESSEE IS THE OWNER OF PLANT AN D MACHINERY AND IT WAS SHOWN IN THE BALANCE SHEET AND THE DEPRE CIATION HAS TO BE GRANTED. CONSIDERING THIS PLEA OF THE ASSESS EE, IN OUR OPINION, IT IS APPROPRIATE TO REMIT THE ISSUE TO TH E FILE OF THE CIT(A) FOR CONSIDERATION AFTER TAKING NOTE OF THE A SSESSEE'S ARGUMENTS AS WELL AS THE DECISION CITED SUPRA AND D ECIDE ACCORDINGLY. THIS GROUND IS ALLOWED FOR STATISTICA L PURPOSES. 14. THE NEXT GROUND IN THESE TWO APPEALS IS WITH REGARD TO DISALLOWANCE OF LIQUIDATED DAMAGES. 15. THE CONTENTION OF THE AR IS THAT THIS EXPENDITURE P ERTAINS TO LIQUIDATED DAMAGES AS THE SAME IS CHARGED BY THE CONTRACTEE DEPARTMENTS TOWARDS DELAY IN EXECUTION AND THE SAME IS NOT ITA. NO. 129/HYD/2013 & ORS. M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 13 PENAL ACTION BY THE CONTRACTEE DEPARTMENTS. SINCE RECOVERIES ARE ENTIRELY BASED ON COMMERCIAL AGREEMENT AND IS N OT THE STATUTORY PROVISION, THE SAME CANNOT BE DISALLOWED. 16. THE DR SUBMITTED THAT THE ABOVE GROUND IS NOT BEFOR E THE CIT(A) AND THE SAME IS TO BE DISMISSED. 17. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. ADMITTEDLY THIS GROUND DOES NOT FIND PL ACE BEFORE THE CIT(A). ACCORDINGLY, CONSIDERING THE PLEA OF THE D R, WE ARE INCLINED TO REMIT THE ISSUE BACK TO THE FILE OF THE CIT(A). THIS GROUND IS PARTLY ALLOWED FOR STATISTICAL PURPOSES. 18. THE NEXT GROUND IS WITH REGARD TO AD-HOC DISALLOWAN CE TOWARDS UNVOUCHED EXPENDITURE AT RS. 80 LAKHS IN BO TH THE ASSESSMENT YEARS. THE ASSESSEE RAISED THIS GROUND BEFORE THE CIT(A) AS GROUND NO. 2 WHICH IS AS FOLLOWS: 'THE AO HAS MADE AN ADDITION OF RS. 80.00 LAKHS AND WHEREAS HAS FAILED TO BRING ANY MATERIAL TO SHOW THAT THE PROVISIONS OF SECTION 40A(3) OF IT AC T, 1961 WERE APPLICABLE AND IN SUCH A SITUATION THE AO IS NOT AUTHORISED TO RESORT TO ANY ARBITRARILY ESTIMATED ADDITIONS BUT TO COMPLETE THE ASSESSMENT AFTER COMPUTING THE INCOME IN ACCORDANCE WITH THE BOOKS OF ACCOUNT.' 19. HOWEVER, THERE IS NO ADJUDICATION BY THE CIT(A) IN HIS ORDER. BEING SO, WE FEEL IT APPROPRIATE TO REMIT T HE ISSUE BACK TO THE FILE OF THE CIT(A) FOR ADJUDICATION. 20. IN THE RESULT, ITA NO. 1426/HYD/2012 AND ITA NO. 1427/HYD/2012 ARE PARTLY ALLOWED FOR STATISTICAL PU RPOSES. ITA NO. 129/HYD/2013 A.Y. 2003-04 BY ASSESSEE ITA NO. 104/HYD/2013 A.Y. 2003-04 BY REVENUE CO NO. 15/HYD/2013 A.Y. 2003-04 BY ASSESSEE ITA NO. 130/HYD/2013 A.Y. 2004-05 BY ASSESSEE ITA. NO. 129/HYD/2013 & ORS. M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 14 ITA NO. 105/HYD/2013 A.Y. 2004-05 BY REVENUE CO NO. 16/HYD/2013 A.Y. 2004-05 BY ASSESSEE 21. THE ABOVE APPEALS AND COS BY THE ASSESSEE AS WELL A S BY THE REVENUE ARE RELATING TO LEVY OF PENALTY U/S. 27 1(1)(C) OF THE ACT. IN THE A.Y. 2003-04, THE AO LEVIED PENALTY U/ S. 271(1)(C) OF THE ACT AT RS. 33,49,763 AND FOR A.Y. 2004-05 AT RS . 21,83,443. 22. THE ASSESSING OFFICER FOR THE A.Y. 2003-04 FIRST MA DE AN ADDITION OF RS. 50 LAKHS TOWARDS UNVOUCHED EXPENDIT URE IN RESPECT OF JOINTING, LABOUR, SUPERVISION CHARGES, S ITE PREPARATION, ETC. HE ALSO MADE ADDITION AT RS. 41. 15 LAKHS BY DISALLOWING DEPRECIATION ON PLANT AND MACHINERY WHI CH WERE TAKEN ON LEASE BY THE ASSESSEE FROM M/S. IVRCL. IN RESPECT OF ABOVE DISCREPANCIES NOTICED BY THE ASSESSING OFFICE R, HE LEVIED PENALTY U/S. 271(1)(C) OF THE ACT TOWARDS THIS. ON APPEAL, THE CIT(A) DELETED THE PENALTY IN RESPECT OF DISALLOWAN CE OF EXPENDITURE. HOWEVER, HE CONFIRMED THE PENALTY IN RESPECT OF DEPRECIATION DISALLOWANCE. SIMILARLY, FOR A.Y. 200 4-05, THERE WAS A DISALLOWANCE OF EXPENDITURE AT RS. 50 LAKHS A ND ALSO DISALLOWANCE OF DEPRECIATION AT RS. 30,86,250 IN RE SPECT OF ASSETS TAKEN BY THE ASSESSEE ON LEASE FROM M/S. IVR CL. ON THESE TWO COUNTS PENALTY WAS LEVIED BY THE AO. 23. ON APPEAL, THE CIT(A) DELETED THE PENALTY LEVIED IN RESPECT OF AD-HOC DISALLOWANCE OF EXPENDITURE. HOWEVER, HE CONFIRMED THE PENALTY IN RESPECT OF DISALLOWANCE OF DEPRECIAT ION. AGAINST DELETION OF PENALTY, THE DEPARTMENT IS IN APPEAL BE FORE US FOR A.YS. 2003-04 AND 2004-05. FOR SUSTAINING PENALTY IN RESPECT OF DISALLOWANCE OF DEPRECIATION, THE ASSESSEE IS IN APPEAL BEFORE US FOR THE SAME ASSESSMENT YEARS. THE ASSESSEE ALS O FILED COS FOR THESE ASSESSMENT YEARS IN SUPPORT OF DELETION O F PENALTY TOWARDS UNVOUCHED EXPENDITURE. ITA. NO. 129/HYD/2013 & ORS. M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 15 24. THE ASSESSEE NOT PRESSED THE COS IN CO NO. 15/HYD/2013 AND 16/HYD/2013 AND THE SAME ARE DISMISSED AS NOT PRESSED . 25. THE LEARNED AR SUBMITTED, WITH REGARD TO SUSTAINING OF PENALTY ON DISALLOWANCE OF DEPRECIATION, THAT THE A SSESSEE CLAIMED DEPRECIATION ON PLANT AND MACHINERY TAKEN O N LEASE BASIS FROM M/S. IVRCL AND PAID MONTHLY INSTALMENTS AS PER LEASE AGREEMENT. HE ALSO SUBMITTED THAT AFTER EXPI RY OF LEASE PERIOD, AS PER CLAUSE NO. 7 OF THE LEASE AGREEMENT DATED 30.3.2001 WITH EFFECT FROM 30.9.2002, THE ASSESSEE BECAME THE OWNER OF THE SAID PLANT AND MACHINERY. HE DREW OUR ATTENTION TO CLAUSE NO. 7 OF THE LEASE AGREEMENT WHICH READS AS FOLLOWS: '7. TRANSFER OF OWNERSHIP: THE MACHINERY LEASED OUT AS PER SCHEDULE 'A' HERETO SHALL BE TRANSFERRED TO TAHER ALI ON PAYMENT OF RS. 10,00,000/- (RUPEES TEN LAKHS ONLY) AFTER COMPLETIO N OF THE LEASE PERIOD AND REGULAR PAYMENT OF THE LEAS E RENTALS. IT IS EXPECTED THAT THE LEASE RENTALS SHA LL BE REGULARLY PAID.' 26. FURTHER, HE SUBMITTED THAT THE ASSESSEE HAS BEEN REGULARLY PAYING THE LEASE RENTALS AND ALSO PAID RS . 10 LAKHS AS PER LEASE AGREEMENT. ACCORDING TO THE AR, THE PLAN T AND MACHINERY IS OWNED BY THE ASSESSEE AND THE SAME IS APPEARING IN THE BALANCE SHEET OF THE ASSESSEE. ACCORDINGLY, THE ASSESSEE IS ENTITLED FOR DEPRECIATION. THE TRIBUNAL HAS NOT CONSIDERED THESE FACTS IN THE QUANTUM APPEAL AND DISALLOWED TH E DEPRECIATION. WITHOUT PREJUDICE TO THE ABOVE ARGUM ENT, HE SUBMITTED THAT NOT GRANTING OF DEPRECIATION BY THE REVENUE AUTHORITIES CANNOT BE A REASON FOR LEVY OF PENALTY U/S. 271(1)(C) OF THE ACT. HE RELIED ON THE JUDGEMENT OF SUPREME COURT IN THE CASE OF CIT V. RELIANCE PETRO PRODUCTS PVT. LTD. (322 ITR 158). ITA. NO. 129/HYD/2013 & ORS. M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 16 27. ON THE OTHER HAND, THE LEARNED DR SUBMITTED THAT TH E ISSUE PERTAINS TO THE CLAIM OF DEPRECIATION WHICH W AS DISALLOWED BY THE AO AND THIS DISALLOWANCE WAS CONFIRMED BY TH E TRIBUNAL. THE ASSESSEE CLAIMED DEPRECIATION AMOUNTING TO RS. 41,15,000 FOR A.Y. 2003-04 AND RS. 30,86,250 FOR A.Y. 2004-05 ON LEASED PLANT AND MACHINERY. THERE IS NO AMBIGUITY IN THE LAW THAT DEPRECIATION IS TO BE ALLOWED ONLY IF THE ASSET IS OWNED BY AN ASSESSEE AND IS PUT TO USE DURING THE FINANCIAL YEA R FOR BUSINESS PURPOSES. IN THE CURRENT CASE CERTAIN PLANT AND MA CHINERY HAD BEEN TAKEN ON LEASE BY THE ASSESSEE FROM M/S. IVRCL SINCE MANY YEARS. THE ASSESSEE FULLY KNEW THAT THE ASSETS WERE NOT OWNED BY IT AND THAT IT COULD NOT CLAIM DEPRECIATIO N ON THESE ASSETS. IT WAS ALSO WITHIN THE KNOWLEDGE OF THE AS SESSEE THAT M/S. IVRCL WAS CLAIMING DEPRECIATION ON THESE VERY ASSETS. IN EARLIER YEARS THE ASSESSEE HAD NOT CLAIMED DEPRECIA TION ON THESE ASSETS. THE ASSESSEE MADE TWO CLAIMS WITH RESPECT T O THE SAME PLANT AND MACHINERY I.E., CLAIM FOR LEASE RENTALS A ND CLAIM FOR DEPRECIATION. THE ASSESSEE KNEW THAT BOTH THE CLAIM S CANNOT BE SIMULTANEOUSLY ALLOWED. HOWEVER, IN SPITE OF THAT LEGAL KNOWLEDGE IT MADE THE CLAIMS IN QUESTION. 28. THE DR FURTHER SUBMITTED THAT THE ASSESSEE'S ARGUME NT THAT IT IS A LEGAL ISSUE AND HENCE PENALTY CANNOT B E IMPOSED IS NOT TENABLE. FIRSTLY, THERE IS NO LEGAL DEBATE ON T HE FACT THAT BOTH THE CLAIMS IN QUESTION CANNOT BE MADE AT THE SAME T IME. MOREOVER, THE FACTS ARE VERY CLEARLY INDICATING THE INTENT OF THE ASSESSEE. HAD THE ASSESSING OFFICER NOT CONDUCTED S CRUTINY AND NOT ADDED THE AMOUNT IN THE ASSESSMENT ORDER, THE A SSESSEE WOULD HAVE GOT AWAY WITH ITS CLAIM ON DEPRECIATION WHICH IS NOT ALLOWABLE. IN ADDITION IT WOULD ALSO HAVE CLAIMED L EASE RENTALS ON THE SAME PLANT AND MACHINERY. THE INTENT OF THE ASSESSEE WAS VERY OBVIOUS I.E., TO ARTIFICIALLY REDUCE THEIR TAXABLE INCOME ITA. NO. 129/HYD/2013 & ORS. M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 17 BY MAKING THE CLAIMS TOWARDS DEPRECIATION WHICH ARE NOT ALLOWABLE. HE SUBMITTED THAT THE TRIBUNAL HAS CLEAR LY BROUGHT OUT THE FACTS IN ITS ORDER IN ITA NO. 843/HYD/08 DA TED 21.01.2011 FOR A.Y. 2004-05 AND DREW OUR ATTENTION TO THE RELEVANT PORTION OF WHICH IS AS UNDER: '5 WE HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL AVAILABLE ON RECORD. WITH REGARD TO THE DISALLOWANCE OF EXPENDITURE AMOUNTING TO RS. 50 LAKHS, WE FIND THAT THE DEPARTMENT FOUND THAT MOST OF THE PAYMENTS PAID BY THE ASSESSEE ARE BY CASH AND NO PROPER EXTERNAL VOUCHERS ARE AVAILABLE FOR SUCH PAYMENTS. IT IS CLAIM OF THE ASSESSEE THAT CERTAIN EXPENDITURE WAS INCURRED BY M/S. IVRCL ON BEHALF OF THE ASSESSEE AND THE SAME WAS DEBITED TO THE ACCOUNT OF THE ASSESSEE AS REFLECTED IN THE LEDGER ACCOUNT. THE ASSESSEE NOT PRODUCED ANY PRIMARY EVIDENCE IN SUPPORT OF ITS CLAIM. THE ASSESSEE HAS NOT PRODUCED ANY EVIDENCE EXCEPT FILING ACCOUNT COPY OF M/S. IVRCL. THE ACCOUNT COPY OF THE IVRCL CANNOT BE TAKEN AS PROOF OF PAYMENT OF EXPENDITURE. IN SOME INSTANCES, THE ASSESSING OFFICER NOTICED THAT THE AMOUNTS DEBITED IN THE CAPITAL ACCOUNTS ALSO REFLECTED IN THE LEDGER ACCOUNT. THE DEPARTMENT RIGHTLY OBSERVED THAT THE ASSESSEE COULD NOT ABSOLVE HIS DUTY SIMPLY BY STATING THAT THE AMOUNT WAS PAID BY THE IVRCL. SINCE THE ASSESSEE COMPANY CLAIMED THE EXPENDITURE, IN OUR CONSIDERED VIEW, IT IS THE DUTY OF THE ASSESSEE COMPANY TO PROVE THE GENUINENESS OF THE SAME. IN THE ABSENCE OF THE SUPPORTING EVIDENCE, THE DEPARTMENT RIGHTLY NOT CERTIFIED THE CORRECTNES S OF THE EXPENDITURE INCURRED BY THE ASSESSEE COMPANY. THE DECISION RELIED ON BY THE LEARNED, COUNSEL ARE ALL DISTINGUISHABLE ON FACTS OF THE INSTANT CASE. AS MOST OF THE PAYMENTS ARE MADE BY THE CASH AND AS MOST OF THE EXPENDITURE WAS NOT PROPERLY SUPPORTED BY VOUCHERS, THE LOWER AUTHORITIES ARE RIGHTLY DISALLO WED THE EXPENDITURE AMOUNTING TO RS. 50 LAKHS ON AD-HOC BASIS AND ADDED THE SAME TO THE INCOME RETURNED. IN VIEW OF THE ABOVE, WE DO NOT SEE ANY INFIRMITY IN THE ORDERS OF THE LOWER AUTHORITIES AND THE SAME ARE UPHELD. WITH REGARD TO THE DISALLOWANCE OF DEPRECIATION OF RS. 41,15,000/- ON CERTAIN LEASED MACHINERY, WE FIND THAT THE ASSETS WERE TAKEN FROM ITA. NO. 129/HYD/2013 & ORS. M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 18 IVRCL ON LEASE BASIS. WE FIND THAT THE ASSESSING OFFICER MADE AN ENQUIRY WITH IVRCL AND FOUND THAT THE IVRCL STILL CLAIMING DEPRECIATION ON THE ASSETS IN QUESTION WHICH IS EVIDENCED BY THE LETTER DATED 17- 2- 2006 BY IVRCL. SINCE THE IVRCL NOT TRANSFERRED THE ASSET TO THE ASSESSEE COMPANY AND THEY CONTINUE TO CLAIM DEPRECIATION, THE LOWER AUTHORITIES ARE RIGHT IN HOLDING THAT THE ASSESSEE IS NOT ENTITLED FOR ANY DEPRECIATION AND RIGHTLY ALLOWED THE LEASE RENTALS PAID BY THE ASSESSEE AS REVENUE EXPENDITURE. HENCE, IN OUR OPINION, THERE SHOULD NOT BY ANY GRIEVANCE T O THE ASSESSEE IN THIS REGARD. IN VIEW OF THE ABOVE, WE DO NOT SEE ANY INFIRMITY INT HE ORDERS OF THE LOWER AUTHORITIES AND THE SAME ARE UPHELD. HENCE, WE REJECT GROUNDS TAKEN BY THE ASSESSEE ON BOTH THE ISSUES.' 29. THE LEARNED DR ON THE ISSUE RELATING TO DELETION OF PENALTY ON DISALLOWANCE TOWARDS UNVOUCHED EXPENDITURE SUBMI TTED THAT AT THE TIME OF ASSESSMENT PROCEEDINGS, IT WAS NOTIC ED THAT THE ASSESSEE CLAIMED EXPENDITURE IN A.Y. 2004-05 TOWARD S SITE EXPENSES AT RS. 37,91,067 , LAYING, JOINTING AND CARTING AT RS. 2,85,13,377 , WELFARE EXPENSES AT RS. 17,83,567 AND MISCELLANEOUS EXPENSES AT RS. 12,74,829. SAME IS TH E POSITION FOR THE A.Y. 2003-04 AND ONLY CHANGE IN THE AMOUNTS . ON VERIFICATION OF THE BOOKS OF ACCOUNT AND THE VOUCHE RS PRODUCED BY THE ASSESSEE INDICATED THAT A GOOD PART OF THOSE CLAIMS WERE ONLY SUPPORTED BY VOUCHERS AND PAYMENTS WERE MADE I N CASH. WHILE THE ASSESSEE RECEIVED REIMBURSEMENT OF THE EX PENDITURE FROM THE SUBCONTRACTORS, AT THE SAME TIME IT FAILED TO KEEP PROPER RECORD OF THE EXPENDITURE INCURRED BY IT FOR EARNING THE INCOME. THE ASSESSEE ALSO FAILED TO GIVE SATISFACTO RY EXPLANATION FOR NON MAINTENANCE OR NON PRODUCTION OF PROPER VOU CHERS. THE AO ADDED A LUMP SUM AMOUNT OF RS. 50 LAKHS IN A.Y. 2003-04 AND RS. 30 LAKHS IN A.Y. 2004-05 TO THE INCOME OF T HE ASSESSEE ON ACCOUNT OF UNVERIFIABLE EXPENDITURE. THE AR OF T HE ASSESSEE ALSO AGREED TO THIS ADDITION AND SO PENALTY WAS LEV IED U/S. 271(1)(C) OF THE ACT AND HE PRAYED TO CONFIRM THE P ENALTY. ITA. NO. 129/HYD/2013 & ORS. M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 19 30. REGARDING DELETION OF PENALTY, THE AR RELIED ON THE ORDER OF THE CIT(A). 31. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. REGARDING THE PENALTY ON DISALLOWANCE O F DEPRECIATION ON PLANT AND MACHINERY THE PENALTY WAS LEVIED BY PLACING RELIANCE ON THE ORDER OF THE TRIBUNAL IN IT A NO. 843/HYD/2008 DATED 21.1.2011 FOR A.Y. 2004-05 WHERE IN THE TRIBUNAL CONFIRMED DISALLOWANCE OF DEPRECIATION AS CITED ABOVE. 32. FOR LEVYING PENALTY U/S. 271(1)(C) OF THE ACT, THER E HAS TO BE CONCEALMENT OF PARTICULARS OF INCOME OF BY ASSES SEE OR FURNISHING OF INACCURATE PARTICULARS OF ITS INCOME. IN THE PRESENT CASE, IT IS NOT THE CASE OF CONCEALMENT OF INCOME AND ALSO IT CANNOT BE SAID THAT THE ASSESSEE HAS FURNIS HED INACCURATE PARTICULARS OF INCOME. THE ASSESSEE CLA IMED DEPRECIATION ON PLANT AND MACHINERY TAKEN ON LEASE FROM M/S. IVRCL. IT IS ON THE BASIS OF LEASE AGREEMENT ENTER ED BY THE ASSESSEE ON 30 TH MARCH, 2001 WITH M/S. IVRCL. IT IS IN CONSONANCE WITH THE AGREEMENT. HOWEVER, THE TRIBUNA L NOT AGREED WITH THE CONTENTION OF THE ASSESSEE'S COUNSE L IN ITS APPEAL IN QUANTUM ADDITION. THE FACTS REMAIN THAT THE ASSESSEE IS HAVING BONA-FIDE BELIEF THAT IT IS ENTITLED FOR DEPRECIATION AS PER THE LEASE AGREEMENT AND THE ASSETS HAVE BEEN DU LY REFLECTED IN THE BALANCE SHEET. THE ASSESSEE HAS FURNISHED T HE ENTIRE FACTS RELATING TO THIS ISSUE WHICH WAS NOT FOUND FA VOURABLE WITH THE DEPARTMENT. THE REVENUE AUTHORITIES REJECTED T HE CLAIM OF GRANTING OF DEPRECIATION. IT WAS UP TO THE REVENUE AUTHORITIES TO ACCEPT OR REJECT THE CLAIM OF THE ASSESSEE. MER ELY BECAUSE IT WAS REJECTED, IT DOES NOT LEAD TO THE CONCLUSION TH AT THE ASSESSEE IS LIABLE FOR PENALTY. IN OUR OPINION, THE DISALLO WANCE OF DEPRECIATION THAT ITSELF CANNOT BE SAID THAT IT IS FALSE. SO THAT THE ITA. NO. 129/HYD/2013 & ORS. M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 20 JUDGEMENT RELIED ON BY THE DEPARTMENT IN THE CASE O F CIT VS. VIDYA GAURI NATVERLAL & ORS. (238 ITR 91) CANNOT BE APPLIED TO THE FACTS OF THE CASE. ACCORDINGLY, WE DELETE THE PENALTY ON THIS ISSUE BY PLACING RELIANCE ON THE JUDGEMENT OF SUPRE ME COURT IN THE CASE OF CIT VS. RELIANCE PETRO PRODUCTS PVT. LT D., WHEREIN HELD THAT MERELY BECAUSE THE ASSESSEE CLAIM OF DEDU CTION OF EXPENDITURE WHICH WAS NOT ACCEPTED BY THE REVENUE A UTHORITIES, PENALTY U/S. 271(1)(C) OF THE ACT IS NOT ATTRACTED; MERE MAKING OF A CLAIM, WHICH IS NOT SUSTAINABLE IN LAW, WILL NOT AMOUNT TO FURNISHING OF INACCURATE PARTICULARS OF INCOME OF T HE ASSESSEE. 33. IN VIEW OF THE ABOVE DISCUSSION, WE ARE INCLINED TO DELETE THE PENALTY ON THIS ISSUE. THE ASSESSEE APP EALS IN ITA NOS. 129/HYD/2013 AND 130/HYD/2012 ARE ALLOWED ON THIS ISSUE. 34. REGARDING LEVY OF PENALTY ON AD-HOC DISALLOWANCE OF EXPENSES LIKE JOINTING, LABOUR, SUPERVISION CHARGES , SITE PREPARATION, ETC., THIS WAS DISALLOWED ON THE REASO N THAT THE EXPENDITURE WAS NOT PROPERLY VOUCHED AND THE DISALL OWANCE OF EXPENDITURE IS ON AD-HOC BASIS. THERE IS NO CONCLU SIVE PROOF THAT THE ASSESSEE HAS FURNISHED INACCURATE PARTICUL ARS OF INCOME OR CONCEALED THE PARTICULARS OF INCOME. THE ASSESSEE WAS NOT ABLE TO FILE ALL VOUCHERS AND BILLS AND THA T LED TO DISALLOWANCE AND THE LUMP SUM DISALLOWANCE WAS MADE ON ESTIMATE BASIS WHICH CANNOT BE A REASON FOR LEVY OF PENALTY. THE AO COULD NOT POINT OUT WHICH ITEM OF EXPENDITURE WA S NOT VERIFIABLE. HAD THE AO PINPOINTED THE PARTICULAR E XPENDITURE THAT IS NOT VERIFIABLE THEN THE CASE WILL BE DIFFER ENT. THE ASSESSING OFFICER WITHOUT EXAMINING THE RECIPIENTS OF THE PAYMENTS, IT IS NOT APPROPRIATE TO COME TO THE CONC LUSION THAT THE ASSESSEE HAS CONCEALED ANY PARTICULARS OF INCOM E OR FURNISHED INACCURATE PARTICULARS OF INCOME. THE PE NALTY ITA. NO. 129/HYD/2013 & ORS. M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 21 PROCEEDINGS ARE QUASI CRIMINAL PROCEEDINGS AND THE CONSIDERATION THAT ARISE IN PENALTY PROCEEDINGS ARE DIFFERENT FROM THOSE ARISING IN THE ASSESSMENT PROCEEDINGS. THOUGH THE FINDING GIVEN IN THE ASSESSMENT ORDER IS A GOOD FIN DING, THE SAME IS NOT CONCLUSIVE IN PENALTY PROCEEDINGS. WHA T IS REQUIRED TO BE SEEN IS WHETHER THE ADDITION HAS BEEN PASSED ON THE MATERIAL FROM WHICH DEFINITE INFERENCE CAN BE DRAWN THAT THE ASSESSEE HAD CONCEALED THE INCOME OR FURNISHED INAC CURATE PARTICULARS OF INCOME. IN THIS CASE ADDITION IS MA DE PURELY ON ESTIMATE/AD-HOC BASIS WITHOUT ANY BASIS AND WITHOUT ANY MATERIAL TO SUPPORT THAT THE ASSESSEE HAD INCOME MO RE THAN THAT DECLARED BY THE ASSESSEE IN ITS RETURN OF INCO ME. IN RESPECT OF SUCH ESTIMATED ADDITION OR DISALLOWANCE, IMPOSIT ION OF PENALTY WILL NOT BE JUSTIFIED. BEING SO, WE ARE IN CLINED TO CONFIRM THE DELETION OF PENALTY BY THE CIT(A). THI S GROUND IN REVENUE APPEAL IS DISMISSED. 35. THE ASSESSEE'S APPEALS IN ITA NO. 129/HYD/2013 AND ITA NO. 130/HYD/2013 ARE ALLOWED . REVENUE APPEALS IN ITA NOS. 104 AND 105/HYD/2013 ARE DISMISSED. THE COS B Y THE ASSESSEE IN CO NOS. 15 AND 16/HYD/2013 ARE DISMISSE D. REVENUE APPEALS ASSESSEE'S COS___ ITA NO. 1483/HYD/2012 CO NO. 153/HYD/2012 ITA NO. 1484/HYD/2012 CO NO. 154/HYD/2012 ITA NO. 1485/HYD/2012 CO NO. 155/HYD/2012 ITA NO. 1486/HYD/2012 CO NO. 156/HYD/2012 ITA NO. 1487/HYD/2012 CO NO. 157/HYD/2012 ITA NO. 1488/HYD/2012 CO NO. 158/HYD/2012 36. THE REVENUE RAISED A COMMON GROUND IN THE ABOVE APPEALS WITH REGARD TO GRANTING OF DEDUCTION U/S. 8 0IA OF THE ACT BY THE CIT(A) BY HOLDING THAT THE BUSINESS OF T HE ASSESSEE WAS THAT OF A DEVELOPER OF INFRASTRUCTURE FACILITY AS ENVISAGED IN ITA. NO. 129/HYD/2013 & ORS. M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 22 THE PROVISIONS OF SECTION 80IA OF THE ACT. THE ASS ESSEE FILED THE COS IN SUPPORT OF THE CIT(A) ORDER. 37. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE IS A COMPANY ENGAGED IN THE BUSINESS OF MANUFACTURING OF PIPES F OR WATER SUPPLY AND SEWERAGE SCHEME AND TURNKEY CONTRACTORS IN INFRASTRUCTURE SECTOR, CLAIMED DEDUCTION U/S. 80IA. THE ASSESSING OFFICER, IN THE ORIGINAL ASSESSMENT FOR T HE A.YS. 2004- 05 TO 2007-08 COMPLETED THE ASSESSMENTS BY DISALLOW ING DEDUCTION U/S. 80IA CLAIMED BY THE ASSESSEE. AGGRI EVED BY THIS, THE ASSESSEE FURTHER FILED APPEALS BEFORE THE TRIBU NAL, HYDERABAD BENCHES. THE TRIBUNAL HAS REMITTED BACK THE ISSUE TO THE FILE OF THE ASSESSING OFFICER. IN ALL THESE ASSESSMENT YEARS, I.E., A.Y. 2004-05 TO A.Y. 2007-08, THE ASSE SSING OFFICER HAS REOPENED THE ASSESSMENTS AND DECIDED THE ASSESS MENTS BY DISALLOWING DEDUCTION U/S. 80IA AND COMPLETED THE ASSESSMENTS. HENCE, THESE APPEALS WERE FILED BY TH E ASSESSEE FOR THESE ASSESSMENT YEARS BEFORE THE CIT(A). FOR THE ASSESSMENT YEARS 2008-09 AND 2009-10, BY FOLLOWING THE EARLIER YEAR ASSESSMENTS AND TO MAINTAIN CONTINUITY, THE AS SESSING OFFICER COMPLETED THE ASSESSMENTS BY DISALLOWING DE DUCTION U/S. 80IA. AGGRIEVED WITH THIS ALSO, THE ASSESSEE FILED APPEALS FOR THESE TWO A.YS. I.E., A.YS. 2008-09 AND 2009-10 . ON APPEAL, THE CIT(A) ALLOWED THE CLAIM OF THE ASSESSEE U/S. 8 0IA OF THE ACT. AGAINST THIS, THE REVENUE IS IN APPEAL BEFORE US. 38. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. WE FIND SIMILAR ISSUE WAS CONSIDERED BY THIS TRIBUNAL IN SUSHEE HITECH CONSTRUCTIONS PVT. LTD. F OR A.YS. 2005-06 TO 2007-08 IN ITA NOS. 269/HYD/2009, ITA NO . 1165/HYD/2009 AND ITA NO. 1171/ HYD/2010 RESPECTIVE LY VIDE ORDER DATED 16.3.2012. THE TRIBUNAL BY THE SAID OR DER DECIDED THE ISSUE IN THE FOLLOWING MANNER- ITA. NO. 129/HYD/2013 & ORS. M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 23 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 T HE PARTIES. WE FIND THAT THE PROVISIONS OF SECTION 80I A (4) OF THE ACT WHEN INTRODUCED AFRESH BY THE FINANC E ACT, 1999, THE PROVISIONS UNDER SECTION 80IA (4A) O F THE ACT WERE DELETED FROM THE ACT. THE DEDUCTION AVAILABLE FOR ANY ENTERPRISE EARLIER UNDER SECTION 80IA (4A) ARE ALSO MADE AVAILABLE UNDER SECTION 80IA (4) ITSELF. FURTHER, THE VERY FACT THAT THE LEGISLATURE MENTIONED THE WORDS (I) 'DEVELOPING' OR (II) 'OPERATING AND MAINTAINING' OR (III) 'DEVELOPING, OPERATING AND MAINTAINING' CLEARLY INDICATES THAT A NY 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 PURCHASE OF MATERIALS HIMSELF AND EXECUTES THE DEVELOPMENT WORK I.E., CARRIES OUT THE CIVIL CONSTRUCTION WORK, HE WILL BE ELIGIBLE FOR TA X BENEFIT UNDER SECTION 80 IA OF THE ACT. IN CONTRAST TO THIS, A ASSESSEE, WHO ENTERS INTO A CONTRACT WITH ANOTHER PERSON INCLUDING GOVERNMENT OR 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 'OWNED' IN SUB- CLAUSE ( A) OF CLAUSE (1) OF SUB SECTION (4) OF SECTION 80IA OF THE ACT REFER TO THE ENTERPRISE. BY READING OF THE SECT ION, IT IS CLEARS THAT THE ENTERPRISES CARRYING ON DEVELOPMENT OF INFRASTRUCTURE DEVELOPMENT SHOULD BE OWNED BY THE COMPANY 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 ONLY TO THE ENTERPRISE CARRYING ON THE BUSINESS WHICH WOULD MEAN THAT ONLY COMPANIES ARE ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA (4) AND NOT ANY OTHER PERSON LIKE INDIVIDUAL, HUF, FIRM ETC. 32. WE ALSO FIND THAT ACCORDING TO SUB-CLAUSE (A), CLAUSE (I) OF SUB SECTION (4) OF SECTION 80-IA THE WORD 'IT' DENOTES THE ENTERPRISE CARRYING ON THE BUSINES S. THE WORD 'IT' CANNOT BE RELATED TO THE INFRASTRUCTU RE ITA. NO. 129/HYD/2013 & ORS. M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 24 FACILITY, PARTICULARLY IN VIEW OF THE 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 OTHERWISE, THE WORD 'IT' IS USED TO DENOTE AN ENTERPRISE. THEREFORE, THERE IS N O REQUIREMENT THAT THE ASSESSEE SHOULD HAVE BEEN THE OWNER OF THE INFRASTRUCTURE FACILITY. 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 2009 TO MENTION THAT THE ACTIVITY UNDERTAKEN BY THE ASSESSE E IS AKIN TO WORKS CONTRACT AND HE IS NOT ELIGIBLE FO R DEDUCTION UNDER SECTION 80IA (4) OF THE ACT. WHETHE R THE ASSESSEE IS A DEVELOPER OR WORKS CONTRACTOR IS PURELY DEPENDS ON THE NATURE OF THE WORK UNDERTAKEN BY THE ASSESSEE. 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 ASSESSEE. THE AGREEMENT ENTERED INTO WITH TH E GOVERNMENT OR THE GOVERNMENT BODY MAY BE A MERE WORKS CONTRACT OR FOR DEVELOPMENT OF INFRASTRUCTURE . IT IS TO BE SEEN FROM THE AGREEMENTS ENTERED INTO BY T HE ASSESSEE WITH THE GOVERNMENT. WE FIND THAT THE GOVERNMENT HANDED OVER THE POSSESSION OF THE PREMISES OF PROJECTS TO THE ASSESSEE FOR THE DEVELOPMENT OF INFRASTRUCTURE FACILITY. IT IS THE ASSESSEE'S RESPONSIBILITY TO DO ALL ACTS TILL THE POSSESSION OF PROPERTY IS HANDED OVER TO THE GOVERNMENT. THE FIRST PHASE IS TO TAKE OVER THE EXISTING PREMISES OF THE PROJECTS AND THEREAFTER DEVELOPING THE SAME INTO INFRASTRUCTURE FACILITY. SECONDLY, THE ASSESSEE SHALL FACILITATE THE PEOPLE TO USE THE AVAILABLE EXISTING FACILITY EVEN WHILE THE PROCESS OF DEVELOPMENT IS IN PROGRESS. ANY LOSS TO THE PUBLIC CAUSED IN THE PROCESS WOULD BE THE RESPONSIBILITY OF THE ASSESSEE. THE ASSESSEE HAS TO DEVELOP THE INFRASTRUCTURE FACILITY. IN THE PROCESS , ALL THE WORKS ARE TO BE EXECUTED BY THE ASSESSEE. IT MA Y BE LAYING OF A DRAINAGE SYSTEM; MAY BE CONSTRUCTION OF A PROJECT; PROVISION OF WAY FOR THE CATTLE AND BULLOCK CARTS IN THE VILLAGE; PROVISION FOR TRAFFIC WITHOUT ANY HINDRANCE, THE ASSESSEE'S DUTY IS TO DEVELOP INFRASTRUCTURE WHETHER IT INVOLVES CONSTRUCTION OF A PARTICULAR ITEM AS AGREED TO IN T HE AGREEMENT OR NOT. THE AGREEMENT IS NOT FOR A SPECIF IC ITA. NO. 129/HYD/2013 & ORS. M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 25 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 T O BE BROUGHT IN BY THE ASSESSEE BY STICKING TO THE QUALITY AND QUANTITY IRRESPECTIVE OF THE COST OF SU CH MATERIAL. THE GOVERNMENT DOES NOT PROVIDE ANY MATERIAL TO THE ASSESSEE. IT PROVIDES THE WORKS IN PACKAGES AND NOT AS A WORKS CONTRACT. THE ASSESSEE UTILIZES ITS FUNDS, ITS EXPERTISE, ITS EMPLOYEES AN D TAKES THE RESPONSIBILITY OF DEVELOPING THE INFRASTRUCTURE FACILITY. THE LOSSES SUFFERED EITHER BY THE GOVT. OR THE PEOPLE IN THE PROCESS OF SUCH DEVELOPMENT WOULD BE THAT OF THE ASSESSEE. THE ASSESSEE HANDS OVER THE DEVELOPED INFRASTRUCTURE FACILITY TO THE GOVERNMENT ON COMPLETION OF THE DEVELOPMENT. THEREAFTER, THE ASSESSEE HAS TO UNDERTAKE MAINTENANCE OF THE SAID INFRASTRUCTURE FO R A PERIOD OF 12 TO 24 MONTHS. DURING THIS PERIOD, IF ANY DAMAGES ARE OCCURRED IT SHALL BE THE RESPONSIBILITY OF THE ASSESSEE. FURTHER, DURING THI S PERIOD, THE ENTIRE INFRASTRUCTURE SHALL HAVE TO BE MAINTAINED BY THE ASSESSEE ALONE WITHOUT HINDRANCE TO THE REGULAR TRAFFIC. THEREFORE, IT IS CLEAR THAT FROM AN UN-DEVELOPED AREA, INFRASTRUCTURE IS DEVELOPED AND HANDED OVER TO THE GOVERNMENT AND AS EXPLAINED BY THE CBDT VIDE ITS CIRCULAR DATED 18-05 - 2010, SUCH ACTIVITY IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA (4) OF THE ACT. THIS CANNOT BE CONSIDE RED AS A MERE WORKS CONTRACT BUT HAS TO BE CONSIDERED AS A DEVELOPMENT OF INFRASTRUCTURE FACILITY. THEREF ORE, THE ASSESSEE IS A DEVELOPER AND NOT A WORKS CONTRACTOR AS PRESUMED BY THE REVENUE. THE CIRCULAR ISSUED BY THE BOARD, RELIED ON BY LEARNED COUNSEL F OR THE ASSESSEE, CLEARLY INDICATE THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA (4) OF TH E ACT. THE DEPARTMENT IS NOT CORRECT IN HOLDING THAT THE ASSESSEE IS A MERE CONTRACTOR OF THE WORK AND NOT A DEVELOPER. 34. WE ALSO FIND THAT AS PER THE PROVISIONS OF THE SECTION 80IA OF THE ACT, A PERSON BEING A COMPANY HAS TO ENTER INTO AN AGREEMENT WITH THE GOVERNMENT OR GOVERNMENT UNDERTAKINGS. SUCH 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 PERSON ENTERING INTO AN AGREEMENT FOR UNDERTAKING THE DEVELOPMENT OF INFRASTRUCTURE ITA. NO. 129/HYD/2013 & ORS. M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 26 FACILITY. EVERY AGREEMENT ENTERED INTO IS A CONTRAC T. THE WORD 'CONTRACTOR' IS USED TO DENOTE THE PERSON WHO ENTERS INTO SUCH CONTRACT. EVEN A PERSON WHO ENTERS 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 DEVELOPE R BUT EVERY DEVELOPER DEVELOPING INFRASTRUCTURE FACIL ITY ON BEHALF OF THE GOVERNMENT IS A CONTRACTOR. 35. WE FIND THAT THE DECISION RELIED ON BY THE LEAR NED COUNSEL FOR THE ASSESSEE IN THE CASE OF CIT VS. LAX MI CIVIL ENGINEERING WORKS [SUPRA] SQUARELY APPLICABLE TO THE ISSUE UNDER DISPUTE WHICH IS IN FAVOUR OF TH E ASSESSEE WHEREIN IT WAS HELD THAT MERE DEVELOPMENT OF A INFRASTRUCTURE FACILITY IS AN ELIGIBLE ACTIVIT Y FOR CLAIMING DEDUCTION UNDER SECTION 80IA OF THE ACT AFTER CONSIDERING THE JUDGEMENT OF THE MUMBAI HIGH COURT IN THE CASE OF ABG HEAVY ENGINEERING [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 AC T, INTENDED TO COVER THE ENTITIES CARRYING OUT DEVELOP ING, OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILI TY KEEPING IN MIND THE PRESENT BUSINESS MODELS AND INTEND TO GRANT THE INCENTIVES TO SUCH ENTITIES. TH E CBDT, ON SEVERAL OCCASIONS, CLARIFIED THAT PURE DEVELOPER SHOULD ALSO BE ELIGIBLE TO CLAIM DEDUCTIO N UNDER SECTION 80IA OF THE ACT, WHICH ULTIMATELY CULMINATED INTO AMENDMENT UNDER SECTION 80IA OF THE ACT, IN THE FINANCE ACT 2001, TO GIVE EFFECT TO THE AFORESAID CIRCULARS ISSUED BY THE CBDT. WE ALSO FIN D THAT, TO AVOID MISUSE OF THE AFORESAID AMENDMENT, AN EXPLANATION WAS INSERTED IN SECTION 80IA OF THE ACT, IN THE FINANCE ACT-2007 AND 2009, TO CLARIFY T HAT MERE WORKS CONTRACT WOULD NOT BE ELIGIBLE FOR DEDUCTIONS UNDER SECTION 80IA OF THE ACT. BUT, CERTAINLY, THE EXPLANATION CANNOT BE READ TO DO AWA Y WITH THE ELIGIBILITY OF THE DEVELOPER; OTHERWISE, T HE PARLIAMENT WOULD HAVE SIMPLY REVERSED THE AMENDMENT MADE IN THE FINANCE ACT, 2001. THUS, THE AFORESAID EXPLANATION WAS INSERTED, CERTAINLY, TO DENY THE TAX HOLIDAY TO THE ENTITIES WHO DOES ONLY MERE WORKS CONTACT OR SUB-CONTRACT AS DISTINCT FROM THE DEVELOPER. THIS IS CLEAR FROM THE EXPRESS INTENSION OF THE PARLIAMENT WHILE INTRODUCING THE EXPLANATION. THE EXPLANATORY MEMORANDUM TO FINANCE ACT 2007 STATES THAT THE PURPOSE OF THE TAX ITA. NO. 129/HYD/2013 & ORS. M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 27 BENEFIT HAS ALL ALONG BEEN TO ENCOURAGE INVESTMENT IN DEVELOPMENT OF INFRASTRUCTURE SECTOR AND NOT FOR TH E PERSONS WHO MERELY EXECUTE THE CIVIL CONSTRUCTION WORK. IT CATEGORICALLY STATES THAT THE DEDUCTION UN DER SECTION 80IA OF THE ACT IS AVAILABLE TO DEVELOPERS WHO UNDERTAKES ENTREPRENEURIAL AND INVESTMENT RISK AND NOT FOR THE CONTRACTORS, WHO UNDERTAKES ONLY BUSINESS RISK. WITHOUT ANY DOUBT, THE LEARNED COUNSEL FOR THE ASSESSEE CLEARLY DEMONSTRATED BEFOR E US THAT THE ASSESSEE AT PRESENT HAS UNDERTAKEN HUGE RISKS IN TERMS OF DEPLOYMENT OF TECHNICAL PERSONNEL , PLANT AND MACHINERY, TECHNICAL KNOW-HOW, EXPERTISE AND FINANCIAL RESOURCES. FURTHER, THE ORDER OF TRIBUNAL IN THE CASE OF B.T. PATIL CITED SUPRA IS P RIOR TO AMENDMENT TO SEC 80IA(4), AFTER THE AMENDMENT THE SECTION 80IA(4) READ AS (I) DEVELOPING OR (II) OPERATING AND MAINTAINING OR (III) DEVELOPING, OPERATING AND MAINTAINING ANY INFRASTRUCTURE FACILI TY, PRIOR TO AMENDMENT THE 'OR' BETWEEN THREE ACTIVITIE S WAS NOT THERE, AFTER THE AMENDMENT 'OR' HAS BEEN INSERTED W.E.F. 1-4-2002 BY FINANCE ACT 2001. THEREFORE, IN OUR CONSIDERED VIEW, THE ASSESSEE SHOULD NOT BE DENIED THE DEDUCTION UNDER SECTION 80IA OF THE ACT AS THE CONTRACTS INVOLVES, DEVELOPMENT, OPERATING, MAINTENANCE, FINANCIAL INVOLVEMENT, AND DEFECT CORRECTION AND LIABILITY PERIOD, THEN SUCH CONTRACTS CANNOT BE CALLED AS SIMPLE WORKS CONTRACT. IN OUR OPINION THE CONTRACTS WHICH CONTAIN ABOVE FEATURES TO BE SEGREGATED AND ON THIS DEDUCTION U/S. 80-IA HAS TO BE GRANTED AND THE OTHER AGREEMENTS WHICH ARE PURE WORKS CONTRACTS HIT BY THE EXPLANATION SECTION 80IA(13), THOSE WORK ARE NOT ENTITLE FOR DEDUCTION U/S 80IA OF THE ACT. THE PROFIT FROM SUCH CONTRACTS WHICH INVOLVES DEVELOPMENT, OPERATING, MAINTENANCE, FINANCIAL INVOLVEMENT, AND DEFECT CORRECTION AND LIABILITY PERIOD IS TO BE COMPUTED BY ASSESSING OFFICER ON PR O- RATA BASIS OF TURNOVER. THE ASSESSING OFFICER IS DIRECTED TO EXAMINE AND GRANT DEDUCTION ON ELIGIBLE TURNOVER AS DIRECTED ABOVE. IT IS NEEDLESS TO SAY T HAT IN SIMILAR CIRCUMSTANCES, SIMILAR VIEW HAS BEEN TAKEN BY THE CHENNAI BENCH OF THE TRIBUNAL AND DEDUCTION U/S. 80IA WAS GRANTED IN THE CASE OF M/S. CHETTINAD LIGNITE TRANSPORT SERVICES (P) LTD., IN I TA NO. 2287/MDS/06 ORDER DATED 27TH JULY, 2007 FOR THE ASSESSMENT YEAR 2004-05. LATER IN ITA NO. 1179/MDS/08 VIDE ORDER DATED 26TH FEBRUARY, 2010 ITA. NO. 129/HYD/2013 & ORS. M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 28 THE TRIBUNAL HAS TAKEN THE SAME VIEW BY INTER-ALIA HOLDING AS FOLLOWS: '7. MOREOVER, THE REASONS FOR INTRODUCING THE EXPLA NATION WERE CLARIFIED AS PROVIDING A TAX BENEFIT BECAUSE MODERN ISATION REQUIRES A MASSIVE EXPANSION AND QUALITATIVE IMPROV EMENT IN INFRASTRUCTURES LIKE EXPRESSWAYS, HIGHWAYS, AIRPORT S, PORTS AND RAPID URBAN RAIL TRANSPORT SYSTEMS. FOR THAT PURPOS E, PRIVATE SECTOR PARTICIPATION BY WAY OF INVESTMENT IN DEVELO PMENT OF 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 TH E PROVISIONS OF SECTION 80IA SHALL NOT APPLY TO A PER SON WHO EXECUTES A WORKS CONTRACT ENTERED INTO WITH THE UND ERTAKING OR ENTERPRISE REFERRED TO IN THE SECTION BUT WHERE A P ERSON MAKES THE INVESTMENT AND HIMSELF EXECUTES THE DEVELOPMENT WORK, HE CARRIES OUT THE CIVIL CONSTRUCTION WORK, HE WILL BE ELIGIBLE FOR THE TAX BENEFIT UNDER SECTION 80IA.' 36. THE ABOVE ORDER WAS FOLLOWED IN SUBSEQUENT ASSESSMENT YEARS 2007-2008 & 2008-09 IN ITA NOS. 1312 & 1313/MDS/2011 VIDE ORDER DATED 18.11.2011 IN THE CASE OF THE SAME ASSESSEE. FURTHER, IN SIMILAR CIRCUMSTANCES, THIS TRIBUNAL IN THE CASE OF M/S. GVPR ENGINEERS LTD. HYDERABAD IN ITA NO. 347/H/08 & OTHERS VIDE ORDER DATED 29TH 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 CONSORTIUM AND NOT AS A SUB- CONTRACTOR, THEN ALSO THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S 80IA OF THE ACT. THE SAME IS APPLICABLE IN CASE OF WORK ALLOTTED BY GOVERNMENT CORPORATION/GOVERNMENT BODIES. 38. FURTHER IN THE CASE OF R.R. CONSTRUCTIONS, THE CHENNAI 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 FOLLOWS: '3. WE HAVE HEARD RIVAL SUBMISSIONS AND HAVE CAREFU LLY PERUSED THE ENTIRE RECORD. THE FIRST ISSUE OF THE A PPEAL IS REGARDING CLAIM OF DEDUCTION UNDER SECTION 80IA(4) OF THE ACT. THE CASE OF THE REVENUE IS THAT THE ASSESSEE IS A ' WORKS CONTRACTOR' AND NOT A 'DEVELOPER' AS STIPULATED UND ER SECTION 80IA(4) OF THE ACT. THE SECTION 80IA(4) APPLIES TO ANY ITA. NO. 129/HYD/2013 & ORS. M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 29 ENTERPRISE, WHICH CARRIES ON THE BUSINESS OF (I) DE VELOPING OR (II) OPERATING AND MAINTAINING OR (III) DEVELOPING, OPERATING AND MAINTAINING ANY INFRASTRUCTURE FACILITIES, WHICH FU LFIL ALL THE ABOVE CONDITIONS. THERE CANNOT BE ANY QUESTION OF P ROVIDING 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 AVAI LABLE IF THE ASSESSEE IS CARRYING OUT THE BUSINESS OF ANY ONE OF THE ABOVE MENTIONED THREE TYPES OF ACTIVITIES. WHEN AN ASSESS EE IS ONLY DEVELOPING AN INFRASTRUCTURE FACILITY PROJECT AND I S NOT MAINTAINING NOR OPERATING IT, OBVIOUSLY SUCH AN ASS ESSEE WILL BE PAID FOR THE COST INCURRED BY IT; OTHERWISE, HOW WI LL THE PERSON, WHO DEVELOPS THE INFRASTRUCTURE FACILITY PROJECT, R EALIZE ITS COST? IF THE INFRASTRUCTURE FACILITY, JUST AFTER ITS DEVE LOPMENT, IS TRANSFERRED TO THE GOVERNMENT, NATURALLY THE COST W OULD BE PAID BY THE GOVERNMENT. THEREFORE, MERELY BECAUSE THE TR ANSFEREE HAD PAID FOR THE DEVELOPMENT OF INFRASTRUCTURE FACI LITY CARRIED OUT BY THE ASSESSEE, IT CANNOT BE SAID THAT THE ASS ESSEE DID NOT DEVELOP THE INFRASTRUCTURE FACILITY. IF THE INTERPR ETATION DONE BY THE ASSESSING OFFICER IS ACCEPTED, NO ENTERPRISE CA RRYING ON THE BUSINESS OF ONLY DEVELOPING HE INFRASTRUCTURE FACIL ITY WOULD BE ENTITLED TO DEDUCTION UNDER SECTION 80IA(4), WHICH IS NOT THE INTENTION OF THE LAW. AN ENTERPRISE, WHO DEVELOP TH E INFRASTRUCTURE FACILITY IS NOT PAID BY THE GOVERNME NT, THE ENTIRE COST OF DEVELOPMENT WOULD BE A LOSS IN THE HANDS OF THE DEVELOPER AS HE IS NOT OPERATING THE INFRASTRUCTURE FACILITY. THE LEGISLATURE HAS PROVIDED THAT THE INCOME OF THE DEV ELOPER 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 DEVE LOPMENT INFRASTRUCTURE FACILITY. OSTENSIBLY, A DEVELOPER WO ULD HAVE INCOME ONLY IF HE IS PAID FOR THE DEVELOPMENT OF IN FRASTRUCTURE FACILITY, FOR THE SIMPLE REASON THAT HE IS NOT HAVI NG THE RIGHT/AUTHORIZATION TO OPERATE THE INFRASTRUCTURE F ACILITY AND TO COLLECT TOLL THERE FROM, HAS NO OTHER SOURCE OF REC OUPMENT OF HIS COST OF DEVELOPMENT. WHILE FILING THE RETURN, THE A SSESSEE HAD MADE CLAIM UNDER SECTION 80IA(4) OF THE ACT. 4. THE ASSESSEE HAS ALSO PRODUCED ALL SIX AGREEMENT S REGARDING SIX PROJECTS UNDERTAKEN BEFORE THE ASSESSING OFFICE R, WHOSE COPIES ARE AVAILABLE BEFORE US ALSO. IT IS A FACT T HAT EVEN AFTER TAKING A CONTRACT FROM THE GOVERNMENT, IF THE ASSES SEE DEVELOPS INFRASTRUCTURE FACILITIES, IT WOULD BE REGARDED AS A 'DEVELOPER' AND 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 SECTION 80IA(4)(I )(A). IT IS UNDENIABLE FACT THAT THE ASSESSEE HAS TAKEN DEVELOP MENT OF INFRASTRUCTURE FACILITY AGREEMENT FROM THE STATE GOVERNMENT/LOCAL AUTHORITY. A CONTRACTOR WHO DEVELO PS THE ITA. NO. 129/HYD/2013 & ORS. M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 30 INFRASTRUCTURE FACILITY BECOMES A DEVELOPER TO CLAI M EXEMPTION UNDER SECTION 80IA(4). THE HON'BLE BOMBAY BENCH OF ITAT WHILE DECIDING THE CASE OF PATEL ENGINEERING LTD. V S. DCIT IN ITA NO.1221/MUM/2004 HAS GONE TO THE EXTENT OF HOLD ING THAT 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 GOVERNMENT S, WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA(4). 5. WE HAVE ALSO TAKEN A SIMILAR VIEW IN ITA NO. 554 /MDS/2010 IN THE CASE OF EAST COAST CONSTRUCTIONS & INDUSTRIE S LTD V. DCIT VIDE ORDER DATED 13.09.2011 AND RELEVANT PARAS FROM 9 TO 14 ARE REPRODUCED HEREUNDER: '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 INFRASTRU CTURE FACILITY'. A PERSON WHO ENTERS INTO CONTRACT WITH A NOTHER 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 F URTHER BEEN AMENDED BY FINANCE (NO. 2) ACT, 2009 WITH RETROSPEC TIVE EFFECT FROM 1.4.2000. THE AMENDMENT IN THIS EXPLANATION WA S NECESSITATED DUE TO CONTRARY JUDICIAL DECISION ON T HIS ISSUE. THUS, WE CAN UNEQUIVOCALLY NOW SAY THAT ANY UNDERTA KING OR ENTERPRISE WHICH EXECUTES THE INFRASTRUCTURE DEVELO PMENT PROJECT, AS REFERRED TO IN SUB-SECTION(4) AS A WORK S CONTRACT AWARDED BY ANY PERSON INCLUDING THE CENTRAL OR STAT E GOVERNMENT, IS NOT ELIGIBLE FOR TAX BENEFIT U/S 80I A(4). HAVING SAID THAT, NOW WE EXAMINE THE FACTS OF THIS CASE. T HE ASSESSEE- COMPANY WAS GIVEN THIS BENEFIT IN ASSESSMENT YEAR 2 003-04 BY THE DEPARTMENT ON IDENTICAL FACTS AFTER CONSIDERING THE EXPLANATION AND AMENDMENT THERETO. TO TRACE THE HIS TORY OF THIS DEDUCTION, WE FIND THAT ORIGINALLY, IN THE PRO VISION OF SECTION 80IA, THERE WAS NO MENTION OF ANY DEVELOPME NT OF 'INFRASTRUCTURE FACILITY'. IT IS ONLY WITH EFFECT F ROM 1.4.2000, THIS SECTION WAS DIVIDED INTO TWO PORTIONS 80IA AND 80IB . SECTION 80IA(4) PRESCRIBES ABOUT THE DEDUCTION AVAILABLE TO A DEVELOPER WHO DEVELOPS INFRASTRUCTURE FACILITIES. I N 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 SIM PLY EXECUTES 'WORKS- CONTRACTS'. EXPLANATION IN QUESTION, AS IT STANDS TODAY, READS AS UNDER: 'EXPLANATION - FOR THE REMOVAL OF DOUBTS, IT IS HER EBY DECLARED THAT NOTHING CONTAINED IN THIS SECTION(I.E. 80IA) S HALL APPLY TO A ITA. NO. 129/HYD/2013 & ORS. M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 31 PERSON WHO EXECUTES A WORKS CONTRACT ENTERED INTO W ITH THE UNDERTAKING OR ENTERPRISE, AS THE CASE MAY BE.' IN CONTRAST TO THIS, A PERSON WHO ENTERS INTO A CON TRACT WITH ANOTHER PERSON (I.E., UNDERTAKING OR ENTERPRISE REF ERRED TO IN SECTION 80-IA) FOR EXECUTING WORKS CONTRACT, WILL N OT BE ELIGIBLE FOR TAX BENEFIT UNDER SECTION 80- IA. 10. WE HAVE FOUND THAT THE ASSESSEE-COMPANY IS A WO RKS CONTRACTOR, WHO HAS ENTERED INTO AGREEMENT WITH THE LOCAL BODIES TO EXECUTE CERTAIN PART OF THE WORK AWARDED TO IT THROUGH CONTRACT FOR INFRASTRUCTURE FACILITY. IT IS TRUE THAT WHERE A PERSON WHO MAKES INFRASTRUCTURE AND HIMSELF EXECU TES DEVELOPMENT WORK AND CARRIES OUT CIVIL WORK WILL BE ELIGIBLE FOR TAX BENEFIT U/S 80IA OF THE ACT. IN CONTRAST TO THI S, A PERSON WHO ENTERS INTO A CONTRACT WITH ANOTHER PERSON FOR EXEC UTING WORKS CONTRACT, WILL NOT BE ELIGIBLE FOR TAX BENEFIT U/S 80IA. IT WAS CLARIFIED BY THE CIRCULAR NO. 3 OF 2008 DATED 12.3. 2008 THAT THE PROVISIONS OF SECTION 80IA SHALL NOT APPLY TO A PER SON WHO EXECUTES ONLY WORK CONTRACTS AND ONLY THOSE WHO MAK E THE DEVELOPMENT WORK WILL BE ELIGIBLE FOR TAX BENEFIT U /S 80IA OF THE ACT. BE THAT AS IT MAY, WHEN WE APPLY THIS PROVISIO N IN ITS LETTERS AND SPIRIT, WE FIND THAT THIS ASSESSEE IS V ERILY ELIGIBLE FOR DEDUCTION U/S 80IA, AS THE ASSESSEE-COMPANY FULFILS ALL THE RELEVANT CONDITIONS. THE FACTS OF THIS CASE GO TO P ROVE THAT THE ASSESSEE IS A 'DEVELOPER' OF INFRASTRUCTURE FACILIT IES. 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 PROJ ECTS DURING THE RELEVANT YEAR AND EXECUTED, CONSTRUCTED, DELIVERED AND MAINTAINED BY IT. AS PER THE DEFINITION OF ADVA NCED LAW LEXICON [PLACED AT PAGE 533 OF THE PAPER BOOK] 'DEV ELOPER' MEANS - A PERSON ENGAGED IN DEVELOPMENT OR OPERATIO N OR MAINTENANCE OF SPECIAL ECONOMIC ZONE, AND ALSO INCL UDES ANY PERSON AUTHORIZED FOR SUCH PURPOSE BY ANY SUCH DEVE LOPER. THE 'WORKS CONTRACT' MEANS AN AGREEMENT IN WRITING FOR THE EXECUTION OF ANY WORK RELATING TO CONSTRUCTION, REP AIR, OR MAINTENANCE OF ANY BUILDING OR SUPERSTRUCTURE, DAM, WEIR, CANAL, RESERVOIR, TANK, LAKE, ROAD, WELL, BRIDGE, C ULVERT, FACTORY, WORKSHOP, POWERHOUSE, TRANSFORMERS OR SUCH OTHER WO RKS OF THE STATE GOVERNMENT OR PUBLIC UNDERTAKINGS AS THE STAT E GOVERNMENT MAY BE BY NOTIFICATION, SPECIFY IN THIS BEHALF AT ANY OF ITS STAGES ENTERED INTO BY THE STATE GOVERNMENT OR BY AN OFFICIAL OF THE STATE GOVERNMENT OR PUBLIC UNDERTAK ING AND INCLUDES AN AGREEMENT FOR THE SUPPLY OF GOODS OR MA TERIAL AND ALL OTHER MATTERS RELATING TO EXECUTION OF ANY OF T HE SAID WORKS. THE CASE OF ACIT VS INDWELL LIANINGS PVT. LTD (SUPR A), ON WHICH THE ASSESSING OFFICER HAS PLACED RELIANCE IS ALSO RELEVANT ITA. NO. 129/HYD/2013 & ORS. M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 32 AND WE EXTRACT CERTAIN RELEVANT PORTION OF THIS DEC ISION FOR READY REFERENCE: VIDE FINANCE ACT, 2007, AN EXPLANATION WAS INSERTED WITH RETROSPECTIVE EFFECT FROM APRIL, 2000 AFTER SUB-SEC TION (13) OF SECTION 80- IA, WHICH READS AS UNDER : 'FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED T HAT NOTHING CONTAINED IN THIS SECTION SHALL APPLY TO A PERSON W HO EXECUTES A WORKS CONTRACT ENTERED INTO WITH THE UNDERTAKING OR ENTERPRISE, AS THE CASE MAY BE.' ACCORDING TO ATTORNEY'S POCKET DICTIONARY, IN RELAT ION TO A CORPORATION OR BUSINESS, THE TERM 'UNDERTAKING' DEN OTES ITS WHOLE ENTERPRISE AND THE WORD 'ENTERPRISE' CONNOTES ALL THE RELATED ACTIVITIES PERFORMED EITHER THROUGH UNIFIED OPERATION OR COMMON CONTROL BY ANY PERSON OR PERSONS FOR A COMMO N BUSINESS PURPOSE. THE MENS LEGIS WITH REFERENCE TO DEVELOPER OF INFRA STRUCTURE FACILITY CAN BE GATHERED FROM THE MEMORANDUM EXPLAI NING 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 DEVELOPM ENT OF INFRASTRUCTURE FACILITIES, INDUSTRIAL PARKS AND SPE CIAL 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 SYST EMS) WHICH WAS LACKING IN OUR COUNTRY. THE PURPOSE OF THE TAX BENEFIT HAS ALL ALONG BEEN FOR ENCOURAGING PRIVATE SECTOR PARTI CIPATION BY WAY OF INVESTMENT IN DEVELOPMENT OF THE INFRASTRUCT URE SECTOR AND NOT FOR THE PERSONS WHO MERELY EXECUTE THE CIVI L CONSTRUCTION WORK OR ANY OTHER WORKS CONTRACT. ACCORDINGLY, IT IS PROPOSED TO CLARIFY THAT THE PRO VISIONS OF SECTION 80-IA SHALL NOT APPLY TO A PERSON WHO EXECU TES A WORKS CONTRACT ENTERED INTO WITH THE UNDERTAKING OR ENTER PRISE REFERRED TO IN THE SAID SECTION. THUS, IN A CASE WH ERE A PERSON MAKES THE INVESTMENT AND HIMSELF EXECUTES THE DEVEL OPMENT WORK, I.E., CARRIES OUT THE CIVIL CONSTRUCTION WORK , HE WILL BE ELIGIBLE FOR TAX BENEFIT UNDER SECTION 80- LA. IN C ONTRAST TO THIS, A PERSON WHO ENTERS INTO A CONTRACT WITH ANOTHER PE RSON (I.E., UNDERTAKING OR ENTERPRISE REFERRED TO IN SECTION 80 -IA) FOR ITA. NO. 129/HYD/2013 & ORS. M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 33 EXECUTING WORKS CONTRACT, WILL NOT BE ELIGIBLE FOR TAX BENEFIT UNDER SECTION 80- IA. THIS AMENDMENT WILL TAKE RETROSPECTIVE EFFECT FROM APRIL I, 2000 AND WILL ACCORDINGLY APPLY IN RELATION TO THE ASSESSMENT YEAR 2000-01 AND SUBSEQUENT YEARS.' IT IS MADE ABUNDANTLY CLEAR THAT THE PRESCRIPTION O F SECTION 80- IA SHALL NOT APPLY TO A PERSON WHO EXECUTES WORK CO NTRACTS ENTERED INTO WITH AN UNDERTAKING OR ENTERPRISE. THU S, IN A CASE WHERE A PERSON WHO MAKES INVESTMENT AND HIMSELF EXE CUTES DEVELOPMENT WORKS AND CARRIES OUT CIVIL WORKS, WILL BE ELIGIBLE FOR TAX BENEFIT UNDER SECTION 80- IA OF THE ACT. IN CONTRAST TO THIS, A PERSON WHO ENTERS INTO A CONTRACT WITH ANOT HER PERSON FOR EXECUTING WORKS CONTRACT WILL NOT BE ELIGIBLE F OR THE 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 S UPPLY 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 O FFICER AND REVERSE THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS)' 11. TO FURTHER ELABORATE THE DISCUSSION ON THIS ISS UE, PARAS 5 & 6 OF THE DECISION OF ITAT PUNE BENCH RENDERED IN TH E CASE OF LAXMI CIVIL ENGG. P. LTD VS ADDL. CIT, 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 BEFORE US ARE (I) W HETHER THE CONTRACTOR IS SYNONYMOUS WITH THE DEVELOPER WITHIN THE MEANING OF SECTION 80IA (4)(I) OF THE ACT; (II) WHE THER THE CONDITION PLACED IN CLAUSE (C) IS APPLICABLE TO THE CASE OF A DEVELOPER, WHO IS NOT CARRYING ON BUSINESS OF OPERA TING AND MAINTAINING THE INFRASTRUCTURAL FACILITIES. IN OUR OPINION, THE ANSWER TO THESE QUESTION ARE PROVIDED BY THE JUDGME NT 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 TH E 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 FACILI TY ON OR AFTER 1ST APRIL, 1995. THE SAME REQUIREMENT IS EMBODIED I N SUB ITA. NO. 129/HYD/2013 & ORS. M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 34 CLAUSE (1) OF SUB-CLAUSE (4) OF THE AMENDED PROVISI ONS. IT WAS URGED THAT SINCE THE ASSESSEE WAS NOT OPERATING AND MAINTAINING THE FACILITY, HE DID NOT FULFIL THE CON DITION. 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 1ST APRIL, 1995. T HEREFORE, THE REQUIREMENT WAS MET IN FACT. MOREOVER, AS A MAT TER OF LAW, WHAT THE CONDITION ESSENTIALLY MEANS IS THAT THE IN FRASTRUCTURE FACILITY SHOULD HAVE BEEN OPERATIONAL AFTER 1ST APR IL, 1995. AFTER SECTION 80IA WAS AMENDED BY THE FINANCE ACT, 2001, THE SECTION APPLIES TO AN ENTERPRISE CARRYING ON THE BU SINESS OF (I) DEVELOPING; OR (II) OPERATING AND MAINTAINING; OR ( III) DEVELOPING, OPERATING AND MAINTAINING ANY INFRASTRU CTURE FACILITY' WHICH FULFILS CERTAIN CONDITIONS. THOSE C ONDITIONS ARE (I) OWNERSHIP OF THE ENTERPRISES BY A COMPANY REGIS TERED IN INDIA OR BY A CONSORTIUMS; (II) AN AGREEMENT WITH T HE CENTRAL OR STATE GOVERNMENT, LOCAL AUTHORITY OR STATUTORY B ODY; AND (III) THE START OF OPERATION AND MAINTENANCE OF THE INFRASTRUCTURE FACILITY SHOULD COMMENCE AFTER 1ST A PRIL, 1995. THE REQUIREMENT THAT OPERATION AND MAINTENANCE OF T HE INFRASTRUCTURE FACILITY SHOULD COMMENCE AFTER 1ST A PRIL, 1995 HAS TO BE HARMONIOUSLY CONSTRUED WITH THE MAIN PROV ISION UNDER WHICH DEDUCTION IS AVAILABLE TO AN ASSESSEE W HO DEVELOPS OR OPERATES AND MAINTAINS, OR DEVELOPS, OP ERATES AND MAINTAINS AN INFRASTRUCTURE FACILITY'. A HARMONIOUS READING OF THE PROVISIONS IN ITS ENTIR ETY WOULD LEAD TO THE CONCLUSION THAT THE DEDUCTION IS AVAILA BLE TO AN ENTERPRISE WHICH (I) DEVELOPS, OR OPERATES AND MAIN TAINS; OR (III) DEVELOPS, MAINTAIN AND OPERATES THAT INFRASTR UCTURE FACILITY. HOWEVER, THE COMMENCEMENT OF THE OPERATIO N AND MAINTENANCE: OF THE INFRASTRUCTURE FACILITY SHOULD BE AFTER 1' APRIL, 1995. IN THE PRESENT CASE THE ASSESSEE CLEAR LY FULFILLED THIS CONDITION '. BEFORE THE AMENDMENT THAT WAS BROUGHT ABOUT BY PARL IAMENT BY FINANCE ACT, 2001 WE HAVE ALREADY NOTED THAT THE CO NSISTENT 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 TH AT THE THREE CONDITIONS FOR DEVELOPMENT, OPERATION AND MAINTENAN CE 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, AS SESSEE 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 ITA. NO. 129/HYD/2013 & ORS. M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 35 THAT THE PERSON WHO ONLY DEVELOPS THE INFRASTRUCTUR E DO NOT HAVE THE OCCASION TO OPERATE AND MAINTAIN THE INFRA STRUCTURE. IT IS FURTHER EVIDENT THAT THE HARMONIOUS READING IS N ECESSARY AND MANDATORY IN VIEW OF HIGH COURT'S JUDGMENT IN THE C ASE OF AN ENTERPRISE CARRYING ON BUSINESS OR DEVELOPING WHICH IS THE CASE OF THE ASSESSEE, ALL THE CONDITIONS REFERRED TO CLA USE (I) OF SECTION 80IA (4) SHOULD REFER TO THE CONDITIONS AS APPLICABLE TO THE DEVELOPER. IN OTHER WORDS, THE DEVELOPER WHO IS ONLY DEVELOPING THE INFRASTRUCTURE FACILITIES SINCE HE D OES 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 S HALL AMOUNT TO ABSURDITY AND THEREFORE UNCALLED FOR. THEREFORE, WE FIND REQUIREMENT OF HARMONIOUS READING OF SUB-CLAUSE (C) VIS--VIS OF CLAUSE (I) OF SECTION 80IA (4) OF THE ACT. THUS, THE DISCUSSION IN HIGH COURT'S DECISION IN PARAGRAPH-22 EXTRACTED ABOVE, IS DIRECTLY APPLICABLE TO THE FACTS OF THE CASE AND EV ENTUALLY IS ENTITLED FOR THE DEDUCTION UNDER SECTION 80IA (4) O F THE ACT. ACCORDINGLY, THE MODIFIED GROUND, WHICH IS COMMON I N 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 ITR 188, HA S ORDAINED THAT TAXING STATUTE GRANTING INCENTIVES FOR PROMOTI NG GROWTH AND DEVELOPMENT SHOULD BE LIBERALLY CONSTRUED. 13. NOW, THE QUESTION ARISES AS TO WHETHER THE TERM 'CONTRACTOR' IS NOT ESSENTIALLY CONTRADICTORY TO THE TERM 'DEVEL OPER'. IN FACT, IN EVERY DEVELOPMENT THE TERM 'DEVELOPER' WILL DEFI NITELY BE A 'WORKS CONTRACTOR' BUT EVERY WORKS CONTRACTOR MAY N OT BE A 'DEVELOPER'. A 'DEVELOPER' IS A SPECIFIC KIND OF WO RKS CONTRACTOR TO BE ELIGIBLE FOR DEDUCTION U/S 80IA(4) WHO FULFIL S ALL THE CONDITIONS NAMELY, IF THE ASSESSEE DEVELOPS THE INF RASTRUCTURE FACILITY IF IT OPERATES THE INFRASTRUCTURE FACILITY AND IF IT MAINTAINS THE INFRASTRUCTURE FACILITY OR TO PUT IT IN SIMPLER TERMS, THE HARMONIOUS READING OF THE PROVISIONS IN ITS ENTIRETY WOULD LEAD TO THE CONCLUSION THAT THIS DEDUCTION IS AVAILABLE TO AN ENTERPRISE WHO - DEVELOPS OR OPERATES AND ALSO M AINTAINS; OR DEVELOPS, MAINTAINS AND OPERATES THAT INFRASTRUC TURE FACILITY. THE PROVISION FOR GIVING THE IMPUGNED INCENTIVES HA S BEEN EXAMINED, RE-EXAMINED, MODIFIED AND AMENDED AFTER G IVING CONSCIOUS AND DELIBERATE DISCUSSIONS BY THE CONCERN ED LAW MAKERS. TO OUR GREAT CHAGRIN EVEN AFTER THIS CONSCI OUS EXERCISE AN ENTITY WHO EXECUTES THE WORKS CONTRACT ENTERED I NTO BETWEEN LOCAL AUTHORITY/CENTRAL OR STATE GOVERNMENT AND MAK ES A DEVELOPMENT OF AN INFRASTRUCTURE HAS NOT BEEN EXCLU DED FROM THE SCOPE OF THIS PROVISION. AND RIGHTLY SO, BECAUS E WHAT INFRASTRUCTURE IS REQUIRED IN PUBLIC DOMAIN IS THE OUTLOOK/DUTY OF A LOCAL AUTHORITY OR OF A CENTRAL/STATE GOVERNME NT. WHEN A ITA. NO. 129/HYD/2013 & ORS. M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 36 CERTAIN INFRASTRUCTURE IS NEEDED, THE CONCERNED AUT HORITIES HAVE A BROADER PICTURE IN THEIR MIND AIMING AT ACQUIRING CERTAIN FACILITY FOR WHICH INFRASTRUCTURE DEVELOPMENT IS RE QUIRED. SO, TO SAY, WHEN ANY ASSESSEE/ENTERPRISE AGREES UNDER A CO NTRACT TO DEVELOP SUCH AN INFRASTRUCTURE FACILITY, IT CANNOT STRAIGHT AWAY BE DUBBED AS NOT THE BRAINCHILD OF THAT ENTERPRISE, BUT ONLY OF THE AUTHORITY IN QUESTION. THEREFORE, AGAIN THIS PR OVISION IN SO FAR AS THE CONDITIONS REQUIRED TO BE FULFILLED TO B E ELIGIBLE FOR THIS INCENTIVE HAD TO BE PROVIDED BY THE JURIDICAL FORUMS DEALING WITH THIS ISSUE. AFTER IN-DEPTH DELIBERATIO NS, DISCUSSIONS AND EXAMINATION OF THESE PROVISIONS, FINALLY, IT HA S BEEN RESOLVED THAT IF AN ENTERPRISE EVEN AFTER ENTERING INTO A CONTRACT WITH A LOCAL AUTHORITY OR THE GOVERNMENTS, MAY BE C ENTRAL OR STATE, IN CASE IT CONSTRUCTS THE INFRASTRUCTURE FAC ILITY, OPERATES 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 FLYOVER, BRI DGE 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 PROPOSALS FORM ULATED BY THE DEPARTMENT WHICH ARE STATED TO BE TENTATIVE, TH E ASSESSEE HAS THE LIBERTY TO MAKE DIFFERENT PROPOSALS WITHOUT DETRIMENTAL TO THE GENERAL FEATURES OF THE DEPARTMENTAL PROPOSA L, LIKE ROAD LEVEL/BOTTOM OF 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 MAINTAINED THEREAFT ER. SO, THIS IS A CASE OF TRANSFER OF PROPERTY IN CHATTEL AND NO T A CONTRACT OF SERVICE. A 'DEVELOPER' AS PER THE ADVANCED LAW LEXI CON MEANS 'A PERSON ENGAGED IN DEVELOPMENT OR OPERATION OR MAINTENANCE OF SPECIAL ECONOMIC ZONE, AND ALSO INCL UDES ANY PERSON AUTHORIZED FOR SUCH PURPOSE BY ANY SUCH DEVE LOPER'. IN THE CASE OF ACIT VS BHARAT UDYOG LTD, 'F' BENCH OF ITAT MUMBAI, HAS CONCLUDED THAT ANY ASSESSEE WHO IS ENGA GED IN DEVELOPING THE INFRASTRUCTURE FACILITY AND ALSO OPE RATING AND MAINTAINING THE SAME, IS ENTITLED TO THE BENEFIT OF DEDUCTION U/S 80IA(4). A COPY OF THIS DECISION IS ENCLOSED AT PAG E 139 OF THE PAPER BOOK. IN THE CASE OF PATEL ENGINEERING LTD VS DY. CIT, 84 TTJ (MUMBAI) 646 [COPY ENCLOSED AT PAGE NO. 145 OF THE PAPER BOOK], IT HAS BEEN HELD THAT A PERSON, WHO ENTERS I NTO 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 PROJECT S, IS OBVIOUSLY A CONTRACTOR BUT DOES NOT DEROGATE THE AS SESSEE FROM ITA. NO. 129/HYD/2013 & ORS. M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 37 BEING A 'DEVELOPER' AS WELL. THE TERM 'CONTRACTOR' IS NOT NECESSARILY CONTRADICTORY TO THE TERM 'DEVELOPER'. ON THE OTHER HAND, RATHER SECTION 80IA(4) ITSELF PROVIDES THAT A SSESSEE SHOULD DEVELOP THE INFRASTRUCTURE FACILITY AS PER T HE AGREEMENT WITH THE CENTRAL GOVERNMENT, STATE GOVERNMENT OR A LOCAL AUTHORITY. SO, ENTERING INTO A LAWFUL AGREEMENT AND THEREBY BECOMING A CONTRACTOR SHOULD IN NO WAY BE A BAR TO THE ONE BEING A 'DEVELOPER'. THE ASSESSEE HAS DEVELOPED INF RASTRUCTURE 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 DETRACT T HE ASSESSEE FROM THE POSITION OF BEING A 'DEVELOPER'; NOR WILL IT DEBAR THE ASSESSEE FROM CLAIMING DEDUCTION U/S 80IA(4). THE F ACTS OF THE PRESENT CASE ARE EXACTLY IDENTICAL TO THE FACTS OF THAT CASE RENDERED BY ITAT MUMBAI BENCH IN WHICH UNDER IDENTI CAL FACTS AND CIRCUMSTANCES, THE ASSESSEE HAS BEEN HELD TO BE ELIGIBLE FOR DEDUCTION U/S 80IA(4). SECTION 80IA(4)(I)(B) REQUIR ES 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 TRANSFERRED THE INF RASTRUCTURE FACILITY DEVELOPED BY IT BY HANDING OVER THE POSSES SION THEREOF TO THE CONCERNED AUTHORITY AS REQUIRED BY THE AGREE MENT. THE HANDING OVER OF THE POSSESSION OF DEVELOPED INFRAST RUCTURE FACILITY/PROJECT IS THE TRANSFER OF THE INFRASTRUCT URE 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 RECOUPMEN T OF THE DEVELOPER'S COSTS WHETHER IT BE 'BT' OR 'BOT' OR 'B OOT' BECAUSE IN 'BOT' AND 'BOOT' THIS RECOUPMENT IS BY W AY OF COLLECTION OF TOLL THERE FROM WHEREAS IN 'BT' IT IS BY WAY OF PERIODICAL PAYMENT BY THE GOVERNMENT/AUTHORITY. THE LAND INVOLVED IN INFRASTRUCTURE FACILITY/PROJECT ALWAYS BELONGS TO 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 HAS UNDERTAKEN WOR K OF A MERE 'DEVELOPER'. RATHER, THE STATUTORY PROVISION AS CON TAINED IN SECTION 80IA WHICH PROVIDES FOR DEDUCTION OF INFRAS TRUCTURE FACILITY NO WAY PROVIDES THAT ENTIRE INFRASTRUCTURE FACILITY PROJECT HAS TO BE DEVELOPED BY ONE ENTERPRISE. THUS , AS PER SECTION 80IA THE ASSESSEE SHOULD DEVELOP THE INFRAS TRUCTURE FACILITY AS PER THE AGREEMENT WITH THE CENTRAL/STAT E 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 ALR EADY STATED, ITA. NO. 129/HYD/2013 & ORS. M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 38 THE DECISION OF ACIT VS BHARAT UDYOG LTD, 118 ITD 3 36 AND PATEL ENGINEERING LTD VS DY. CIT, 84 TTJ 646, ARE R ELEVANT. AS PER CIRCULAR NO. 4/2010[F.NO. 178/14/2010-ITA-I] DA TED 18.5.2010, WIDENING OF EXISTING ROADS CONSTITUTES C REATION OF NEW INFRASTRUCTURE FACILITY FOR THE PURPOSE OF SECT ION 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 EXP LANATION 2 TO SECTION 80IA VIDE FINANCE ACT, 2007, DOES NOT AP PLY TO A WORKS CONTRACT ENTERED INTO BY THE GOVERNMENT AND T HE ENTERPRISE. IT APPLIES TO A WORK CONTRACT ENTERED I NTO BETWEEN THE ENTERPRISE AND OTHER PARTY 'THE SUB-CONTRACTOR' . THE AMENDMENT AIMS AT DENYING DEDUCTION TO THE SUB CONT RACTOR WHO EXECUTES A WORK CONTRACT WITH THE ENTERPRISE AS HELD BY THE ITAT, JAIPUR 'A' BENCH IN THE CASE OF OM METAL INFR A PROJECTS LTD VS CIT-I, JAIPUR, IN I.T.A. NO. 722 & 723/JP/20 08 DATED 31.12.2008. THE RELIANCE BY THE LD. CIT(A) ON THE D ECISION OF ITAT, CHENNAI BENCH IN THE CASE OF ACIT VS INDWELL LIANINGS PVT. LTD, 313 ITR(AT) 118, HAS BEEN ENLARGED IN ITS FINDING BY THE ITAT, MUMBAI 'F' BENCH IN ITS DECISION 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 VIEW 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 DEC ISION THE DEFINITION AND DIFFERENCE BETWEEN WORKS CONTRACTOR AND A DEVELOPER HAS BEEN EXAMINED IN DETAIL. THE MAIN THR UST OF THE DECISION IS THAT A DEVELOPER NEED NOT BE THE OWNER OF THE LAND ON WHICH DEVELOPMENT IS MADE. ALTHOUGH THAT DECISIO N WAS 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 INCENTIVE PRO VISIONS, THE CONSTRUCTION SHOULD BE LIBERALLY GIVEN AS HELD BY T HE HON'BLE SUPREME COURT RENDERED IN THE CASE OF BAJAJ TEMPO L TD VS CIT, 196 ITR 188. THUS, WHEN THE ASSESSEE MAKES INVESTME NT AND HIMSELF EXECUTES DEVELOPMENT WORK AND CARRIES OUT C IVIL WORKS, HE IS ELIGIBLE FOR TAX BENEFIT U/S 80IA OF THE ACT. ACCORDINGLY, WITH THE FOREGOING DISCUSSION, WE HOLD THAT THE ASS ESSEE IS ENTITLED TO DEDUCTION U/S 80IA(4) OF THE ACT, AND T HEREFORE, 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 NO T FIND ANY VALID MERIT IN THE REVENUE'S APPEAL. ACCORDINGLY, T HE APPEAL STANDS DISMISSED. ITA. NO. 129/HYD/2013 & ORS. M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 39 39. IN VIEW OF THE ABOVE DISCUSSION, WE ARE INCLINE D TO PARTLY ALLOW THE GROUND RELATING TO CLAIMING OF DEDUCTION U/S. 80IA OF THE ACT IN ALL THESE APPEALS . 39. FURTHER SIMILAR ISSUE WAS CONSIDERED BY THE TRIBUNA L IN THE CASE OF KOYA & CO. CONSTRUCTIONS, HYDERABAD IN ITA NOS. 417-418/HYD/2013 DATED 23.8.2013 AND ALLOWED THE CL AIM OF THE ASSESSEE AFTER CONSIDERING THE GIVING EFFECT OR DER TO THE OPINION OF THE THIRD MEMBER IN THE CASE OF B.T. PAT IL AND SONS, BELGAUM CONSTRUCTIONS PVT. LTD. VS. ACIT IN ITA NO. 1408 AND 1409/PN/2003 DATED 28/02/2013, WHEREIN THE TRIBUNAL HELD THAT IN VIEW OF THE JUDGEMENT OF BOMBAY HIGH COURT IN THE CASE OF ABG HEAVY INDUSTRIES LTD. (322 ITR 323) THE ASSE SSEE ENTITLED FOR 80IA DEDUCTION BY HOLDING AS FOLLOWS: BACKGROUND OF THE CASE IS THAT THE ASSESSING OFFICE R PASSED AN ASSESSMENT ORDER DISALLOWING THE ASSESSEES CLAIM FOR DEDUCTION U/S.80IA(4) OF THE A CT. THE CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. MATTER WAS CARRIED BEFORE THE ITAT. HOWEVE R, WHILE PASSING THE ORDER, THE JUDICIAL MEMBER AND TH E ACCOUNTANT MEMBER DIFFERED. WHILE THE JUDICIAL MEMBER ACCEPTED THE CLAIM OF THE ASSESSEE, THE ACCOUNTANT MEMBER DID NOT AGREE. ACCORDINGLY, UNDER PROVISIONS OF SECTION 255(4) OF THE ACT THE MATTER WAS REFERRED TO THE THIRD MEMBER. THE ISSUE IN QUESTION PERTAINS TO A.Y. 2000-01 AND 2001-02 THE APPEALS WERE HEARD BY THE THIRD MEMBER. HOWEVER, WHILE GIVING ITS OPINION AS PER THE PROVISIONS OF SECTION 255(4) OF THE ACT THE THIRD MEMBER WAS OF THE OPINION THAT THE SAID MATTER OUGHT TO BE HEARD BY THE LARGER BENCH OF THIRD MEMBER I.E. A BENCH COMPRISING OF THREE MEMBERS U/S. 255(4) OF THE ACT. THE MATTER WAS HEARD AT LENGTH BY THE LARGER BENCH OF THE THIRD MEMBER AND THEY AGREED WITH THE ACCOUNTANT MEMBER. THEY WERE OF THE OPINION THAT THE ASSESSEE IS NOT ENTITLED TO DEDUCTION U/S.80IA(4) OF THE ACT. THE SAID MATTER WAS REFERRED BACK TO THE DIVISION BENCH OF THE TRIBUNAL TO GIVE EFFECT IN CONFORMITY WITH THE OPIN ION OF THE THIRD MEMBER AS PER THE PROVISIONS OF SECTIO N 255(4) OF THE ACT. ITA. NO. 129/HYD/2013 & ORS. M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 40 2. THE SAID APPEALS WERE PENDING BEFORE THE DIVISIO N BENCH OF THE TRIBUNAL TO GIVE EFFECT TO THE OPINION OF THE THIRD MEMBER AS PER THE PROVISIONS OF SECTION 255(4) OF THE ACT. HOWEVER, THE MATTER WAS DISMISSED IN LIMINE BECAUSE OF NON-APPEARANCE ON BEHALF OF THE ASSESSEE. THE ASSESSEE MOVED A MISCELLANEOUS APPLICATION BEFORE THE TRIBUNAL TO RECALL THE SAID ORDER. WHILE THE SAID MISCELLANEOUS APPLICATION WAS PENDING BEFORE THE TRIBUNAL, BY WAY OF ABUNDANT PRECAUTION THE ASSESSEE FILED APPEALS BEFORE THE HON'BLE BOMBAY HIGH COURT BEING APPEAL NUMBER ITXA 1307 OF 2011 FOR A.Y. 2000-01 AND 1640 OF 2011 FOR A.Y. 200102 RAISING VARIOUS CONTENTION REGARDING THE ALLOWANCE OF DEDUCTION U/S . 80IA(4) OF THE ACT. 3. WHILE THE SAID APPEAL WAS SUB JUDICE BEFORE THE HON'BLE BOMBAY HIGH COURT THE TRIBUNAL RECALLED ITS ORDER DISMISSING THE APPEALS OF THE ASSESSEE IN LIMINE AND GAVE A FRESH DATE OF HEARING TO THE ASSESSEE. 4. WHILE THE SAID APPEALS ARE PENDING BEFORE THE HON'BLE TRIBUNAL TO GIVE EFFECT TO THE OPINION OF T HE THIRD MEMBER AS PER THE PROVISIONS OF SECTION 255(4 ) OF THE ACT, THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF ABG HEAVY INDUSTRIES LTD., PASSED AN ORDER GRANTING DEDUCTION TO THE SAID ASSESSEE U/S. 80IA(4 ) OF THE ACT. THE SAID JURISDICTIONAL ORDER IS CONTRA RY TO THE OPINION GIVEN BY THE THIRD MEMBER OF THE TRIBUNAL. MEANWHILE THE APPEAL FILED BY THE ASSESSE E AGAINST THE ORDER OF THE TRIBUNAL DISMISSING THE APPEALS OF THE ASSESSEE IN LIMINE, BEFORE THE HON'B LE BOMBAY HIGH COURT CAME UP FOR HEARING ON 24/01/2013. IN THE COURSE OF HEARING BEFORE THE HON'BLE BOMBAY HIGH COURT THE COUNSEL OF THE ASSESSEE BROUGHT TO THE NOTICE OF THE HON'BLE HIGH COURT THE FACT THAT THE TRIBUNAL IN THE MISCELLANEO US APPLICATION FILED BY THE ASSESSEE HAD RECALLED ITS ORDER AND THE SAID MATTER WAS NOW FIXED FOR HEARING ON 15/02/2013. AS SUCH THE ASSESSEE REQUESTED TO WITHDRAW THE SAID APPEAL. THE ASSESSEE ALSO DREW ATTENTION OF THE HON'BLE HIGH COURT TO THE DECISION OF ABG HEAVY INDUSTRIES AND REQUESTED THE HON'BLE BOMBAY HIGH COURT TO DIRECT THE TRIBUNAL TO CONSIDE R THE ABG HEAVY INDUSTRIES DECISION ON THE ISSUE WHILE GIVING EFFECT TO THE OPINION OF THE THIRD MEM BER AS PER THE PROVISIONS OF SECTION 255(4) OF THE ACT. ITA. NO. 129/HYD/2013 & ORS. M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 41 5. THE HON'BLE BOMBAY HIGH COURT PERMITTED THE COUNSEL OF THE ASSESSEE TO WITHDRAW THE SAID APPEALS. WHILE PASSING THE ORDER THE HON'BLE HIGH COURT HAS KEPT ALL THE CONTENTIONS OPEN AND FURTHER DIRECTED THE TRIBUNAL TO CONSIDER THE DECISION OF T HE ABG HEAVY INDUSTRIES AND OTHER DECISIONS WHILE PASSING THEIR ORDER GIVING EFFECT TO THE OPINION OF THE THIRD MEMBER AS PER THE PROVISIONS OF SECTION 255(4 ) OF THE ACT. THE RELEVANT PORTION OF THE SAID ORDER OF HONBLE JURISDICTIONAL HIGH COURT IN ITXA NO.1307 O F 2011 FOR A.Y. 2000-01 AND 1640 OF 2011 FOR A.Y. 2001-02 IS AS UNDER: 1. SINCE THE TRIBUNAL HAS RECALLED THE IMPUGNED ORDER DATED 23.03.2011, THE APPELLANT IS WITHDRAWING ITS APPEAL. 2. FURTHER, WHILE CONSIDERING THE MATTER AFRESH, THE TRIBUNAL WILL TAKE INTO CONSIDERATION ALL DECISIONS INCLUDING THE DECISION OF THIS COURT IN THE MATTER OF CIT V. ABG HEAVY INDUSTRIES LTD. REPORTED IN 322 ITR PAGE 323. ALL CONTENTIONS ARE KEPT OPEN. 3. THE APPEAL IS DISMISSED OF IN ABOVE TERMS. 6. THE ISSUE BEFORE US IS WHETHER THE TRIBUNAL WHIL E COMPLYING WITH THE PROVISIONS OF SECTION 255(4) OF THE ACT CAN CONSIDER THE JUDGMENT OF THE HON'BLE HIGH COURT IN THE CASE OF ABG HEAVY INDUSTRIES. IN LIGHT OF THE CLEAR DIRECTIONS GIVEN BY THE HON'BLE BOMBAY HIGH COURT IN THE APPEALS FILED BY THE ASSESSEE FOR THE IMPUGNED ASSESSMENT YEARS INTER ALIA DIRECTED THE TRIBUNAL TO CONSIDER THE SAID DECISION OF ABG HEAVY INDUSTRIES AND ALL OTHER DECISIONS, WE CAN CONSIDER THE SAID JUDGMENTS OF ABG HEAVY INDUSTRIES AND ALSO THE OTHER JUDGMENTS FOR ALLOWIN G THE DEDUCTION U/S. 80IA(4) OF THE ACT WHILE GIVING EFFECT TO THE OPINION OF THE THIRD MEMBER AS PER TH E PROVISIONS OF SECTION 255(4) OF THE ACT. FOLLOWING THE DIRECTIONS OF THE HON'BLE BOMBAY HIGH COURT BEING THE JURISDICTIONAL HIGH COURT, THE TRIBUNAL IS BOUN D TO FOLLOW THE DIRECTIONS AND WE DO ACCORDINGLY. 7. STAND OF ASSESSEE BEFORE US IS THAT ISSUE AT HAN D IS COVERED BY THE DECISION OF THE HONBLE BOMBAY HIGH COURT IN THE CASE OF ABG HEAVY INDUSTRIES LTD . ITA. NO. 129/HYD/2013 & ORS. M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 42 & OTHERS (SUPRA). IN VIEW OF THE AMENDMENT TO SECTI ON 80IA(4A) BY FINANCE ACT, 1999 EFFECTIVE FROM 01.04.2000 TO AVAIL THE DEDUCTION UNDER SUCH SECTIO N FOR THE A.YS. 2000-01 & 2001-02, ASSESSEE SHOULD CARRY ON ALL THREE ACTIVITIES I.E. DEVELOPING, MAINTAINING & OPERATING CUMULATIVELY. BY DEVELOPING THE INFRASTRUCTURE FACILITY AND TRANSFERRING IT TO ANOTHER PERSON FOR MAINTAINING AND OPERATING, THE BENEFIT CAN BE AVAILED ONLY FROM THE A.Y. 2002-03. IN VIEW OF THE AMENDMENT TO SECTION BY FINANCE ACT, 2001 WHERE IN 'OR' IS INSERTED BETWEEN DEVELOPING AND MAINTAINING & OPERATING I.E. DEVELOPING OR MAINTAINING & OPERATING. IN CASE OF ABG HEAVY INDUSTRIES LTD. & OTHERS (SUPRA), THE HON'BLE BOMBA Y HIGH COURT HAS OBSERVED AS UNDER: 'WITH EFFECT FROM 1ST APRIL, 2000, BY THE FINANCE ACT OF 1999, CERTAIN CHANGES WERE BROUGHT ABOUT. SECTION 80-IA & 80-IR WERE SUBSTITUTED FOR SECTION 80-IA. SUB-SECTION (4) OF SECTION 80-IA OF THE ACT PROVIDED THAT THE SECTION SHALL APPLY TO ANY ENTERPRISE CARRYING ON THE BUSINESS OF (I) DEVELOPING, (II) MAINTAINING & OPERATING, OR (III) DEVELOPING, MAINTAINING AND OPERATING AN INFRASTRUCTURE FACILITY WHICH FULFILS CERTAIN CONDITIONS. BY THE FINANCE ACT OF 2001, THE WORD 'OR' CAME TO BE INTRODUCED AFTER THE WORD DEVELOPING, TO CLARIFY IN EFFECT THAT THE AGREEMENT BETWEEN THE ENTERPRISE AND THE AUTHORITY OF THE CENTRAL OR THE STATE GOVT. OR, AS THE CASE MAY BE, A LOCAL AUTHORITY OR A STATUTORY BODY MAY PROVIDE FOR (I) DEVELOPING, OR (II) MAINTAINING & OPERATING, OR (III). DEVELOPING, MAINTAINING & OPERATING A NEW INFRASTRUCTURE FACILITY. IT WAS FURTHER HELD THAT THE REQUIREMENT OF OPERATION & MAINTENANCE OF INFRASTRUCTURE FACILITY SHOULD COMMENCE AFTER 1ST APRIL, 1995 HAS TO BE HARMONIOUSLY CONSTRUED WITH THE MAIN PROVISION UNDER WHICH THE DEDUCTION IS AVAILABLE. THUS, JURISDICTIONAL HIGH COURT HELD THAT THE AMENDMENT OF FINANCE ACT 2001 OF INSERTING 'OR' BETWEEN 'DEVELOPING' AND 'MAINTAINING & OPERATING' IS CLARIFICATORY IN NATURE TO CURE THE AMBIGUITY OF THE AMENDMENT OF FINANCE ACT, 1999 AND THEREFORE SUCH AMENDMENT WILL BE APPLICABLE RETROSPECTIVELY FROM THE A.Y. 2000-01 & ONWARDS. IN ORDER TO ITA. NO. 129/HYD/2013 & ORS. M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 43 BE ELIGIBLE FOR DEDUCTION THE ASSESSEE SHOULD DEVELOP THE INFRASTRUCTURE FACILITY AS A WHOLE AND NOT IN A PARTICULAR PART OF IT. WE FIND THAT HON'BLE BOMBAY HIGH COURT IN THE CASE OF ABG HEAVY INDUSTRIES HAS OBSERVED AS UNDER: THE ASSESSEE DID NOT HAVE TO DEVELOP THE ENTIRE PROJECT IN ORDER TO QUALIFY FOR A DEDUCTION UNDER S. 80-IA. THE PARLIAMENT DID NOT LEGISLATE A CONDITION IMPOSSIBLE OF COMPLIANCE.' 8. IN THE CASE OF ABG HEAVY INDUSTRIES (SUPRA), THE ASSESSEE THEREIN HAD NOT DEVELOPED THE ENTIRE PORT BUT WAS ONLY THE SUPPLIER OF CRANES AT THE LOADING AND UNLOADING TERMINAL AT THE SAID JNPT PORT. THUS ASSESSEE WAS NOT REQUIRED TO EXECUTE THE ENTIRE PROJECT AS OBSERVED BY THE THIRD MEMBER. ANOTHER SIGNIFICANT WORD USED HERE IS 'OWNED', WHICH INDICATES THAT THE INFRASTRUCTURE FACILITY SHOULD B E OWNED BY A COMPANY SO AS TO BE ENTITLED TO DEDUCTION UNDER THIS SECTION. THE WORK DONE BY THE ASSESSEE IS NOT OWNED BY IT, IT DOES NOT SATISFY S UB CLAUSE (A) OF SECTION 80IA(4)(I). THE INFRASTRUCTUR E FACILITY SHOULD BE OWNED BY THE ASSESSEE IS NOT CORRECT INTERPRETATION. IT IS EVIDENT FROM SECTION ITSELF AS CLARIFIED BY THE JURISDICTIONAL HIGH COURT IN AB G HEAVY INDUSTRIES (SUPRA) INTER ALIA HELD THAT THE ASSESSEE HAS SHOULDERED OUT INVESTMENT & TECHNICAL RISK IN RESPECT OF THE WORK EXECUTED AND IT IS LIAB LE FOR LIQUIDATED DAMAGES IF FAILED TO FULFILL THE OBLIGATION LAID DOWN IN THE AGREEMENT. THE LIABILIT Y WHICH HAS BEEN ASSUMED BY THE ASSESSEE UNDER TERMS OF THE CONTRACT ARE OBLIGATIONS INVOLVING THE DEVELOPMENT OF AN INFRASTRUCTURE FACILITY. THE ASSESSEE HAS ALSO IN ITS EMPLOYMENT TECHNICALLY AND ADMINISTRATIVELY QUALIFIED TEAM OF PERSONS AND THEREFORE IT IS NOT CORRECT TO SAY THAT ASSESSEE IS MERELY A CONTRACTOR & NOT A DEVELOPER. THE ASSESSEE IS ELIGIBLE FOR BENEFIT U/S 80-1 A EVEN IF PART OF THE INFRASTRUCTURAL PROJECT WORK IS EXECUTED. 9. IT WAS FOUND BY THE ERSTWHILE JUDICIAL MEMBER THAT ASSESSEE FULFILLED THE CONDITIONS OF BEING A DEVELOPER AS SUBSEQUENTLY INTERPRETED BY THE HON'BL E BOMBAY HIGH COURT. WITH REGARD TO CLARIFICATORY AMENDMENT TO SUB-SECTION (13) OF SECTION 80IA BY FINANCE ACT 2007 & 2009 WHEREBY THE ASSESSEE IS NOT HELD ELIGIBLE FOR DEDUCTION U/S 80IA(4A). IN TH IS ITA. NO. 129/HYD/2013 & ORS. M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 44 REGARD, WE FIND THAT THE AMENDMENT OF 2007 DEBARS THE SUB-CONTRACTOR FROM AVAILING BENEFITS U/S. 80IA(4A) . THE AMENDMENT OF 2009 IS NOT APPLICABLE IN THE CASE WHERE THE ASSESSEE EXECUTES THE WORK BY SHOULDERING INVESTMENT & TECHNICAL RISK BY EMPLOYING TEAM OF TECHNICALLY & ADMINISTRATIVELY QUALIFIED PERSONS AND IT IS LIABLE FOR LIQUIDATED DAMAGES IF FAILED TO FULFILL THE OBLIGATION LAID DO WN IN THE AGREEMENT AND ALSO SECURING BY BANK GUARANTEE. AS THE ASSESSEE HAS FULFILLED THE SAID CONDITIONS I S EVIDENT AS DISCUSSED ABOVE. PRACTICALLY, THE OPINIO N OF THE THIRD MEMBER OF THE HON'BLE TRIBUNAL HAS BEE N OVERRULED BY THE HON'BLE BOMBAY HIGH COURT THAT EVEN A CONTRACTOR IS A DEVELOPER AND FURTHER INTERPRETATION OF THE AMENDMENTS BY FINANCE ACT 2009 AND THE CONDITIONS TO BE FULFILLED BY AN ASSESSEE TO BE TERMED AS DEVELOPER FOR THE PURPOSE OF SECTION 80IA HAS BEEN FOLLOWED BY VARIOUS TRIBUNALS. 10. IN VIEW OF THE ABOVE, WE FIND THAT LAW AS INTERPRETED BY THE THIRD MEMBER OF THE HON'BLE TRIBUNAL IS NO LONGER GOOD LAW. MORE SPECIFICALLY I N LIGHT OF THE OBSERVATIONS MADE BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF ABG HEAVY INDUSTRIES LIMITED AND WHILE GIVING THE EFFECT AS P ER PROVISIONS 255(4) OF THE ACT THE HON'BLE TRIBUNAL W AS CLEARLY DIRECTED TO CONSIDER THE SAID DECISIONS AND ALLOW THE DEDUCTION U/S. 80IA OF THE ACT FOR ALL TH E PROJECTS UNDERTAKEN BY THE ASSESSEE. 11. THE ASSESSEE COMPANY HAS BEEN INCLUDED AS A SUB CONTRACTOR FOR THE ALL THE OTHER PROJECTS EITHE R THE CONTRACTS ARE DIRECTLY IN THE NAME OF ASSESSEE COMPANY OR IN THE NAME OF THE JOINT VENTURE ENTERPRISE. THE ASSESSEE HAS UNDERTAKEN THE WORK ON BACK TO BACK AGREEMENT CONCEPT UNDER SUB CONTRACT FROM PATEL ENGINEERING COMPANY LIMITED (HEREINAFTER REFERRED TO AS PEC) VIDE SUB-CONTRACT AGREEMENT DATED 15.10.1992 FOR CONSTRUCTION OF TUNNEL WHICH SUPPLIES THE WATER FORM RIVER KOYNA AND MAKES IT AVAILABLE TO POWER HOUSE. IN FACT THE ASSESSEE AND PEC HAD PROPOSED A JOINT VENTURE TO THE RELEVANT AUTHORITIES FOR THE EXECUTION OF THE S AID PROJECT. AS THE PROJECT WAS BEING FINANCED BY WORLD BANK THE RELEVANT AUTHORITIES FORWARDED THE PROPOSA L TO WORLD BANK. WORLD BANK HOWEVER DID NOT ACCEPT THE PROPOSAL BUT THEY SUGGESTED THAT M/S. PATEL ITA. NO. 129/HYD/2013 & ORS. M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 45 ENGINEERING COMPANY LTD., MAY EMPLOY THE ASSESSEE COMPANY AS SUB CONTRACTOR. IT WAS AT THE SUGGESTION OF WORLD BANK THAT THE ASSESSEE COMPANIES NAME WAS INCLUDED AS A SUB CONTRACTOR INSTEAD OF FORMING OF A JOINT VENTURE. THE PROJECT AUTHORITIES INCLUDING WORLD BANK HAVE APPROVED AND CERTIFIED THE ASSESSEE AS SUB-CONTRACTOR FOR THE AB OVE SAID WORK AFTER THOROUGH SCRUTINY AND DETAIL DESCRIPTION OF THE WORK TO BE UNDERTAKEN BY THE ASSESSEE COMPANY. THE ASSESSEE COMPANY NAME IS INCLUDED IN MAIN CONTRACT AGREEMENT ENTERED INTO BETWEEN THE EMPLOYER AND PEC AS SUB CONTRACTOR FOR KOYNA PROJECT WORKS BY PROJECT AUTHORITIES. IN FACT THE GOVERNMENT OF MAHARASHTRA HAS ENTERED IN TRIPARTITE AGREEMENT WITH THE ASSESSEE COMPANY AND PEC. WORKS COMPLETION CERTIFICATE HAS BEEN ISSUED I N FAVOUR OF THE ASSESSEE COMPANY FOR THE EXECUTION OF THE WORK. POWER OF ATTORNEY IS GIVEN BY PRIME CONTRACTOR TO SUB CONTRACTOR AND ACCEPTED AND EXCEEDED BY PROJECT AUTHORITIES. 12. THE FACT THAT THE ASSESSEE HAS A TRIPARTITE AGREEMENT WITH THE RELEVANT AUTHORITIES MAKES THE ASSESSEE A PARTY TO THE MAIN CONTRACT WORK ITSELF A ND WHICH CLEARLY SHOWS THAT THE ASSESSEE ON THEIR OWN RIGHT ARE CONTRACTORS AND NOT JUST SUB CONTRACTORS AS NORMALLY UNDERSTOOD. THE ASSESSEE IS THE CONTRACTOR VIS-A-VIS THE PORTION ALLOTTED TO THEM AND NOT ONLY SUBCONTRACTORS, I.E. A DIRECT PARTY TO THE MAIN AGREEMENT. THE ASSESSEE HAS ENTERED INTO A MAIN AGREEMENT, IN THEIR OWN RIGHT, CAN CLAIM THE BENEFI T OF SECTION 80IA. AS THE ASSESSEE BEING DIRECTLY UNDER CONTRACT TO THE CONCERN FOR THE WORK DONE AND ARE ALSO DIRECTLY DEALING WITH THE GOVERNMENT ON WHOSE BEHALF THE ASSESSEE ARE DOING THE WORK, THEY CAN BE CONSIDERED AS MAIN CONTRACTORS ALONGWITH PEC AND ARE NOT SIMPLY SUB CONTRACTORS VIS-A-VIS THE WORK UNDERTAKEN BY THEM. AS SUCH THE ASSESSEE IS OTHERWISE FULFILLING ALL THE CONDITIONS THEY ARE EN TITLED TO DEDUCTION UNDER THE PROVISIONS OF SECTION 80IA. SIMILAR VIEW HAS BEEN TAKEN BY ITAT INDORE IN THE CASE OF AYUSH AJAY CONSTRUCTION LTD. VS ITO 79 ITD 213, WHEREIN THE ENTIRE PROJECT WAS ASSIGNED BY THE PARTY GETTING THE TENDER TO ANOTHER COMPANY. IN SUC H CIRCUMSTANCES THE ITAT INDORE, HAS HELD AS UNDER: 'IT IS A SETTLED POSITION OF LAW THAT THAT WHILE CONSTRUING THE TAX PROVISIONS BESIDES ITA. NO. 129/HYD/2013 & ORS. M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 46 DETERMINING THE INTENTION OF THE LEGISLATURE FOR ITS INTRODUCTION TO THE STATUTE, THE EXPRESSION USED THEREIN SHOULD ORDINARILY BE UNDERSTOOD IN A SENSE IN WHICH THEY BEST HARMONISE WITH THE OBJECT OF THE STATUTE AND WHICH EFFECTUATE THE OBJECT OF THE LEGISLATION. THE PROVISIONS OR PROMOTING ECONOMIC GROWTH SHOULD BE INTERPRETED LIBERALLY AND THE RESTRICTION ON IT TOO HAS TO BE CONSTRUED SO AS TO ADVANCE THE OBJECTIVE OF THE PROVISIONS AND NOT TO FRUSTRATE IT. IF THE FACTS OF THE CASE WERE PUT WITHIN THE ABOVE PARAMETER, THE ASSESSEE, THOUGH IT NOT ENTERED INTO AN AGREEMENT WITH THE STATE GOVERNMENT AT THE INITIAL STAGE, HAD OBTAINED THE TENDER/CONTRACT BY VIRTUE OF A VALID ASSIGNMENT, WHICH WAS DULY RECOGNISED BY THE STATE GOVERNMENT. THEREFORE, IT SHOULD BE DEEMED TO HAVE ENTERED INTO AN AGREEMENT WITH THE STATE GOVERNMENT FOR CONSTRUCTION OF THE SAID BRIDGE ON BOT BASIS. IT WAS NOT THE CASE OF THE REVENUE THAT THE ENTIRE EXPENDITURE INCURRED IN THE CONSTRUCTION OF THE AFORESAID BRIDGE WAS NOT BORNE BY THE ASSESSEE BUT BY 'A ', THE MAIN TENDERER. ' THE REVENUE HAD REJECTED THE CLAIM OF THE ASSESSEE FOR THE SIMPLE REASON THAT THE ASSESSEE HAD NEVER ENTERED INTO ANY CONTRACT WITH THE STATE GOVERNMENT AND THE ASSESSEE- COMPANY WAS NOTHING BUT A COLOURABLE DEVICE TO EVADE TAX. IT IS A SETTLED POSITION OF LAW THAT THE COMPANY IS A JURISTIC ENTITY AND IT SHOULD BE CONSIDERED INDEPENDENT FROM THE SHAREHOLDERS OR THE DIRECTORS. THE ACTION OF THE ASSIGNING AND THE WORK OF CONSTRUCTION UNDERTAKEN BY THE ASSESSEE WAS RECOGNISED BY THE STATE GOVERNMENT AND A TRIPARTITE AGREEMENT WAS EXECUTED BETWEEN THE ASSESSEE A AND THE STATE GOVERNMENT THROUGH WHICH THE STATE GOVERNMENT HAD RECOGNISED THAT THE ASSESSEE HAD STEPPED INTO THE SHOES OF A AND NOTIFIED AUTHORISING THE ASSESSEE TO COLLECT THE TOLL TAX FOR A PARTICULAR PERIOD. SINCE THE ASSESSEE COMPANY HAD RECTIFIED ALL ACT AND DEEDS OF ITS PROMOTER U' AND OWNED ALL THE ASSETS AND LIABILITIES OF ITS ITA. NO. 129/HYD/2013 & ORS. M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 47 PROMOTER THROUGH AN AGREEMENT OF ASSIGNMENT EXECUTED BETWEEN THE ASSESSEE AND A AFTER OBTAINING APPROVAL FROM THE STATE GOVERNMENT, THE ASSESSEE SHOULD BE DEEMED TO HAVE UNDERTAKEN THE CONSTRUCTION WORK SINCE 1-4- 1995. SINCE THE GOVERNMENT HAD PROVIDED THIS DEDUCTION IN ORDER TO ENCOURAGE ECONOMIC GROWTH OF THE COUNTRY, THE PLENITUDE OF EXEMPTION SHOULD NOT BE WHITTLED DOWN, BY LAYING STRESS ON AMBIGUITY HERE AND THERE. IF IT WAS PROVED THAT, THE ASSESSEE-COMPANY HAD OBTAINED THE STATUS OF A TENDERER BY VIRTUE OF A VALID ASSIGNMENT, IT SHOULD NOT BE DENIED THE BENEFIT OF DEDUCTION PROVIDED BY THE CENTRAL GOVERNMENT THROUGH INTRODUCTION OF SUB- SECTION (4A) OF SECTION 80 IA. THE ACTION OF 'A' AND THE ASSESSEE COULD ONLY BE TERMED AS A VALID TAX PLANNING WHICH WAS PERMISSIBLE UNDER THE LAW. THEREFORE, THE ASSESSEE HAD FULFILLED THE REQUIREMENTS PROVIDED IN SECTION 80IA (4A)(II) FOR CLAIMING DEDUCTION, AND, THEREFORE, THE ASSESSING OFFICER SHOULD HAVE ALLOWED THE DEDUCTION CLAIMED BY THE ASSESSEE COMPANY. 13. IT WAS FURTHER CLARIFIED ON BEHALF OF THE ASSES SEE THAT WITH REGARDS TO BHIMA SINA LINK TUNNEL PROJECT , THE ORIGINAL AGREEMENT IS BETWEEN THE OWNER AND JOINT VENTURE FROM CONSISTING OF THE ASSESSEE COMPANY AND M/S.SWAPNALI CONSTRUCTIONS WHICH WAS FORMED TO SHARE THE WORK IN 60% & 40%. M/S.SWAPNALI CONSTRUCTIONS EXPRESSED THEIR INABILIT Y TO UNDERTAKE THE WORK AND HAD TRANSFERRED THEIR SHARE OF 40% OF WORK TO THE ASSESSEE COMPANY ON BACK TO BACK AGREEMENT BASIS FOR A CONSIDERATION VIDE AGREEMENT DATED 28/04/97. THUS THE ASSESSEE COMPANY HAD EXECUTED 100% OF THE WORK. IT IS FURTHER STATED THAT THE ASSESSEE COMPANY WERE ISSUING R.A. BILLS FOR 100% OF THE WORK DONE TO JOI NT VENTURE FIRM AND JOINT VENTURE FIRM IN TURN ISSUED R.A. BILLS TO THE OWNERS. JOINT VENTURE FIRM HAD NO T EXECUTED ANY PORTION OF WORK UNDER THE PROJECT. THE JOINT VENTURE FIRM HAS FILED ITS RETURN OF INCOME W ITH NIL PROFIT OR LOSS. IN FACT THE WORK COMPLETION CERTIFICATE ISSUED BY PROJECT AUTHORITIES IS IN FAV OUR OF THE ASSESSEE COMPANY ONLY AND NOT IN FAVOUR OF JOIN T VENTURE, ALSO THE WHOLE AMOUNT OF INITIAL SECURITY DEPOSIT, THE BANK GUARANTEES WERE GIVEN BY THE ITA. NO. 129/HYD/2013 & ORS. M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 48 ASSESSEE COMPANY ONLY IN THE NAME OF THE ASSESSEE AND NOT BY THE JOINT VENTURE, AS THE JOINT VENTURE PARTNER IS IN NO WAY CONNECTED WITH THE EXECUTION O F THE WORK AND TO THAT EFFECT IT HAD ALREADY SUBMITTE D NECESSARY INSTRUMENT LIKE 'ASSIGNMENT DEED, 'POWER OF ATTORNEY', UNDERTAKING WITH BANKERS ETC. 14. IN THIS BACKGROUND, THE ASSESSEE COULD CERTAINL Y CLAIM THE DEDUCTIONS UNDER THE PROVISION OF SECTION 80IA. ONE HAS TO SEE THE SUBSTANCE AND NOT THE FORM ESSENTIALLY, THOUGH IT WAS A JOINT VENTURE, IT WAS CONVERTED INTO ASSESSEE'S VENTURE. THE OTHER VENTURER WITHDREW AND THE ENTIRE WORK WAS EXECUTED BY THE ASSESSEE THOUGH IN THE NAME OF JOINT VENTURE . THE JOINT VENTURE IS NOTHING BUT THE VENTURE OF THE ASSESSEE COMPANY AND THE OTHER PERSON NOT BEING A PARTY AFTER WITHDRAWING THE QUESTION OF JOINT VENTU RE DOES NOT ARISE. THE VENTURE WAS FULLY CARRIED OUT B Y THE ASSESSEE AND IT WAS ENTIRELY EXECUTED BY THE ASSESSEE COMPANY. TAKING THE SUBSTANCE OF THE TRANSACTION, THE ASSESSEE ARE ENTITLED TO ALL THE PROFITS IN RESPECT OF THE CONTRACT EXECUTED BY THEM , HENCE THE ASSESSEE WOULD CERTAINLY BE ENTITLED TO DEDUCTION UNDER THE PROVISIONS OF 80IA AS THEY HAVE FULFILLED ALL THE OTHER CONDITIONS. THIS VIEW GET STRENGTH FROM DECISION IN THE CASE OF ITAT, INDORE BENCH, IN CASE OF AYUSH AJAY CONSTRUCTIONS LTD. (SUPRA). THUS, WHILE GIVING EFFECT TO THE OPINION O F THIRD MEMBER U/S.255(4) OF THE ACT, WE TAKE VIEW IN CONFORMITY WITH ORDER OF JURISDICTIONAL HIGH COURT IN CASE OF ABG HEAVY INDUSTRIES LTD. (SUPRA) AVAILABLE AT THIS TIME THOUGH CONTRARY TO THE OPINION EXPRESS ED BY THE THIRD MEMBER. SO IN VIEW OF ABOVE DISCUSSION , FOLLOWING THE RATIO OF JURISDICTIONAL HIGH COURT IN CASE OF ABG HEAVY INDUSTRIES LTD. (SUPRA), THE ASSESSING OFFICER IS DIRECTED TO ALLOW DEDUCTION U/S.80IA(4) OF THE ACT TO THE ASSESSEE WITH REGARD TO THE PROJECT S IN QUESTION FOR BOTH THE YEARS. THE MATTER IS DISPOSED OFF ACCORDINGLY. 40. IN OUR OPINION, IN VIEW OF THE ABOVE DISCUSSION, TH E ASSESSEE IS ENTITLED FOR DEDUCTION U/S. 80IA(4) OF THE ACT. ACCORDINGLY, WE DISMISS THE GROUND TAKEN BY THE REV ENUE. AS WE HAVE DISMISSED THE GROUND TAKEN BY THE REVENUE I N ITS ITA. NO. 129/HYD/2013 & ORS. M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 49 APPEALS, THE GROUND IN THE COS OF THE ASSESSEE, WHI CH IS SUPPORTIVE OF CIT(A) ORDER, BECOME INFRUCTUOUS. 41. IN THE RESULT, REVENUE APPEALS IN ITA NOS. 1483 TO 1488/HYD/ 2012 AND COS OF THE ASSESSEE IN CO NOS. 1 53 TO 158/HYD/ 2012 ARE DISMISSED . 42. TO SUM UP ASSESSEES APPEAL IN ITA NOS. 1425/HYD/20 12 IS ALLOWED S. NO. ITA/CO NO. ASSESSEE/ REVENUE APPEAL RESULT 1. ITA NO.1425/HYD/2012 ASSESSEE ALLOWED 2. 3. ITA NO.1426/HYD/2012 ITA NO.1427/HYD/2012 ASSESSEE PARTLY ALLOWED FOR STATISTICAL PURPOSES. 4. 5. ITA NO.129/HYD/2013 ITA NO.130/HYD/2013 ASSESSEE ASSESSEE ALLOWED ALLOWED 6. 7. ITA NO.104/HYD/2013 ITA NO.105/HYD/2013 REVENUE REVENUE DISMISSED DISMISSED 8. 9. CO NO. 15/HYD/2013 CO NO. 16/HYD/2013 ASSESSEE ASSESSEE DISMISSED DISMISSED 10- 15 ITA NO. 1483-1488/ HYD/2012 REVENUE DISMISSED 16- 21 CO NOS. 153 TO 158/12 ASSESSEE DISMISSED ORDER PRONOUNCED IN THE OPEN COURT ON 30 TH AUGUST, 2013. SD/ - (SAKTIJIT DEY) JUDICIAL MEMBER SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED 30 TH AUGUST, 2013 TPRAO COPY FORWARDED TO: 1. M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD., 1 - 11251/ 4/B, 6 TH FLOOR, TIRUMALA HEIGHTS, BEHIND SHOPPERS STOP, BEGUMPET, HYDERABAD-16 2. THE ACIT, CIRCLE - 2(3), 8 TH FLOOR, 'B' BLOCK, IT TOWERS, AC GUARDS, MASAB TANK, HYDERABAD-500 004 3. THE DCIT, CIRCLE - 2(3), 8 TH FLOOR, 'B' BLOCK, IT TOWERS, AC GUARDS, MASAB TANK, HYDERABAD-500 004 ITA. NO. 129/HYD/2013 & ORS. M/S. TAHER ALI INDUSTRIES & PROJECTS PVT. LTD. ======================= 50 4. THE DCIT, CIRCLE - 2(2), IT TOWERS, AC GUARDS, MASAB TANK, HYDERABAD-500 004 5 . THE CIT(A) - III , HYDERABAD 6 . THE CIT - II , HYDERABAD 7 . THE DR 'A' BENCH, ITAT, HYDERABAD