Appeal Details
Counselvise Citation
[2016] 131 COUNSELVISE.COM (IT) 4640 (ITAT-KOLKATA)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
3 year(s) 3 month(s) 8 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
24-08-2016
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
A
Next Hearing Date
30-06-2016
Assessment Year
2006-2007
Appeal Filed On
16-05-2013
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCH A KOLKATA BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER AND SHRI S.S.VISWANETHRA RAVI, JUDICIAL MEMBER ITA NO.1291-1292/KOL/2013 ASSESSMENT YEARS:2006-07 & 2009-10 DCIT, CENTRAL CIRCLE- XXVIII, 4 TH FLOOR, AAYAKAR POORVA, 110, SHANTI PALLY, KOLKATA-700 107 / V/S . M/S SPML INFRA LTD (ERSTWHILE M/S SUBHASH PRJECTS & MARKETING LTD) 22, CAMAC STREET, KOLKATA- 700 016 [ PAN NO.AADCS 2469 K ] /APPELLANT .. /RESPONDENT /BY APPELLANT SHRI H.K.LAL, CIT-DR /BY RESPONDENT SHRI RAVI TULSIYAN, FCA /DATE OF HEARING 30-06-2016 /DATE OF PRONOUNCEMENT 24-08-2016 /O R D E R PER WASEEM AHMED, ACCOUNTANT MEMBER:- BOTH APPEAL BY REVENUE ARE AGAINST THE SEPARATE ORD ERS OF COMMISSIONER OF INCOME TAX (APPEALS)-XXXVIII, KOLKATA IN APPEAL NO. 204-205/CC-XXVIII/CIT(A)- C-I/11-12 BY EVEN DATE I.E. 24.01.2012. ASSESSMENTS WERE FRAMED BY DCIT.CC.XXVIII, KOLKATA U/S 143(3)/147 OF THE INCOM E TAX ACT, 1961 (HEREINAFTER REFERRED TO AS THE ACT) VIDE HIS ORDER DATED 29.1 2.2011 FOR ASSESSMENT YEARS 2006-07 & 2009-10 RESPECTIVELY. ITA NO.1291-1292/KOL/2013 A.YS 06 -07 & 09-10 DCIT CC-XXVIII, KOL. V. M/S SPML INFRA LT D PAGE 2 2. BOTH THE APPEALS ARE HEARD TOGETHER AND ARE BEIN G DISPOSED OF BY WAY OF CONSOLIDATE ORDER FOR THE SAKE OF CONVENIENCE. SHRI RAVI TULSIYN LD. AUTHORIZED REPRESENTATIVE APP EARED ON BEHALF OF ASSESSEE AND SHRI H.K. LAL, LD. DEPARTMENTAL REPRESENTATIVE APPE ARED ON BEHALF OF REVENUE. 3. FIRST WE TAKE UP ITA NO.1291/KOL/2013 FOR A.Y 06-07. THE GROUNDS RAISED BY THE REVENUE PER ITS APPEAL ARE AS UNDER:- A) THAT THE ORDER OF THE LD. CIT(A) IS BAD IN LAW A S THE SAME HAS BEEN PASSED IN THE NAME OF M/S SUBHASH PROJECTS & MARKETING LTD WHILE THE NAME OF THE ASSESSEE HAS CHANGED TO M/S SPML INFRA LTD W.E.F. 12.04.2010, B) THAT THE LD. CIT(A) HAS SERVED A COPY OF THE REM AND REPORT FURNISHED BY THIS OFFICE TO THE ASSESSEE BUT HAS NOT PROVIDED ANY OPP ORTUNITY TO THIS OFFICE TO OFFER ITS COMMENTS ON THE REJOINDER FILED BY THE ASSESSEE IN RESPONSE TO THE SAID REMAND REPORT AND, THUS, HAS VIOLATED THE PRINCIPLES OF NA TURAL JUSTICE, C) THAT THE LD. CIT(A) HAS FAILED TO APPRECIATE THA T THE DEFINITION OF THE TERM 'WORKS CONTRACT' AS OCCURRING IN EXPLANATION BELOW SECTION 80-IA(13) HAS NOT BEEN PROVIDED IN THE INCOME-TAX ACT AND, HENCE, THE SAME HAS TO B E IMPORTED FROM THE RELATED ACTS. D) THAT THE LD. CIT(A) HAS FAILED TO APPRECIATE THA T THE DEFINITIONS OF THE TERM 'WORKS CONTRACT' AS PER CENTRAL SALES TAX ACT AND WEST BEN GAL VALUE ADDED TAX ACT, ARE APPLICABLE IN THE CASE OF THE ASSESSEE SINCE THE SA ID ACTS ARE APPLICABLE TO THE CONTRACTS EXECUTED BY THE ASSESSEE, E) THAT THE LD. CIT(A) HAS FAILED TO APPRECIATE THA T CONSIDERING THE DEFINITION OF ' WORKS CONTRACT ' AS PER CENTRAL SALES TAX ACT AND WEST BENGAL VALU E ADDED TAX ACT, THE ASSESSEE-COMPANY IS SIMPLY A CONTRACTO R WHO MERELY EXECUTED WORKS CONTRACT AND HENCE NOT ENTITLED TO THE DEDUCTION U/ S 80LA WITHIN THE SCOPE OF EXPLANATION BELOW SECTION 80-IA(13) OF THE ACT F) THAT THE LD. CITCA) HAS FAILED TO INTERPRET THE LEGISLATIVE INTENT OF THE PROVISIONS OF SECTION 80-IA TO THE EXTENT SPELT OUT IN CBDT'S CIR CULAR NO. 3 OF 2008 DATED 12.03.2008, WHICH STATES THAT THE INCENTIVE OF DEDU CTION U/S 80-IA HAS ALL ALONG BEEN INTENDED TO BENEFIT DEVELOPERS WHO UNDERTAKE ENTREP RENEURIAL RISK AND INVESTMENT RISK AND NOT CONTRACTORS WHO ONLY UNDERTAKE BUSINESS RIS K, G) THAT THE LD. CIT(A) HAS FAILED TO UNDERSTAND THE DIFFERENCE BETWEEN THE ' DEVELOPMENT AGREEMENT ' AND ' CONSTRUCTION CONTRACT ' WHERE IN THE FORMER'S CASE, THERE IS NO COMMITMENT IN TERMS OF REVENUE TO BE GE NERATED WHILE IN THE CASE OF THE LATER, THERE IS ALWAYS A FIXED COMMITMENT OF REVENU E, H) THAT THE LD. CIT(A) HAS FAILED TO APPRECIATE THA T WHEN AN ASSESSEE EXECUTE A CONTRACT AGAINST A PRE-DETERMINED AMOUNT OF REVENUE , IT CEASE TO UNDERTAKE ANY ITA NO.1291-1292/KOL/2013 A.YS 06 -07 & 09-10 DCIT CC-XXVIII, KOL. V. M/S SPML INFRA LT D PAGE 3 ENTREPRENEURIAL RISK AND INVESTMENT RISK AND THUS L OSES THE CHARACTER OF A ' DEVELOPER ' TO WHICH THE INCENTIVE OF DEDUCTION U/S 80-IA HAS A LL ALONG BEEN AIMED, I) THAT THE LD. CLTCA) HAS FAILED TO APPRECIATE THA T THE SIMPLE FACT THAT TAX WAS DEDUCTED U/S 194C FROM ALL THE ALLEGED 'ELIGIBLE PR OJECTS' MAKES IT CLEAR THAT THE ASSESSEE WAS INTO A SIMPLE CONSTRUCTION CONTRACT AN D THUS WAS NOT ENTITLED TO DEDUCTION U/S 80-IA, J) THAT THE LD. CIT(A) HAS FAILED TO REALISE THAT W HEN AN ASSESSEE EXECUTES A PROJECT OF INFRASTRUCTURE DEVELOPMENT WITH THE ADVANCE RECEIVE D FROM THE GOVERNMENT OR THE LOCAL AUTHORITIES, THE VERY PURPOSE AND INTENT OF P RIVATE SECTOR PARTICIPATION IN THE DEVELOPMENT OF INFRASTRUCTURE IS DEFEATED AND, ACCO RDINGLY, THE ASSESSEE CEASES TO BE ENTITLED TO THE DEDUCTION. GOING BOTH BY WORDS AND SPIRIT OF SECTION 80-IA, K) THAT THE LD. CITCA) HAS ERRED IN FACTS AS WELL A S IN THE CIRCUMSTANCES OF THE CASE IN PLACING RELIANCE UPON THE DECISIONS OF VARIOUS C OURTS OF LAW WHICH ARE YET TO REACH FINALITY, 1) THAT IN VIEW OF THE GROUNDS (C) TO (K) ABOVE, TH E LD. CIT(A) HAS ERRED IN FACTS AS WELL AS IL1 THE CIRCUMSTANCES OF THE CASE IN DIRECT ING TO DELETE THE DISALLOWANCE OF DEDUCTION U/S 80-IA TO THE TUNE OF RS.7,79,20,811/- ; AND M) THAT THE DEPARTMENT CRAVES THE RIGHT TO ADD, DEL ETE, MODIFY OR ABROGATE THE GROUNDS OF APPEAL DURING THE COURSE OF HEARING OF T HE CASE. 4. THE REVENUE HAS RAISED SEVERAL GROUNDS OF APPEAL BUT THE ONLY COMMON ISSUE ARISING IS THAT LD CIT(A) ERRED IN PROVIDING DEDUCT ION U/S. 80-IA(4) OF THE ACT BY TREATING THE ASSESSEE AS DEVELOPER OF INFRASTRUCTUR E FACILITY ALTHOUGH ASSESSEE IS EXECUTING A WORKS CONTRACT. 5. THE FACTS IN BRIEF ARE THAT ASSESSEE IN THE PRES ENT CASE IS A LIMITED COMPANY AND ENGAGED IN THE BUSINESS OF DEVELOPMENT OF INFRA STRUCTURE FACILITY. DURING THE YEAR UNDER CONSIDERATION ASSESSEE HAS CLAIMED DEDUCTION UNDER SECTION 80-IA OF THE ACT IN RESPECT OF THE FOLLOWING PROJECTS:- PROJECT NAME DEDUCTION CLAIMED (RS) JUDHPUR PROJECT 2,83,71.828/- SANTALDIH PROJECT 4,08,58,949/- BENIHALA LIS PROJECT 24,54,116/- URBANI LIS 27,18,977/- O&M BANGALORE PROJECT 35,16,941/- 7,79,20,811/- ITA NO.1291-1292/KOL/2013 A.YS 06 -07 & 09-10 DCIT CC-XXVIII, KOL. V. M/S SPML INFRA LT D PAGE 4 THE AFORESAID PROJECTS WERE AWARDED BY CENTRAL / ST ATE GOVERNMENT / LOCAL AUTHORITY / STATUTORY BODY ON TURNKEY BASIS. THE ASSESSING OF FICER, DURING THE COURSE OF ASSESSMENT PROCEEDINGS OBSERVED THAT IN ALL THE AFO RESAID PROJECTS, THE GOVERNMENT / SEMI GOVERNMENT ORGANIZATIONS ARE THE EMPLOYER AND ASSESSEE IS ACTING AS A CONTRACTOR. ALL THE PROJECTS WERE AWARDED TO THE AS SESSEE ON THE BASIS OF QUOTED TENDER AND WERE FUNDED BY THE RESPECTIVE GOVERNMENT / SEMI GOVERNMENT ORGANIZATIONS. THEREFORE THE ASSESSEE RECEIVED ONLY RUNNING ACCOUN T PAYMENT AND / OR LUMP SUM PAYMENT AS PER THE CONDITIONS MENTIONED IN THE WORK S ORDER / AGREEMENT. ACCORDINGLY, AO OPINED THAT ASSESSEE IS EXECUTING THE PROJECTS A S WORKS CONTRACTOR WITHIN THE MEANING OF EXPLANATION TO SEC. 80IA OF THE ACT. HEN CE, AO DISALLOWED THE DEDUCTION CLAIM U/S 80-IA(4) FOR AN AMOUNT OF 7,79,20,811/- AND ADDED TO THE TOTAL INCOME OF ASSESSEE. 6. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE L D CIT(A) WHEREAS ASSESSEE SUBMITTED THAT SEC. 80-IA NOWHERE DEFINES THE TERM WORKS CONTRACT , HENCE THE NATURAL MEANING OF THE WORD SHALL APPLY. AS PER THE OXFORD DICTIONARY THE TERM WORK MEANS APPLICATION OF EFFORT TO A PURPOSE OR USE O F ENERGY. THUS GOING BY THE DICTIONARY MEANING WE MAY SAY THAT A WORKS CONTRACT IS A CONTRACT WHICH INVOLVES EFFORT OR IN OTHER WORDS LABOUR OF THE CONTRACTOR. FURTHER AS PER THE BLACKS LAW DICTIONARY, THE TERM WORK MEANS LABOUR OR IN OTHE R WORDS PHYSICAL AND MENTAL EXERTION TO ATTAIN AN END ESP. AS CONTROLLED BY AND FOR THE BENEFIT OF THE EMPLOYER. THUS AS PER BLACKS LAW ALSO A WORKS CONTRACT IS A L ABOUR CONTRACT UNDER WHICH THE CONTRACTOR MERELY EMPLOYS HIS LABOUR AS PER THE DIR ECTIONS OF THE CONTRACTEE. THE ASSESSEE ALSO SUBMITTED THAT THE WORK AS DEFINED UN DER SECTION 194C OF THE ACT IS ALSO NOT APPLICABLE EVEN TO THE ACTIVITIES OF THE ASSESS EE. THUS AS PER SEC. 194C ALSO, WORKS CONTRACT DOES NOT INCLUDE A CONTRACT WHEREI N THE CONTRACTOR IN ADDITION TO EMPLOYING LABOUR, PROCURES MATERIAL FROM A THIRD PA RTY. THUS, CONTRACTS INVOLVING MERE LABOUR OF THE CONTRACTOR ARE INCLUDED IN THE P URVIEW OF WORKS CONTRACT. FURTHER ASSESSEE SUBMITTED THAT EXPLANATORY MEMORANDUM IN T HE FINANCE BILL, 2007 HAS EXPLAINED THE PURPOSE EXTENDING TAX BENEFIT U/S 80- IA OF THE ACT WAS TO ENCOURAGE INVESTMENT FROM THE PRIVATE SECTOR. THE ASSESSEE, I N THE INSTANT CASE, HAS DEPLOYED ITS ITA NO.1291-1292/KOL/2013 A.YS 06 -07 & 09-10 DCIT CC-XXVIII, KOL. V. M/S SPML INFRA LT D PAGE 5 FUND OF LABOR AND MATERIALS THEREFORE IT CANNOT BE COVERED UNDER THE DEFINITION OF WORKS CONTRACT. THEREFORE, THE ASSESSEE IS ENTITLED FOR THE DEDUCTION U/S. 80-IA OF THE ACT AND CONSIDERING THE SAME, LD CIT(A) DELETED THE ADDITION MADE BY AO BY OBSERVING AS UNDER:- 5. I HAVE CONSIDERED THE FACTS OF THE CASE. I HAVE ALSO PERUSED THE RIVAL SUBMISSIONS MADE BY THE APPELLANT AS WELL AS BY THE AO. I FIND THAT THE FACTS OF THE PRESENT CASE AND THE LEGAL ISSUE INVOLVED IN THIS APPEAL ARE SIM ILAR TO THE FACTS AND THE LEGAL ISSUE INVOLVED IN THE CASE OF THE APPELLANT FOR THE ASSES SMENT YEAR 2009-10. GROUND NO 3 AND 4 IN THE PRESENT APPEAL ARE DIRECTED AGAINST TH E ACTION OF THE AO IN DISALLOWING THE DEDUCTION U/S. 80IA AS CLAIMED BY THE APPELLANT ON THE PROJECTS DEVELOPED BY IT ON THE GROUND THAT THE APPELLANT IS A MERE WORKS CONTR ACTOR AND IS THEREFORE INELIGIBLE FOR DEDUCTION BY VIRTUE OF THE EXPLANATION BELOW SU B-SECTION (13) OF SECTION 80IA. I HAVE DEALT WITH THIS ISSUE IN DETAIL IN MY APPELLAT E ORDER DATED THE 18 TH MARCH, 2013 IN THE CASE OF THE APE FOR THE ASSESSMENT YEAR 200 9-10 IN APPEAL NO. 205/CC- XXVIII/CIT(A)C-I/11-12 WHEREIN, AFTER CONSIDERING T HE FACTS OF THE CASE OF THE APPELLANT AND DULY EXAMINING THE LEGAL POSITION ON SECTION 80IA, I HAVE HELD THAT THE APPELLANT IS A DEVELOPER OF INFRASTRUCTURE FACILI TIES AS REQUIRED UNDER THE SAID SECTION AND IS THEREFORE ELIGIBLE FOR DEDUCTION U/S . 80IA. THE DECISION GIVEN BY ME FOR THE ASSESSMENT YEAR 2009-10 IS ALSO APPLICABLE FOR THE PRESENT ASSESSMENT YEAR SINCE THE FACTUAL AND LEGAL POSITION REMAINS THE SAME. FO LLOWING THE DECISION IN THE CASE OF THE APPELLANT FOR THE ASSESSMENT YEAR 2009-10 IN AP PEAL NO. 205/CC-XXVIII/CIT(A) C-I/11-12, IT IS TO BE HELD THAT THE APPELLANT IS A DEVELOPER WHO FULFILS ALL THE REQUIREMENTS FOR CLAIMING DEDUCTION U/S. 80IA AND I S THEREFORE ELIGIBLE FOR DEDUCTION UNDER THE SAID SECTION. ACCORDINGLY, THE AO IS DIRE CTED TO ALLOW THE DEDUCTION OF RS.7,79,20,811/- AS CLAIMED BY THE APPELLANT. GROUN D NO 3 AND 4 ARE ALLOWED. BEING AGGRIEVED BY THIS ORDER OF LD CIT(A) REVENUE IS IN APPEAL BEFORE US. 7. BEFORE US LD. DR SUBMITTED THAT ASSESSEE IS MERE LY ENGAGED IN THE WORKS CONTRACT AND THEREFORE IT NOT ELIGIBLE FOR DEDUCTIO N UNDER SECTION 80-IA OF THE ACT. THE LD. DR VEHEMENTLY RELIED ON THE ORDER OF AO. ON THE OTHER HAND, LD. AR FILED A PAPER BOOK CONSISTING OF PAGES FROM 1 TO 408 AND SUBMITTE D THAT THE ASSESSEE IN PURSUANT TO AGREEMENTS WITH VARIOUS GOVERNMENT BODIES HAS UNDER TAKEN THE PROJECTS FOR THE DEVELOPMENT OF INFRASTRUCTURE FACILITIES. ACCORDING LY THE ASSESSEE IS ENTITLED FOR THE DEDUCTION 80IA OF THE ACT. THE LD. AR ALSO SUBMITTE D THAT THE AO HAS NOT DISPUTED THE FACTS OF THE ASSESSEE BUSINESS ACTIVITIES. THE WORK S CONTRACT IS A CONTRACT UNDER WHICH THE CONTRACTOR IS MERELY SUPPLYING/ EMPLOYING THE L ABOUR BUT IN THE INSTANT CASE THE ASSESSEE IS ALSO PROVIDES THE MATERIAL AND OTHER RE QUISITES INCLUDING MACHINERIES IN ADDITION TO THE CAPITAL INVESTMENT IN THE PROJECT. THUS, IT IS NOT A CASE WHERE THE ITA NO.1291-1292/KOL/2013 A.YS 06 -07 & 09-10 DCIT CC-XXVIII, KOL. V. M/S SPML INFRA LT D PAGE 6 ASSESSEE IS ACTING AS A WORKS CONTRACTOR AND THE GO VERNMENT AUTHORITY HAS PROVIDED THE ASSESSEE WITH THE ENTIRE SET UP I.E. PLANT & MA CHINERY, MATERIALS AND THE INFRASTRUCTURE NEEDED TO SUPPORT CONSTRUCTION. IT I S ALSO NOT A CASE THAT THE ASSESSEE HAD TO EMPLOY ONLY LABOUR TO CARRY OUT CONSTRUCTION. IN STEAD, THE ASSESSEE HAD PROVIDED AN ENTIRE ENTERPRISE WHICH WAS NEEDED TO CONVERT THE S ITE (GIVEN BY THE GOVERNMENT) INTO AN INFRASTRUCTURAL FACILITY. REGARDLESS TO SAY THE AFORESAID ACTIVITIES UNDERTAKEN BY THE ASSESSEE INVOLVED A SUBSTANTIAL AMOUNT OF RISK. LIK E ANY OTHER ENTREPRENEUR WHO EMPLOYS HIS MATERIAL, PLANT, MACHINERY, LABOUR ETC. IN A PROJECT AND UNDERTAKES RISK, THE ASSESSEE WAS ALSO EXPOSED TO A SUBSTANTIAL AMOU NT OF RISK BY VIRTUE OF ENGAGING HIS ESTABLISHMENT IN THE INFRASTRUCTURE PROJECTS. IN AD DITION, THE ASSESSEE WAS EXPOSED TO RISK OF NON-COMPLETION OF WORK WITHIN TIME, ANY DAM AGE CAUSED TO THE WORKS, SITE ETC., INCREASE IN PRICES OF MATERIALS, LABOUR ETC. BEYOND WHAT THE GOVERNMENT HAD AGREED TO COMPENSATE AS PER THE AGREEMENT. NOW, SINCE THE ASS ESSEE IS NOT OF A WORKS CONTRACTOR SIMPLICITOR, IT IS CLEARLY OUTSIDE THE PURVIEW OF T HE EXPLANATION TO SECTION 80-IA(13) OF THE ACT. TO SUBSTANTIATE THE ABOVE ATTENTION IS INV ITED TO THE AGREEMENTS WITH GOVERNMENT AUTHORITIES, WHICH HAVE BEEN DISCUSSED I N DETAIL IN THE FOLLOWING PARAGRAPHS: I. JODHPUR PROJECT: RS. 2,83,71,828/- THE AGREEMENT FOR THE AFORESAID PROJECT IS ENCLOSED AT PAGES 1-60 OF PAPER BOOK. THE FOLLOWING CONDITIONS LISTED IN THE AGREEMENT CLEARL Y ESTABLISH THAT THE ASSESSEE WAS A DEVELOPER AND NOT A MERE WORKS CONTRACTOR: A. SCOPE OF WORK: (I) DRAWINGS AND DESIGN: THE ASSESSEE WAS RESPONSIBLE FOR THE DESIGN OF THE WORK UNDER THE CONTRACT AND WAS ALSO RESPONSIBLE FOR ACC URACY OF THE SAID DESIGNS. (PG. 38, PARA 9.1) THE ASSESSEE WAS TO CARRY OUT PREPARATORY WORKS SUCH AS TOPOGRAPHIC SURVEY, SOIL INVESTIGATIONS, GEO-TECHNICAL INVESTIG ATIONS ETC. TO PREPARE THE PLANS, L- SECTIONS, DESIGNS, WORKING DRAWINGS ETC. IT WAS TO SUBMIT THE DETAILED DESIGN AND THE EXECUTION DRAWINGS SUCH AS SITE PLANS, GENERAL ARRA NGEMENT DRAWINGS, L-SECTIONS, PLANS, ARCHITECTURAL, STRUCTURAL DRAWINGS AND ALL W ORKING DRAWINGS, FOR APPROVAL. (PARA 9.2) ITA NO.1291-1292/KOL/2013 A.YS 06 -07 & 09-10 DCIT CC-XXVIII, KOL. V. M/S SPML INFRA LT D PAGE 7 (II) MATERIALS: ALL THE MATERIAL REQUIRED FOR THE WORK WAS TO BE P ROVIDED BY THE ASSESSEE. (PAGE 39, PARA 10) (III) LABOUR: THE ASSESSEE WAS REQUIRED TO EMPLOY STAFF FOR EXEC UTION OF WORK. (PARA 8.2 ON PAGE 37) (IV) PLANT: THE ASSESSEE WAS TO ARRANGE AND SUPPLY AT ITS OWN COST ALL MATERIAL, PLANT, TOOLS, APPLIANCES, IMPLEMENTS, LADDERS, CORDAGE, TA CKLE, SCAFFOLDING AND TEMPORARY WORKS REQUIRED FOR PROPER EXECUTION OF THE WORK. ( PAGE 15, CLAUSE 18) (V) COST OF INSPECTION AND TESTING: FOR ALL EQUIPMENT AND MATERIAL REQUIRED FOR THE EXECUTION OF THE WORK, THE ARRANGEMENT FOR INSPECTI ON AND EXPENSES THERETO WAS TO BE BORNE BY THE ASSESSEE. (PAGE 40, PARA 10.2) FURTHER, THE ASSESSEE WAS TO PROVIDE ALL APPARATUS, ASSISTANCE, ELECTRICITY, FUEL, CONSUMABLES LABOUR, MATERIALS TO CARRY OUT EFFICIEN T TESTING OF EQUIPMENT, MATERIAL AND OTHER PARTS OF WORKS. (PARA 10.3) (VI) WATER AND ELECTRICITY: THE COST OF ALL WATER CONNECTIONS NECESSARY FOR TH E EXECUTION OF THE WORK AND THE COST OF WATER CONSUME D AND HIRE CHARGES OF METERS AND THE COST OF ELECTRICITY CONSUMED IN CONNECTION WITH THE EXECUTION OF WORK WAS TO BE PAID BY THE ASSESSEE. (PAGE 19, CLAUSE 36B) (VII) SITE OFFICE, STAFF QUARTERS ETC.: THE ASSESSEE WAS TO HAVE AN OFFICE NEAR THE SITE AND A CLERK FOR SERVICE OF COMMUNICATION NOTICES.(P AGE 37, PARA 8.1) FURTHER, ALL THE EXPENSES IN CONNECTION WITH PURCHA SE OR CONSTRUCTION OR MAINTENANCE OF SITE OFFICE, STAFF QUARTERS WAS TO BE BORNE BY T HE ASSESSEE. (PARA 7.13, PAGE 37) (VIII) ROYALTIES AND TAXES: THE ASSESSEE WAS TO PAY ALL ROYALTIES, OCTROI AND OTHER TAXES AND DUTIES IN RESPECT OF MATERIALS CONSUMED O N PUBLIC WORK. (CLAUSE 36A ON PAGE 19). IX) INSURANCE: THE ASSESSEE WAS TO TAKE ACCIDENT INSURANCE AND TH IRD PARTY INSURANCE. (PARA 7.2 ON PAGE 3). THE RESPONSIBILITY OF TIMELY PAYMENT OF PREMIUMS WAS THAT OF THE ASSESSEE. (X) QUALITY ASSURANCE SYSTEM: THE ASSESSEE WAS TO INSTITUTE A QUALITY ASSURANCE SYSTEM TO DEMONSTRATE COMPLIANCE WITH REQUIREMENTS OF THE CONTRACT. (PARA 7.6 ON PAGE 36) ITA NO.1291-1292/KOL/2013 A.YS 06 -07 & 09-10 DCIT CC-XXVIII, KOL. V. M/S SPML INFRA LT D PAGE 8 (XI) RIGHTS OF WAY AND FACILITIES: THE ASSESSEE WAS TO BEAR ALL COSTS AND CHARGES FOR SPECIAL/TEMPORARY RIGHTS OF WAY WHICH MAY BE REQUIR ED FOR THE WORK. (PARA 7.9 ON PAGE 36) (XII) SECURITY OF THE SITE: THE ASSESSEE WAS TO PROVIDE ADEQUATE MANPOWER AND MEANS FOR THE SECURITY OF THE MATERIAL, WORK-IN-PROGRESS ETC. IT WAS RESPONSIBLE FOR KEEPING UNAUTHORISED PERSONS OFF THE SITE. (PAGE 36 & 37, P ARA 7.11) (XIII) DEFECTS LIABILITY PERIOD: EVEN AFTER COMPLETION OF WORKS THE ASSESSEE WAS RESPONSIBLE FOR CORRECTING DEFECTS IN THE WORKS FOR A PERIOD OF 24 MONTHS FROM THE DATE OF ISSUE OF CERTIFICATE FOR COMPLETION OF WORKS. (P G. 42) (XIV) OPERATIONS & MAINTENANCE: THE PROJECT HAD AN OPERATION AND MAINTENANCE PERIOD OF 5 YEARS.(PAGE 3) B. INVESTMENT: IN ORDER TO UNDERTAKE THE SAID PROJECT THE ASSESSEE WAS TO FORWARD A SUM OF RS. 41 LACS/ 1.63 CRORES AS EARNEST MONEY DEPOSIT (SEE PAGE 3 & 4). FURTHER, IT WAS TO DEPOSIT AN AMOUNT EQUAL TO 10% OF THE CONTRACT VALUE TOWARDS S ECURITY DEPOSIT IN CASH OR IN FORM OF BANK GUARANTEE OR BY WAY OF DEDUCTION FROM RUNNI NG BILLS. (SEE PAGE 3 & 5). THE SAID DEPOSIT WAS TO BE RELEASED ONLY AFTER SATISFAC TORY COMPLETION OF THE MAINTENANCE PERIOD (PAGES 53 & 48). A PERUSAL OF PROJECT BALANCE SHEET ON PAGE 68 SHOWS AN INVESTMENT OF RS. 4,41,60,431/- ON THE SAID PROJECT. C. RISKS: (I) THE ASSESSEE WAS TO FINISH THE WORK SPECIFIED I N THE CONTRACT WITHIN TIME FAILING WHICH THE ASSESSEE WOULD BE LIABLE TO COMPENSATE TH E EMPLOYER. (PAGE 6) (II) AS ALREADY DISCUSSED ABOVE, THE SECURITY DEPOS IT MADE BY THE ASSESSEE WAS TO BE RELEASED NOT ON COMPLETION OF THE WORKS, BUT AFTER THE MAINTENANCE PERIOD OF 5 YEARS. THUS, THE COMPLETION OF THE WORK DID NOT ABSOLVE TH E ASSESSEE OF ALL ITS RESPONSIBILITIES. EVEN AFTER COMPLETION IT HAD THE RESPONSIBILITY OF MAINTAINING THE FACILITY FOR 5 YEARS ( SEE PAGE 53 & 48)) (III) IN CASE OF ANY INJURY TO THE WORKERS THE ASSE SSEE IS HELD RESPONSIBLE FOR THE SAME, THE ASSESSEE WOULD BE LIABLE TO A PAY COMPENSATION TO THEM (PAGE 18) ITA NO.1291-1292/KOL/2013 A.YS 06 -07 & 09-10 DCIT CC-XXVIII, KOL. V. M/S SPML INFRA LT D PAGE 9 (IV) THE ASSESSEE WAS RESPONSIBLE FOR ANY DAMAGE TH AT OCCURS TO THE BUILDING IN WHICH THEY MAY BE WORKING OR TO THE WORK AND WAS MAKE GOO D THE DAMAGE AT HIS EXPENSE. (PAGE 15) D. CONCLUSION: FROM THE AFORESAID CONDITIONS, IT IS CLEAR THAT THE ASSESSEE WAS NOT MERELY RESPONSIBLE FOR SUPPLYING LABOUR FOR THE AFORESAID PROJECT, BUT RATHER WAS RESPONSIBLE FOR THE DEVELOPMENT OF THE ENTIRE INFRASTRUCTURE FACILITY. IN ORDER TO DO SO, IT DEPLOYED ITS VARIOUS RESOURCES, MATERIALS, LABOUR, SUPERVISOR, E NGINEERS ETC. IT MADE SUBSTANTIAL INVESTMENTS AND EXPOSED ITSELF TO VARIOUS RISKS. HE NCE IT IS CLEAR THAT THE ASSESSEE WAS A DEVELOPER IN THE AFORESAID PROJECT AND HENCE IS E LIGIBLE FOR DEDUCTION U/S 80-1A. II. SANTALDIH THERMAL POWER PROJECT, WEST BENGAL: RS. 4,08,58,949/- THE AGREEMENT BETWEEN THE ASSESSEE AND THE WEST BEN GAL POWER DEVELOPMENT CORPORATION LTD., FOR THE AFORESAID PROJECT IS ENCL OSED AT PAGES 70-146 OF PAPER BOOK. THE FOLLOWING CONDITIONS LISTED IN THE AGREEMENT CL EARLY ESTABLISH THAT THE ASSESSEE WAS A DEVELOPER AND NOT A MERE WORKS CONTRACTOR: A. SCOPE OF WORK: (I) DRAWINGS: THE ASSESSEE WAS RESPONSIBLE FOR DEVELOPING DETAIL ED DRAWINGS TO ADOPT EQUIPMENT AND MATERIALS TO BE SUPPLIED TO THE REQUI REMENTS INDICATED IN THE SPECIFICATION. FURTHER, IT WAS RESPONSIBLE FOR AND WAS TO PAY FOR ANY ALTERATIONS OF WORK DUE TO DISCREPANCIES IN THE DRAWINGS. (PG. NO 92 & 93, PARA 13) (II) MATERIALS: THE ASSESSEE WAS RESPONSIBLE FOR ARRANGEMENT OF MA TERIALS REQUIRED FOR THE WORK. (PG. 93). FURTHER, THE ASSESSEE WAS REQUI RED TO ESTABLISH ON SITE TESTING FACILITIES AND WAS REQUIRED TO CONDUCT TESTS, AT IT S OWN COST, AS SPECIFIED. (PG. 143, PARA 21.1) (III) LABOUR: THE ASSESSEE WAS REQUIRED TO MAKE ARRANGEMENTS FOR LABOUR REQUIRED FOR THE WORK (PARA 16.5, PAGE 140. IT WAS RESPONSIBLE F OR PAYMENT OF WAGES AND WAS REQUIRED TO OBSERVE THAT HOURS AND CONDITIONS OF LA BOUR ARE NOT UNFAVORABLE. (PAGE 139, PARA 16.3). IN ADDITION TO THE ABOVE, THE ASSESSEE WAS TO DEPLOY ENGINEERS AND SUPERVISORY PERSONNEL REQUIRED FOR WORK. [PG. 136, PARA (J)] FURTHER IT WAS RESPONSIBLE ITA NO.1291-1292/KOL/2013 A.YS 06 -07 & 09-10 DCIT CC-XXVIII, KOL. V. M/S SPML INFRA LT D PAGE 10 FOR PROVIDING ACCOMMODATION AND DAILY TRANSPORT TO ITS LABOUR AND OTHER PERSONNEL. [PG. 135 PARAS (F) & (G)] (IV) ERECTION/CONSTRUCTION TOOLS, TACKLES AND MACHI NERY: THE ASSESSEE WAS TO PROVIDE ALL CONSTRUCTION/ERECTION MACHINERY, TOOLS, TACKLES AND SCAFFOLDING REQUIRED FOR WORK. (PG. 144, PARA 22.10) (V) INSURANCE: THE ASSESSEE WAS REQUIRED TO ARRANGE, AT ITS OWN C OST, ALL INSURANCE PERTINENT TO THE WORK. (HIGHLIGHTED PORTION ON PG. 116) (VI) SITE OFFICE: THE ASSESSEE HAD THE RESPONSIBILITY OF SITE OFFICE CONSTRUCTION AND APPROACH RODS AS REQUIRED. [PAGE 136, PARA (K)]. FU RTHER IT WAS TO BEAR ALL EXPENSES FOR SPECIAL AND TEMPORARY WAY LEAVES REQUIRED IN CONNEC TION WITH ACCESS TO THE SITE. (PG. 144, PARA 21.5] (VII) OTHERS: ANY OPEN/COVERED STORAGE REQUIRED FOR THE PROTECT ION AND STORAGE OF GOODS, CONSTRUCTION MATERIALS AND MACHINERY WAS TO BE CONS TRUCTED BY THE ASSESSEE AT HIS OWN COST. (PG. 134) WATCH AND WARD PG. 135, PARA (E)] POSTAGE, TELEPHONE AND TELEGRAPH EXPENSES [PG. 13 6, PARA (1)] CLEANING UP THE SITE [PARA (M) ON PAGE 136] THE ASSESSEE WAS TO TAKE ALL THE SAFETY PRECAUTIO NS DURING THE ERECTION/CONSTRUCTION WORK. [PARA (R) ON PAGE 136] PROVISION OF SANITARY CONVENIENCE IN THE SITE OFF ICE, STORES AND FOR THE USE OF WORKMEN AT THE SITE AND AT LABOUR COLONY. [PARA (U) ON PAGE 137] LIGHTS, GUARDS, FENCING AND WATCHING [PG 141, PAR A 17.1] (VIII) WARRANTY: THE WARRANTY PERIOD OF THE WORKS WAS 12 MONTHS FRO M THE DATE OF TAKING OVER THE COMPLETED PLANT OR FULLY COMPLETED UNIT AT THE DISCRETION OF THE OWNER (PAGE 97) B. INVESTMENT: IN ORDER TO UNDERTAKE THE SAID PROJECT THE ASSESSEE WAS TO FURNISH A PERFORMANCE GUARANTEE EQUAL TO 10% OF THE CONTRACT PRICE FOR D ILIGENT AND DUE FULFILLMENT OF ALL OBLIGATIONS UNDER THE CONTRACT. THE SAID GUARANTEE WAS TO PROVIDE FOR PAYMENT OF ANY CLAIMS/DAMAGES DUE TO THE OWNER FOR FAILURE OF THE ASSESSEE TO MET HIS OBLIGATIONS ITA NO.1291-1292/KOL/2013 A.YS 06 -07 & 09-10 DCIT CC-XXVIII, KOL. V. M/S SPML INFRA LT D PAGE 11 UNDER THE CONTRACT. THE SAID GUARANTEE WOULD BE REL EASED AT THE END OF THE WARRANTY PERIOD. (PAGE 84) A PERUSAL OF PROJECT BALANCE SHEE T ON PAGE 148 SHOWS AN INVESTMENT OF RS. 13,69,87,730/- ON THE SAID PROJEC T. C. RISKS: (I) THE ASSESSEE WAS TO FINISH THE WORK SPECIFIED I N THE CONTRACT WITHIN TIME FAILING WHICH THE ASSESSEE WOULD BE LIABLE TO LIQUIDATED DA MAGES. (PAGE 91) (II) AS ALREADY DISCUSSED ABOVE, THE PERFORMANCE GU ARANTEE MADE BY THE ASSESSEE WAS TO BE RELEASED NOT ON COMPLETION OF THE WORKS, BUT AT THE END OF WARRANTY PERIOD. THUS, THE COMPLETION OF THE WORK DID NOT ABSOLVE THE ASSE SSEE OF ALL ITS RESPONSIBILITIES. THE SAID GUARANTEE WAS TO PROVIDE FOR PAYMENT OF ANY CL AIMS/DAMAGES DUE TO THE OWNER FOR FAILURE OF THE ASSESSEE TO MET HIS OBLIGATIONS UNDER THE CONTRACT. (SEE PAGE 97) (III) THE ASSESSEE WAS TO INDEMNIFY THE OWNER OF AL L COSTS, CHARGES, EXPENSES ON ACCOUNT OF ANY CLAIMS, DEMANDS, ACTIONS AND PROCEED INGS AGAINST THE OWNER IN RESPECT OF ANY INJURY, LOSS OR DAMAGE. (PAGE 114) D. CONCLUSION: FROM THE AFORESAID CONDITIONS, IT IS CLEAR THAT THE ASSESSEE WAS NOT MERELY RESPONSIBLE FOR SUPPLYING LABOUR FOR THE AFORESAID PROJECT, BUT RATHER WAS RESPONSIBLE FOR THE DEVELOPMENT OF THE ENTIRE INFRASTRUCTURE FACILITY. IN ORDER TO DO SO, IT DEPLOYED ITS VARIOUS RESOURCES, MATERIALS, LABOUR, SUPERVISOR, E NGINEERS ETC. IT MADE SUBSTANTIAL INVESTMENTS AND EXPOSED ITSELF TO VARIOUS RISKS. H ENCE, IT IS CLEAR THAT THE ASSESSEE WAS A DEVELOPER IN THE AFORESAID PROJECT AND HENCE IS E LIGIBLE FOR DEDUCTION U/S 80-IA. ILL. URBANI LIFT IRRIGATION SCHEME: RS. 27,18,977/- THE AGREEMENT BETWEEN THE ASSESSEE AND KARNATAKA NE ERAVARI NIGAM LIMITED FOR THE AFORESAID PROJECT IS ENCLOSED AT PAGES 149-237 OF P APER BOOK. THE FOLLOWING CONDITIONS LISTED IN THE AGREEMENT CLEARLY ESTABLIS H THAT THE ASSESSEE WAS A DEVELOPER AND NOT A MERE WORKS CONTRACTOR: A. SCOPE OF WORK: (I) DRAWINGS AND DESIGNS: THE ASSESSEE WAS RESPONSIBLE FOR THE DRAWING AND D ESIGN OF TEMPORARY WORKS. IT WAS REQUIRED TO SUBMIT THE S AID DRAWINGS TO THE ENGINEERS AND OBTAIN HIS APPROVAL BEFORE STARTING SUCH WORK (PARA 18.2 & 18.5 OF PAGE 184, 185) ITA NO.1291-1292/KOL/2013 A.YS 06 -07 & 09-10 DCIT CC-XXVIII, KOL. V. M/S SPML INFRA LT D PAGE 12 (II) MATERIALS REQUIRED FOR THE PROJECT: THE CONTRACTOR WAS RESPONSIBLE FOR PROCUREMENT OF REQUIRED QUANTITY OF PIPES, SPECIAL MACHINERY, ELECTRICAL ITEMS ETC. (PG. 198, PARA 18) (III) LABOUR: THE CONTRACTOR WAS REQUIRED TO MAKE ITS OWN ARRANG EMENT FOR THE ENGAGEMENT OF ALL STAFF AND LABOUR, FOR THEIR PAYME NT, HOUSING, FEEDING AND TRANSPORT. (PARA 1, PG. 194). FURTHER HE WAS TO TAKE ADEQUATE PROVISIONS FOR THE SAFETY OF THE WORKMEN (PG. 202 OF THE AGREEMENT) AND MAINTAIN ADE QUATE SANITARY FACILITIES FOR THE EMPLOYEES (PARA 7 ON PAGE 196) (IV) PLANT: ALL TOOLS AND PLANTS REQUIRED FOR THE WORK WAS TO SUPPLIED BY THE CONTRACTOR AT ITS OWN COST. (PG. 198, PARA 17) (V) POWER & WATER: THE CONTRACTOR WAS REQUIRED TO MAKE ITS OWN ARRANG EMENT FOR ELECTRICITY REQUIRED AT SITE AND MAKE ITS OWN ARRAN GEMENT OF WATER. (PARA 2 AND 3 ON PAGE 195) (VI) SURVEY STATIONS: THE CONTRACTOR WAS REQUIRED TO PROVIDE AND MAINTAI N AT ITS OWN EXPENSE, SURVEY STATIONS. HE WAS FURTHER REQUIRED T O CONDUCT ALL THE SURVEYS REQUIRED FOR EXECUTION OF THE WORK. (PARA 4 ON PAGE 195) (VII) TEMPORARY FENCING: THE CONTRACTOR WAS REQUIRED, AT HIS OWN EXPENSE, T O ERECT AND MAINTAIN TEMPORARY FENCES AND GATES ALONG THE B OUNDARIES. (PARA 5 ON PAGE 196) (VIII) ROYALTY: THE CONTRACTOR WAS TO PAY ALL FEES, ROYALTIES, OCT ROI DUES LEVIED BY THE STATE GOVERNMENT OR ANY OTHER LOCAL BODY (CLAUSE 36 (B), PAGE 234) (IX) OPERATION & MAINTENANCE OF THE SYSTEM: AS PER SCOPE OF WORK ON PAGE 150, THE ASSESSEE WAS RESPONSIBLE FOR PROPER OPERATION O F THE INSTALLATIONS FOR 2 YEARS. FURTHER IT WAS TO MAINTAIN THE SYSTEM IN GOOD ORDER FOR 1 YR [SEE PAGE 210 CLAUSE (F)] B. INVESTMENT: IN ORDER TO UNDERTAKE THE SAID PROJECT THE ASSESSEE WAS TO FURNISH AN EARNEST MONEY DEPOSIT EQUAL TO 1% AND FURTHER SECURITY DEPOSIT EQ UAL TO 6.5% OF THE COST OF WORK FOR DILIGENT AND DUE FULFILLMENT OF ALL OBLIGATIONS UND ER THE CONTRACT (PAGE 209). THE SAID DEPOSIT WAS TO BE REFUNDED AFTER THE FINAL BILLS AR E PAID OR AFTER 12 MONTHS FROM THE DATE OF COMPLETION OF WORK DURING WHICH PERIOD THE WORK WAS TO BE MAINTAINED BY THE ASSESSEE IN GOOD ORDER [PAGE 210, CLAUSE (F)]. A PE RUSAL OF PROJECT BALANCE SHEET ON PAGE 243 SHOWS AN INVESTMENT OF RS. 1,10,31,129/- O N THE SAID PROJECT. ITA NO.1291-1292/KOL/2013 A.YS 06 -07 & 09-10 DCIT CC-XXVIII, KOL. V. M/S SPML INFRA LT D PAGE 13 C. RISKS: (I) THE ASSESSEE WAS TO FINISH THE WORK SPECIFIED I N THE CONTRACT WITHIN TIME FAILING WHICH THE ASSESSEE WOULD BE LIABLE TO LIQUIDATED DA MAGES. (PARA 41.1, PAGE 190) (II) AS ALREADY DISCUSSED ABOVE, THE SECURITY DEPOS IT MADE BY THE ASSESSEE WAS TO BE RELEASED NOT ON COMPLETION OF THE WORKS, BUT AT THE END OF MAINTENANCE PERIOD. THUS, THE COMPLETION OF THE WORK DID NOT ABSOLVE THE ASSE SSEE OF ALL ITS RESPONSIBILITIES. THE SAID GUARANTEE COULD HAVE BEEN FORFEITED BY THE NIG AM IN ORDER TO RECOVER ANY SUMS FROM THE ASSESSEE. (SEE LAST PARA ON PAGE 213) (III) THE ASSESSEE WAS WHOLLY RESPONSIBLE FOR ANY I NJURY OR DAMAGE TO PERSONS AND PROPERTIES, WHICH MAY OCCUR IRRESPECTIVE OF ANY PRE CAUTIONS HE MAY TAKE DURING THE EXECUTION OF THE WORKS. THE ASSESSEE WAS TO MAKE GO OD ALL CLAIMS AND LOSS ARISING OUT OF SUCH ACCIDENTS AND INDEMNIFY THE EMPLOYER FROM A LL SUCH CLAIMS AND EXPENSES. (PARA 2, PAGE 199) (ALSO SEE CLAUSE 19, PAGE 226) D. CONCLUSION: FROM THE AFORESAID CONDITIONS, IT IS CLEAR THAT THE ASSESSEE WAS NOT MERELY RESPONSIBLE FOR SUPPLYING LABOUR FOR THE AFORESAID PROJECT, BUT RATHER WAS RESPONSIBLE FOR THE DEVELOPMENT OF THE ENTIRE INFRASTRUCTURE FACILITY. IN ORDER TO DO SO, IT DEPLOYED ITS VARIOUS RESOURCES, MATERIALS, LABOUR, SUPERVISOR, E NGINEERS ETC. IT MADE SUBSTANTIAL INVESTMENTS AND EXPOSED ITSELF TO VARIOUS RISKS. HE NCE, IT IS CLEAR THAT THE ASSESSEE WAS A DEVELOPER IN THE AFORESAID PROJECT AND HENCE IS E LIGIBLE FOR DEDUCTION U/S 80-IA. IV. BENIHALA LIS PROJECT: RS. 24,54,116/- THE AGREEMENT FOR THE AFORESAID PROJECT IS ENCLOSED AT PAGES 244-315 OF PAPER BOOK. THE FOLLOWING CONDITIONS LISTED IN THE AGREEMENT CL EARLY ESTABLISH THAT THE ASSESSEE WAS A DEVELOPER AND NOT A MERE WORKS CONTRACTOR: A. SCOPE OF WORK: (I) DESIGN AND DRAWINGS: THE ASSESSEE WAS RESPONSIBLE FOR DRAWINGS AND DESI GNS FOR TEMPORARY WORKS. (PARA 18.2 ON PAGE 264) (II) MATERIAL: THE ASSESSEE WAS RESPONSIBLE FOR PROCUREMENT OF RE QUIRED QUANTITY OF MATERIALS LIKE PIPES, SPECIALS, MACHINERY, ELECTRIC AL ITEMS ETC.(PARA 18 ON PAGE 278 AND CLAUSE 20 ON PAGE 306) ITA NO.1291-1292/KOL/2013 A.YS 06 -07 & 09-10 DCIT CC-XXVIII, KOL. V. M/S SPML INFRA LT D PAGE 14 (III) LABOUR: THE ASSESSEE WAS RESPONSIBLE FOR THE ENGAGEMENT OF ALL STAFF AND LABOUR AND ALSO FOR THEIR PAYMENT, HOUSING, FEEDING AND TR ANSPORT. (PARA 1 ON PAGE 274). THE ASSESSEE WAS TO TAKE ADEQUATE MEASURES TO ENSUR E THEIR SAFETY. (SEE SAFETY PROVISIONS ON PAGES 282). THE ASSESSEE WAS RESPONSI BLE FOR AND WAS TO BEAR ALL EXPENSES OF PROVIDING MEDICAL AID TO WORKMEN ON THE SITE. FURTHER IT WAS TO PROVIDE ALL NECESSARY PERSONAL SAFETY EQUIPMENT, FIRST AID APPARATUS FOR THE USE OF PERSONS EMPLOYED ON THE SITE.( CLAUSES 30(B) AND 31 ON PAGE 309 & 310. IN CASE OF AN ANY INJURIES TO WORKMEN THE ASSESSEE WOULD BE RESPONSIB LE FOR PAYMENT OF COMPENSATION. [PAGE 309, CLAUSE 30(A)] (IV) PLANT: ALL TOOLS AND PLANTS REQUIRED FOR THE WORK INCLUDI NG SHEET PILES AND TIMBER FOR SHORING AND STRUTTING, PUMP SETS ETC. WAS TO BE SUPPLIED BY THE ASSESSEE AT ITS OWN COST.( PARA 17 ON PAGE 278 AND CLAUSE 20 ON PAGE 30 6) (V) WATER AND ELECTRICITY: THE ASSESSEE WAS TO MAKE ITS OWN ARRANGEMENT FOR T HE FRESH WATER REQUIRED FOR MANUFACTURING OF THE PIPES , CONSTRUCTION OF CIVIL WORKS AND TESTING OF PIPELINES AS WELL AS POTABLE WATER REQUI RED FOR HIS FACTORY AND LABOUR CAMPS. (PARA 2 ON PAGE 275) FURTHER HE WAS TO MAKE ITS ARR ANGEMENTS FOR THE ELECTRICAL ENERGY REQUIRED AT THE SITE. (PARA 3 ON PAGE 275) (VI) SURVEY STATIONS: THE ASSESSEE WAS TO, AT HIS OWN EXPENSE, PROVIDE A ND MAINTAIN SURVEY STATIONS REQUIRED TO CARRY OUT SURVEYS, MEAS UREMENTS ETC. IN CONNECTION WITH WORKS (PARA 4 ON PAGE 275) (VII) OTHER INFRASTRUCTURAL FACILITIES: THE ASSESSEE WAS TO ERECT AND MAINTAIN IN A GOOD CONDITION TEMPORARY FENCES AND GATES ALONG THE BOUNDARIES. (PARA 5 ON PAGE 276 ) PROVISION OF SEPTIC TANK/PIT LATRINES AT THE CONS TRUCTION SITE/CAMPS (PARA 15.10 ON PAGE 286) PROVISION OF CRECHES FOR WORKING WOMEN LABOUR (PA RA 15.10 ON PAGE 286) DRINKING WATER (PG. 286) PROVISION AND MAINTENANCE OF CLEAN SANITARY FACIL ITIES ON THE SITE FOR USE OF ITS EMPLOYEES. (PARA 7 ON PAGE 276) WATCHING AND LIGHTING (PAGE 278, PARA 15) ITA NO.1291-1292/KOL/2013 A.YS 06 -07 & 09-10 DCIT CC-XXVIII, KOL. V. M/S SPML INFRA LT D PAGE 15 (VIII) ROYALTY ETC.: ALL QUARRY FEES, ROYALTIES AND OCTROI DUES LEVIED BY THE STATE GOVERNMENT OR ANY LOCAL BODY OR AUTHORITY AND GROUN D RENT WAS TO BE PAID BY THE ASSESSEE. (CLAUSE 37(B) ON PAGE 312) (IX) TEMPORARY DIVERSION OF ROADS: THE ASSESSEE WAS TO MAKE AT ITS OWN COST ALL NECESSARY PROVISION FOR THE TEMPORARY DIVERSION OF ROADS, CART-TRACKS, FOOTPATHS, DRAINS, WATER COURSES, CHANNELS ETC. (PARA 12 ON PA GE 277) IT WAS TO PAY CUSTOMARY VEHICLE LICENSE AND PERMIT FEES FOR USE OF PUBLIC ROADS. (PARA 10 ON PAGE 277) (X) OPERATION & MAINTENANCE OF THE SYSTEM: AS PER SCOPE OF WORK ON PAGE 245, THE ASSESSEE WAS RESPONSIBLE FOR PROPER OPERATION OF TH E INSTALLATIONS FOR 2 YEARS. FURTHER IT WAS TO MAINTAIN THE SYSTEM IN GOOD ORDER FOR 1 YR [ SEE PAGE 290 CLAUSE (F)] B. INVESTMENT: IN ORDER TO UNDERTAKE THE SAID PROJECT THE ASSESSEE WAS TO FURNISH AN EARNEST MONEY DEPOSIT EQUAL TO 1 % AND FURTHER SECURITY DEPOSIT E QUAL TO 6.5% OF THE COST OF WORK FOR DILIGENT AND DUE FULFILLMENT OF ALL OBLIGATIONS UND ER THE CONTRACT (PAGE 289). THE SAID DEPOSIT WAS TO BE REFUNDED AFTER THE FINAL BILLS AR E PAID OR AFTER 12 MONTHS FROM THE DATE OF COMPLETION OF WORK DURING WHICH PERIOD THE WORK WAS TO BE MAINTAINED BY THE ASSESSEE IN GOOD ORDER [PAGE 290, CLAUSE (F)]. A PE RUSAL OF PROJECT BALANCE SHEET ON PAGE 321 SHOWS AN INVESTMENT OF RS. 1,71,85,5411- O N THE SAID PROJECT. C. RISKS: (I) THE ASSESSEE WAS TO FINISH THE WORK SPECIFIED I N THE CONTRACT WITHIN TIME FAILING WHICH THE ASSESSEE WOULD BE LIABLE TO LIQUIDATED DA MAGES. (PARA 41.1, PAGE 270) (II) AS ALREADY DISCUSSED ABOVE, THE SECURITY DEPOS IT MADE BY THE ASSESSEE WAS TO BE RELEASED NOT ON COMPLETION OF THE WORKS, BUT AT THE END OF MAINTENANCE PERIOD. THUS, THE COMPLETION OF THE WORK DID NOT ABSOLVE THE ASSE SSEE OF ALL ITS RESPONSIBILITIES. THE SAID GUARANTEE COULD HAVE BEEN FORFEITED BY THE NIG AM IN ORDER TO RECOVER ANY SUMS FROM THE ASSESSEE. (SEE PARA (E) ON PAGE 290 & LAST PARA ON PAGE 293) (III) THE ASSESSEE WAS WHOLLY RESPONSIBLE FOR ANY I NJURY OR DAMAGE TO PERSONS AND PROPERTIES, WHICH MAY OCCUR IRRESPECTIVE OF ANY PRE CAUTIONS HE MAY TAKE DURING THE EXECUTION OF THE WORKS. THE ASSESSEE WAS TO MAKE GO OD ALL CLAIMS AND LOSS ARISING OUT ITA NO.1291-1292/KOL/2013 A.YS 06 -07 & 09-10 DCIT CC-XXVIII, KOL. V. M/S SPML INFRA LT D PAGE 16 OF SUCH ACCIDENTS AND INDEMNIFY THE EMPLOYER FROM A LL SUCH CLAIMS AND EXPENSES. (PARA 2, PAGE 279) (ALSO SEE CLAUSE 19, PAGE 306) (IV) CONCLUSION: FROM THE AFORESAID CONDITIONS, IT IS CLEAR THAT THE ASSESSEE WAS NOT MERELY RESPONSIBLE FOR SUPPLYING LABOUR FOR THE AFORESAID PROJECT, BUT RATHER WAS RESPONSIBLE FOR THE DEVELOPMENT OF THE ENTIRE INFRASTRUCTURE FACILITY. IN ORDER TO DO SO, IT DEPLOYED ITS VARIOUS RESOURCES, MATERIALS, LABOUR, SUPERVISOR, E NGINEERS ETC. IT MADE SUBSTANTIAL INVESTMENTS AND EXPOSED ITSELF TO VARIOUS RISKS. HE NCE, IT IS CLEAR THAT THE ASSESSEE WAS A DEVELOPER IN THE AFORESAID PROJECT AND HENCE IS E LIGIBLE FOR DEDUCTION U/S 80-IA. HENCE IN THE LIGHT OF THE ABOVE, THE ASSESSEE IS EN TITLED TO DEDUCTION U/S 80-IA OF THE ACT. IN ADDITION TO THE ABOVE, THE ASSESSEE WAS EVE N ASSESSED TO VAT ON THE AFORESAID PROJECTS. THE GIVEN FACT FURTHER STRENGTHENS THE CL AIM OF THE ASSESSEE THAT THE SAID CONTRACTS CONSTITUTE DEVELOPMENT CONTRACTS AND NOT WORKS CONTRACT. LASTLY ATTENTION IS INVITED TO THE RECENT JUDGMENT OF THE KOLKATA TRIBU NAL IN CASE OF SIMPLEX-SOM DUTT BUILDERS J.V AND SIMPLEX-SUBHASH J.V & SIMPLEX PROJ ECTS LTD.(ORDER ENCLOSED AT PAGES 119-137 OF PAPER BOOK OF ORDERS) ,WHEREIN THE HON'BLE TRIBUNAL ON SIMILAR FACTS ALLOWED THE CLAIM OF THE ASSESSEE U/S 80-IA. NOW CO MING TO THE AO'S CONTENTION THAT WHEN THE ASSESSEE EXECUTES A PROJECT WITH ADVANCES RECEIVED FROM GOVERNMENT, THE VERY PURPOSE OF PRIVATE SECTOR PARTICIPATION IS DEF EATED (GROUND J). IN THIS REGARD IT IS CLARIFIED THAT ADVANCES (IF AT ALL ANY WAS RECEIVED ) WERE RECEIVED AGAINST FURNISHING OF BANK GUARANTEE (OF AN EQUAL OR HIGHER AMOUNT) BY TH E ASSESSEE. FURTHER, A PERUSAL OF THE PROJECT BALANCE SHEETS (ALREADY DISCUSSED ABOVE ) HAVE ALREADY EXHIBITED THE FUNDS DEPLOYED BY THE ASSESSEE IN THE GIVEN PROJECTS. THU S, THE CLAIM OF THE AO THAT NO FINANCE WAS PROVIDED BY THE ASSESSEE IS FACTUALLY I NCORRECT. 8. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. FROM THE FOREGOING DISCUSSION WE FIND THAT THE PROV ISIONS OF SECTION 80-IA OF THE ACT APPLIES TO THE ENTERPRISE CARRYING ON THE BUSINESS OF (I) DEVELOPING OR (II) OPERATING AND MAINTAINING OR (III) DEVELOPING, OPERATING AND MAIN TAINING ANY INFRASTRUCTURE FACILITY WHICH FULFILS ALL THE FOLLOWING CONDITIONS, NAMELY :- ITA NO.1291-1292/KOL/2013 A.YS 06 -07 & 09-10 DCIT CC-XXVIII, KOL. V. M/S SPML INFRA LT D PAGE 17 (A) IT IS OWNED BY A COMPANY REGISTERED IN INDIA OR BY A CONSORTIUM OF SUCH COMPANIES 9 OR BY AN AUTHORITY OR A BOARD OR A CORP ORATION OR ANY OTHER BODY ESTABLISHED OR CONSTITUTED UNDER ANY CENTRAL OR STA TE ACT; (B) IT HAS ENTERED INTO AN AGREEMENT WITH THE CENTR AL GOVERNMENT OR A STATE GOVERNMENT OR A LOCAL AUTHORITY OR ANY OTHER STATUT ORY BODY FOR (I) DEVELOPING OR (II) OPERATING AND MAINTAINING OR (III) DEVELOPI NG, OPERATING AND MAINTAINING A NEW INFRASTRUCTURE FACILITY; (C) IT HAS STARTED OR STARTS OPERATING AND MAINTAIN ING THE INFRASTRUCTURE FACILITY ON OR AFTER THE 1ST DAY OF APRIL, 1995. PROVIDED TH AT WHERE AN INFRASTRUCTURE FACILITY IS TRANSFERRED ON OR AFTER THE 1ST DAY OF APRIL, 1999 BY AN ENTERPRISE WHICH DEVELOPED SUCH INFRASTRUCTURE FACILITY (HEREA FTER REFERRED TO IN THIS SECTION AS THE TRANSFEROR ENTERPRISE) TO ANOTHER EN TERPRISE (HEREAFTER IN THIS SECTION REFERRED TO AS THE TRANSFEREE ENTERPRISE) F OR THE PURPOSE OF OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY ON ITS BEHA LF IN ACCORDANCE WITH THE AGREEMENT WITH THE CENTRAL GOVERNMENT, STATE GOVERN MENT, LOCAL AUTHORITY OR STATUTORY BODY, THE PROVISIONS OF THIS SECTION SHAL L APPLY TO THE TRANSFEREE ENTERPRISE AS IF IT WERE THE ENTERPRISE TO WHICH TH IS CLAUSE APPLIES AND THE DEDUCTION FROM PROFITS AND GAINS WOULD BE AVAILABLE TO SUCH TRANSFEREE ENTERPRISE FOR THE UNEXPIRED PERIOD DURING WHICH TH E TRANSFEROR ENTERPRISE WOULD HAVE BEEN ENTITLED TO THE DEDUCTION, IF THE T RANSFER HAD NOT TAKEN PLACE. FROM THE ABOVE IT IS CLEAR IN ORDER TO AVAIL DEDUCT ION U/S 80-IA ALL THE FOLLOWING CONDITIONS SHOULD BE SATISFIED: (I) THE ASSESSEE IS A COMPANY OR A CONSORTIUM OF COMPANIES; (II) THERE EXISTS AN AGREEMENT WITH THE CENTRAL GOV ERNMENT, STATE GOVERNMENT, LOCAL AUTHORITY OR ANY OTHER STATUTORY BODY AND (III) PURSUANT TO THE AGREEMENT SPECIFIED IN POINT (II) THE COMPANY ENGAGES ITSELF IN ANY OF THE FOLLOWING ACTIVITIES: (A) DEVELOPMENT OF INFRASTRUCTURE FACILITY (B) OPERATION AND MAINTENANCE OF INFRASTRUCTURE FAC ILITY (C) DEVELOPMENT, OPERATION AND MAINTENANCE OF INFRA STRUCTURE FACILITY ITA NO.1291-1292/KOL/2013 A.YS 06 -07 & 09-10 DCIT CC-XXVIII, KOL. V. M/S SPML INFRA LT D PAGE 18 8.1 NOW THE ASSESSEE IN THE GIVEN CASE IS A COMPANY WHICH, PURSUANT TO AGREEMENTS WITH VARIOUS GOVERNMENT BODIES, ENGAGED ITSELF IN T HE DEVELOPMENT OF INFRASTRUCTURE FACILITY AS DEFINED IN THE EXPLANATION TO SUB SECTI ON 4 OF SECTION 80-IA . THESE SET OF FACTS HAVE NOT BEEN DISPUTED BY THE AO. THE LD. AO DISALLOWED THE CLAIM ON THE GROUND THAT THE ASSESSEE WAS A MERE WORKS CONTRACTO R CONDUCTING MERE CIVIL CONSTRUCTION AND HENCE AS PER THE EXPLANATION TO SE CTION 80- IA(13), THE DEDUCTION IS NOT AVAILABLE TO HIM. ACCORDING TO THE AO, THE INVE STMENTS WERE MADE BY THE GOVERNMENT AUTHORITIES BECAUSE THE ASSESSEE WAS REC EIVING PAYMENTS IN PROGRESS OF THE WORKS ON MEASUREMENT. ATTENTION IN THIS REGARD IS FIRSTLY INVITED TO THE PROVISIONS OF THE EXPLANATION OF SECTION 80-IA OF THE ACT AS P RODUCED BELOW: 'FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED T HAT NOTHING CONTAINED IN THIS SECTION SHALL APPLY IN RELATION TO A BUSINESS REFER RED TO IN SUB-SECTION (4) WHICH IS IN THE NATURE OF A WORKS CONTRACT AWARDED BY ANY PERSON (INCLUDING THE CENTRAL OR STATE GOVERNMENT) AND EXECUTED BY THE UN DERTAKING OR ENTERPRISE REFERRED TO IN SUB-SECTION (1). ' FROM A PLAIN READING OF THE ABOVE IT IS CLEAR THAT DEDUCTION U/S 80-IA DOES NOT APPLY TO WORKS CONTRACT. NOW THE RELEVANT QUESTION ARISES BE FORE US FOR ADJUDICATION IS THAT WHAT CONSTITUTES A WORKS CONTRACT. SECTION 80-IA NO WHERE DEFINES THE TERM ' WORKS CONTRACT ', HENCE THE NATURAL MEANING OF THE WORD SHALL APPL Y. AS PER THE OXFORD DICTIONARY THE TERM 'WORK' MEANS APPLICATION OF EFF ORT TO A PURPOSE OR USE OF ENERGY. THUS GOING BY THE DICTIONARY MEANING WE MAY SAY THA T A WORKS CONTRACT IS A CONTRACT WHICH INVOLVES EFFORT OR IN OTHER WORDS LABOUR OF T HE CONTRACTOR. FURTHER AS PER THE BLACK'S LAW DICTIONARY, THE TERM 'WORK' MEANS LABOU R OR IN OTHER WORDS PHYSICAL AND MENTAL EXERTION TO ATTAIN AN END ESP. AS CONTROLLED BY AND FOR THE BENEFIT OF THE EMPLOYER. THUS AS PER BLACKS'S LAW ALSO A WORKS CON TRACT IS A LABOUR CONTRACT UNDER WHICH THE CONTRACTOR MERELY EMPLOYS HIS LABOUR AS P ER THE DIRECTIONS OF THE CONTRACTEE. FURTHER, ATTENTION IS INVITED TO RELEVANT EXTRACTS OF SECTION 194C OF THE IT ACT: '(IV) 'WORK' SHALL INCLUDE- (A) ADVERTISING; (B) BROADCASTING AND TELECASTING INCLUDING PRODUCTI ON OF PROGRAMMES FOR SUCH BROADCASTING OR TELECASTING; ITA NO.1291-1292/KOL/2013 A.YS 06 -07 & 09-10 DCIT CC-XXVIII, KOL. V. M/S SPML INFRA LT D PAGE 19 (C) CARRIAGE OF GOODS OR PASSENGERS BY ANY MODE OF TRANSPORT OTHER THAN BY RAILWAYS; (D) CATERING; (E) MANUFACTURING OR SUPPLYING A PRODUCT ACCORDING TO THE REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY USING MATERIAL PURCH ASED FROM SUCH CUSTOMER, BUT DOES NOT INCLUDE MANUFACTURING OR SUPPLYING A P RODUCT ACCORDING TO THE REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY USING MATERIAL PURCHASED FROM A PERSON, OTHER THAN SUCH CUSTOMER.' THUS AS PER SECTION 194C ALSO, ' WORKS CONTRACT ' DOES NOT INCLUDE A CONTRACT WHEREIN THE CONTRACTOR IN ADDITION TO EMPLOYING LABOUR, PRO CURES MATERIAL FROM A THIRD PARTY. THUS, CONTRACTS INVOLVING MERE LABOUR OF THE CONTRA CTOR ARE INCLUDED IN THE PURVIEW OF 'WORKS CONTRACT'. FURTHER, ATTENTION IS INVITED TO THE JUDGMENT OF THE SUPREME COURT IN CASE OF ASSOCIATED CEMENT CO. LTD. VS. CIT [201 ITR 435], WHEREIN THE HON'BLE COURT WHILE INTERPRETING THE TERM ' WORK ' U/S 194C HELD THAT WORDS `ANY WORK' IN SUB-S. (1) OF S. 194C MEANS AN Y WORK INCLUDING SUPPLY OF LABOUR TO CARRY OUT WORK AND IS NOT INTENDED TO BE CONFINED TO OR RESTRICTED TO WORKS CONTRACT, THEREFORE, A PERSON WHO CREDITS TO THE ACCOUNT OF OR PAYS TO A CONTRACTOR ANY SUM PAYABLE ON BEHALF OF ORGANIZATIO NS SPECIFIED IN S. 194C(1) FOR CARRYING OUT ANY WORK (INCLUDING SUPPLY OF LABO UR FOR CARRYING OUT ANY WORK) IS LIABLE TO DEDUCT INCOME-TAX AS REQUIRED UN DER THAT SUB-SECTION. THE WORDS IN THE SUB-SECTIONS (1) OF 194C `ON INCOME CO MPRISED THEREIN' APPEARING IMMEDIATELY AFTER THE WORDS `DEDUCT AN AMOUNT EQUAL TO TWO PER CENT OF SUCH SUM AS INCOME-TAX' FROM THEIR PURPORT, CANNOT BE UN DERSTOOD AS THE PERCENTAGE AMOUNT DEDUCTIBLE FROM THE INCOME OF THE CONTRACTOR OUT OF THE SUM CREDITED TO HIS ACCOUNT OR PAID TO HIM IN PURSUANCE OF THE CONT RACT, BUT DEDUCTION IS TO BE MADE OUT OF PAYMENTS MADE TO THE CONTRACTOR. 8.2 WE SEE NO REASON TO CURTAIL OR TO CUT DOWN THE MEANING OF THE PLAIN WORDS USED IN THE SECTION. ''ANY WORK' MEANS ANY WORK AND NOT A ' WORKS CONTRACT '', WHICH HAS A SPECIAL CONNOTATION IN THE TAX LAW. INDEED IN THE S UB-SECTION THE ' WORK ' REFERRED TO THEREIN EXPRESSLY INCLUDES SUPPLY OF LABOUR TO CARR Y OUT A WORK. IT IS A CLEAR INDICATION OF THE LEGISLATURE THAT THE ' WORK ' IN THE SUB-SECTION IS NOT INTENDED TO BE CONFINED TO OR RESTRICTED TO ' WORKS CONTRACT '. THE ISSUE BEFORE THE SUPREME COURT IN THE AFORES AID CASE WAS WHETHER THE TERM ' WORK ' USED IN SECTION 194C NEEDS TO BE RESTRICTED TO ITA NO.1291-1292/KOL/2013 A.YS 06 -07 & 09-10 DCIT CC-XXVIII, KOL. V. M/S SPML INFRA LT D PAGE 20 'WORKS CONTRACT'. THE APEX COURT LAID OUT THAT THE TERM 'WORK' USED IN SECTION 194C NEED NOT BE RESTRICTED TO ' WORKS CONTRACTS ' (I.E. LABOUR CONTRACTS) BECAUSE THE SUB- SECTION EXPRESSLY INCLUDES SUPPLY OF LABOUR TO CARR Y OUT WORK. IN OTHER WORDS, IT IS IMPLIED THAT WORKS CONTRACT MEANS SUPPLY OF LABOUR TO CARRY OUT WORK. THUS FROM THE ABOVE WE MAY SAY THAT A WORKS CONTRACT CONSTITUTES A CONTRACT UNDER WHICH THE CONTRACTOR IS MERELY EMPLOYING HIS EFFORTS OR LABOU R. UNDER SUCH A CONTRACT, THE CONTRACTEE PROVIDES THE MATERIAL AND OTHER REQUISIT ES (A COMPLETE INFRASTRUCTURE) NEEDED TO CARRY OUT THE DESIRED WORK TO THE CONTRAC TOR WHO BY APPLYING HIS LABOUR TO THE SAID MATERIAL TURNS THE MATERIAL INTO A DESIRED PRODUCT. FURTHER, ATTENTION IS INVITED TO THE MEMORANDUM EXPLAINING THE PROVISIONS IN THE FINANCE BILL, 2007, REPORTED IN [2007] 289 ITR (ST.) 292 AT PAGE 312, WHICH READS A S UNDER: 'SECTION 80-LA, INTER ALIA, PROVIDES FOR A TEN-YEAR TAX BENEFIT TO AN ENTERPRISE OR AN UNDERTAKING ENGAGED IN DEVELOPMENT OF INFRASTRUC TURE FACILITIES, INDUSTRIAL PARKS AND SPECIAL ECONOMIC ZONES. THE TAX BENEFIT W AS INTRODUCED FOR THE REASON THAT INDUSTRIAL MODERNIZATION REQUIRES A PAS SIVE EXPANSION OF, AND QUALITATIVE IMPROVEMENT IN, INFRASTRUCTURE (VIZ., E XPRESSWAYS, 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 {OR ENCOURAGING PRIVATE SECTOR PARTICIPATION BY WAY OF INVESTMENT I N DEVELOPMENT OF THE INFRASTRUCTURE SECTOR AND NOT {OR THE PERSONS WHO M ERELY EXECUTE THE CIVIL 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 EXECUTES A WORKS CONTRACT ENT ERED INTO WITH THE UNDERTAKING OR ENTERPRISE REFERRED TO IN THE SAID SECTION. THUS, I N A CASE WHERE A PERSON MAKES THE INVESTMENT AND HIMSELF EXECUTES THE DEVELOPMENT WOR K, I.E., CARRIES OUT THE CIVIL CONSTRUCTION WORK HE WILL BE ELIGIBLE FOR TAX BENEF IT UNDER SECTION 80- IA OF THE ACT. IN CONTRAST TO THIS, A PERSON WHO ENTERS INTO A CONTRA CT WITH ANOTHER PERSON (I.E., UNDERTAKING OR ENTERPRISE REFERRED TO IN SECTION 80 -IA) FOR EXECUTING WORKS CONTRACT, WILL NOT BE ELIGIBLE FOR TAX BENEFIT UNDER SECTION 80- IA. THIS AMENDMENT WILL TAKE RETROSPECTIVE EFFECT FROM 1 ST APRIL 2000 AND WILL ACCORDINGLY APPLY IN RELATION TO THE ASSESSMENT YEAR 2000-01 AND SUBSEQUENT YEARS. THE E XPLANATORY MEMORANDUM CLEARLY LAYS OUT THAT PURPOSE OF EXTENDING TAX BENE FIT U/S 80-IA WAS TO ENCOURAGE INVESTMENTS FROM THE PRIVATE SECTOR AND HENCE WORK CONTRACTS, I.E. CONTRACTS INVOLVING MERELY LABOUR (OR MERE EXECUTION OF CONSTRUCTION WI THOUT MAKING INVESTMENTS) ARE ITA NO.1291-1292/KOL/2013 A.YS 06 -07 & 09-10 DCIT CC-XXVIII, KOL. V. M/S SPML INFRA LT D PAGE 21 OUTSIDE THE PURVIEW OF THE PROVISIONS OF SECTION 80 -1A. THUS, THE TERM ' WORKS CONTRACT ' USED IN EXPLANATION TO SECTION 80-IA(L3) MEANS A CONTRACT OF DEVELOPING INFRASTRUCTURE BY MERELY EMPLOYING LABOUR AND MAKIN G NO INVESTMENTS. WE ALSO FIND SUPPORT FROM THE FOLLOWING JUDGMENTS: THE HYDERABAD BENCH OF TRIBUNAL IN CASE OF M/S. GVPR ENGINEERS LTD. VS. ACIT (2012) 32 CCH 0296 HYDTRIB (2012) 51 SOT 0207 (HYD) (URO). THE RELEVANT EXTRACT OF THE ORDER IS REPRODUCED AS UNDER : THE NEXT QUESTION TO BE ANSWERED IS WHETHER THE AS SESSEE IS A DEVELOPER OR MERE WORKS CONTRACTOR. WHETHER THE ASSESSEE IS A DE VELOPER OR WORKS CONTRACTOR IS PURELY DEPENDS ON THE NATURE OF THE W ORK UNDERTAKEN BY THE ASSESSEE. EACH OF THE WORK UNDERTAKEN HAS TO BE ANA LYZED AND A CONCLUSION HAS TO BE DRAWN ABOUT THE NATURE OF THE WORK UNDERTAKEN BY THE ASSESSEE. THE AGREEMENT ENTERED INTO WITH THE GOVERNMENT OR THE G OVERNMENT BODY MAY BE A MERE WORKS CONTRACT OR FOR DEVELOPMENT OF INFRASTRU CTURE. IT IS TO BE SEEN FROM THE AGREEMENTS ENTERED INTO BY THE ASSESSEE WITH TH E GOVERNMENT. THE GOVERNMENT HANDED OVER THE POSSESSION OF THE PREMIS ES OF PROJECTS TO THE ASSESSEE FOR THE DEVELOPMENT OF INFRASTRUCTURE FACI LITY. IT IS THE ASSESSEE'S RESPONSIBILITY TO DO ALL ACTS TILL THE POSSESSION O F PROPERTY IS HANDED OVER TO THE GOVERNMENT. THE FIRST PHASE IS TO TAKE OVER THE EXI STING PREMISES OF THE PROJECTS AND THEREAFTER DEVELOPING THE SAME INTO INFRASTRUCT URE FACILITY. SECONDLY, THE ASSESSEE SHALL FACILITATE THE PEOPLE TO USE THE AVA ILABLE EXISTING FACILITY EVEN WHILE THE PROCESS OF DEVELOPMENT IS IN PROGRESS. AN Y LOSS TO THE PUBLIC CAUSED IN THE PROCESS WOULD BE THE RESPONSIBILITY OF THE A SSESSEE. THE ASSESSEE HAS TO DEVELOP THE INFRASTRUCTURE FACILITY. IN THE PROCESS , ALL THE WORKS ARE TO BE EXECUTED BY THE ASSESSEE. IT MAY BE LAYING OF A DRA INAGE SYSTEM; MAY BE CONSTRUCTION OF A PROJECT; PROVISION OF WAY FOR THE CATTLE AND BULLOCK CARTS IN THE VILLAGE; PROVISION FOR TRAFFIC WITHOUT ANY HIND RANCE, THE ASSESSEE'S DUTY IS TO DEVELOP INFRASTRUCTURE WHETHER IT INVOLVES CONSTRUC TION OF A PARTICULAR ITEM AS AGREED TO IN THE AGREEMENT OR NOT. THE AGREEMENT IS NOT FOR A SPECIFIC WORK, IT IS FOR DEVELOPMENT OF FACILITY AS A WHOLE. THE ASSE SSEE IS NOT ENTRUSTED WITH ANY SPECIFIC WORK TO BE DONE BY THE ASSESSEE. THE MATER IAL REQUIRED IS TO BE BROUGHT IN BY THE ASSESSEE BY STICKING TO THE QUALITY AND Q UANTITY IRRESPECTIVE OF THE COST OF SUCH MATERIAL. THE GOVERNMENT DOES NOT PROVIDE A NY MATERIAL TO THE ASSESSEE. IT PROVIDES THE WORKS IN PACKAGES AND NOT AS A WORKS CONTRACT. THE ASSESSEE UTILIZES ITS FUNDS, ITS EXPERTISE, ITS EMP LOYEES AND TAKES THE RESPONSIBILITY OF DEVELOPING THE INFRASTRUCTURE FAC ILITY. THE LOSSES SUFFERED EITHER BY THE GOVT. OR THE PEOPLE IN THE PROCESS OF SUCH DEVELOPMENT WOULD BE THAT OF THE ASSESSEE. THE ASSESSEE HANDS OVER THE D EVELOPED INFRASTRUCTURE FACILITY TO THE GOVERNMENT ON COMPLETION OF THE DEV ELOPMENT. THEREAFTER, THE ASSESSEE HAS TO UNDERTAKE MAINTENANCE OF THE SAID I NFRASTRUCTURE FOR A PERIOD OF 12 TO 24 MONTHS. DURING THIS PERIOD, IF ANY DAMAGES ARE OCCURRED IT SHALL BE ITA NO.1291-1292/KOL/2013 A.YS 06 -07 & 09-10 DCIT CC-XXVIII, KOL. V. M/S SPML INFRA LT D PAGE 22 THE RESPONSIBILITY OF THE ASSESSEE. FURTHER, DURING THIS PERIOD, THE ENTIRE INFRASTRUCTURE SHALL HAVE TO BE MAINTAINED BY THE A SSESSEE ALONE WITHOUT HINDRANCE TO THE REGULAR TRAFFIC. THEREFORE, IT IS CLEAR THAT FROM AN UN- DEVELOPED AREA, INFRASTRUCTURE IS DEVELOPED AND HAN DED OVER TO THE GOVERNMENT AND AS EXPLAINED BY THE CBDT VIDE ITS CI RCULAR DATED 18-05-2010, SUCH ACTIVITY IS ELIGIBLE FOR DEDUCTION UNDER SECTI ON 80IA (4) OF THE ACT. THIS CANNOT BE CONSIDERED AS A MERE WORKS CONTRACT BUT H AS TO BE CONSIDERED AS A DEVELOPMENT OF INFRASTRUCTURE FACILITY. THEREFORE, THE ASSESSEE IS A DEVELOPER AND NOT A WORKS CONTRACTOR AS PRESUMED BY THE REVEN UE. THE DEPARTMENT IS NOT CORRECT IN HOLDING THAT THE ASSESSEE IS A MERE CONT RACTOR OF THE WORK AND NOT A DEVELOPER. 8.3 IT WAS ALSO OBSERVED THAT 'THE EXPLANATORY MEMO RANDUM TO FINANCE ACT 2007 STATES THAT THE PURPOSE OF THE TAX 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 TH AT THE DEDUCTION UNDER SECTION 80IA OF THE ACT IS AVAILABLE TO DEVELOPERS WHO UNDERTAKES E NTREPRENEURIAL AND INVESTMENT RISK AND NOT FOR THE CONTRACTORS, WHO UNDERTAKES ONLY BU SINESS RISK. SIMILARLY THE CHENNAI BENCH OF TRIBUNAL IN CASE OF R.R. CONSTRUCTIONS, CHENNAI VS DEPARTMENT OF INCOME TAX 2013) 35 CCH 0547 CHEN TRI B (2015) 152 ITD 0625 (CHENNAI) HELD THAT ' WHEN THE ASSESSEE MAKES INVESTMENT AND HIMSELF EXEC UTES DEVELOPMENT WORK AND CARRIES OUT CIVIL WORKS HE IS ELIGIBLE FOR TAX BENEFIT U/S 80IA OF THE ACT. ACCORDINGLY, WITH THE FOREGOING DISCUSSION , WE HOLD THAT THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 80IA(4) OF THE ACT, AND T HEREFORE, WE ORDER TO DELETE THE ADDITION MADE IN THIS RESPECT ' THUS, THE MEMORANDUM EXPLAINING THE PROVISIONS IN T HE FINANCE BILL, 2007, FURTHER STRENGTHENS THE CONTENTION OF THE ASSESSEE THAT A W ORKS CONTRACT IS A CONTRACT WHICH INVOLVES MERE LABOUR OF THE CONTRACTOR. HOWEVER, IF UNDER A CONTRACT, THE CONTRACTOR EMPLOYS HIS CAPITAL AND ENTERPRISE IN ADDITION TO L ABOUR, THEN THE SAID CONTRACT DOES NOT CONSTITUTE A WORKS CONTRACT UNDER THE EXPLANATION T O SECTION 80-IA(L3) AND THE CONTRACTOR SHALL BE ELIGIBLE FOR DEDUCTION U/S 80-I A. NOW COMING TO THE FACTS OF THE CASE, IT IS SUBMITTED THAT THE ASSESSEE WAS NOT MER E WORKS CONTRACTOR, WHO HAD MERELY EMPLOYED ITS LABOUR UNDER THE PROJECTS FROM THE VAR IOUS GOVERNMENT AUTHORITIES. THE ASSESSEE WAS A DEVELOPER. IN ADDITION TO EMPLOYING LABOUR IT MADE INVESTMENTS, IT ITA NO.1291-1292/KOL/2013 A.YS 06 -07 & 09-10 DCIT CC-XXVIII, KOL. V. M/S SPML INFRA LT D PAGE 23 DEVELOPED AN ENTERPRISE/INFRASTRUCTURE TO SUPPORT T HE WORK UNDER THE VARIOUS PROJECTS. IN ADDITION TO LABOUR, IT DEPLOYED ITS MACHINERY, M ATERIALS AND DID ALL THE THINGS NECESSARY (I.E. PROVIDED AN ENTERPRISE) TO SUPPORT THE CONSTRUCTION WORK UNDERTAKEN UNDER THE VARIOUS PROJECTS. THE ASSESSEE WAS PROVID ED WITH THE SITE ALONE AND BY PUTTING ITS OWN INPUTS (NOT LABOUR ALONE) HE CONVER TED THE SITE INTO AN INFRASTRUCTURAL FACILITY. 8.4 FURTHER, ITAT (HYDERABAD) IN CASE OF SIVA SWATH I CONSTRUCTIONS PVT. LTD. VS DCIT, CIRCLE-3(2) IN ITA NO.1008-09/HYD/2013 FOR AY S 2009-10 & 2010-11 DATED 25.10.2013 HELD THAT 'THE NEXT REASON GIVEN BY THE CIT(A) IS WITH REGARD TO NON- FINANCIAL PARTICIPATION BY THE ASSESSEE, AS THE ASS ESSEE HAS GOT MOBILIZATION ADVANCE. THE MOBILIZATION ADVANCE HAS NOT BEEN GIVEN FREELY. IT HAS BEEN GIVEN ONLY AFTER THE ASSESSEE FURNISHED A BANK GUARANTEE, AND THE BANK G UARANTEE HAS BEEN GIVEN BY THE BANK ONLY AFTER GETTING ENOUGH SECURITY FROM THE AS SESSEE, TO PROTECT ITSELF FROM ANY RISK ON ACCOUNT OF ANY DEFAULT ON THE PART OF THE A SSESSEE. THE ASSESSEE HAS TAKEN FINANCIAL ASSISTANCE FROM BANK AND PAID HUGE INTERE ST OF RS. 2,87,10,943.00 FOR ASSESSMENT YEAR 2009-10 AND OF RS. 9,35,78,373.00 F OR ASSESSMENT YEAR 2010-11, AS SEEN FROM THE PROFIT AND LOSS ACCOUNT OF THE ASSESS EE FOR THE RELEVANT YEARS ENDING ON 31.3.2009 AND 31.3.2010 RESPECTIVELY, COPIES OF WHI CH ARE FURNISHED BY THE ASSESSEE AT PAGES 20 AND 65 OF THE PAPER-BOOK. SIMILARLY, ASSES SEE HAS INVESTED ITS OWN FUND OF RS.5,55,00,000.00 FOR ASSESSMENT YEAR 2009-10 AND O F RS. 7,86,75,710.00 FOR THE ASSESSMENT YEAR 2010-11, AS SEEN FROM THE BALANCE S HEET OF THE ASSESSEE AS ON 31.3.2009 AND 31.3.2010 RESPECTIVELY, COPIES OF WHI CH ARE FURNISHED BY THE ASSESSEE AT PAGES 21 AND 66 OF THE PAPER-BOOK. IN THIS VIEW OF THE MATTER, THE REASON GIVEN BY THE CIT(A) ON THIS ASPECT FOR DENYING DEDUCTION TO THE ASSESSEE UNDER S.80-IA IS ALSO NOT VALID. THUS IN LIGHT OF THE AFORESAID DECISION OF THE TRIB UNAL HYDERABAD BENCH, THE CONTENTION OF THE AO IS NOT VALID. FURTHER, MERELY BECAUSE THE ASSESSEE WAS RECEIVING PAYMENTS FROM THE GOVERNMENT IN PROGRESS OF WORK IT CANNOT BE SAID THAT THE PROJECTS WERE FINANCED BY GOVERNMENT. IN THIS REGARD IT IS P OINTED OUT THAT UNDER SUB-SECTION 4 ITA NO.1291-1292/KOL/2013 A.YS 06 -07 & 09-10 DCIT CC-XXVIII, KOL. V. M/S SPML INFRA LT D PAGE 24 OF SECTION 80-IA, DEDUCTION IS AVAILABLE TO A DEVEL OPER, I.E. IF, AN ASSESSEE, MERELY DEVELOPS THE INFRASTRUCTURE FACILITY WITHOUT OPERAT ING AND MAINTAINING THE SAME, IT IS ENTITLED TO DEDUCTION. THE BOMBAY HIGH COURT IN CAS E OF COMMISSIONER OF INCOME-TAX V. ABG HEAVY INDUSTRIES LIMITED [322 ITR 323] OBSERVED THAT 'PARLIAMENT AMENDED THE PROVISIONS OF SECTION 80-LA OF THE ACT SO AS TO CLARIFY THAT IN ORDER TO AVAIL OF A DEDUCTION, THE ASSESSEE COULD (I) DEVELOP ; OR (II) OPERATE AND MAINTAIN ; OR (III) DEVELOP, OPERATE AND MAINTAIN THE FACILITY. THE CON DITION AS REGARDS DEVELOPMENT, OPERATION AND MAINTENANCE OF AN INFRASTRUCTURE FACI LITY WAS CONTEMPORANEOUSLY CONSTRUED BY THE AUTHORITIES AT ALL MATERIAL TIMES, TO COVER WITHIN ITS PURVIEW THE DEVELOPMENT OF AN INFRASTRUCTURE FACILITY UNDER A S CHEME BY WHICH AN ENTERPRISE WOULD BUILD, OWN, LEASE AND EVENTUALLY TRANSFER THE FACIL ITY. ' 'THIS WAS PERHAPS A PRACTICAL REALISATION OF THE FA CT A DEVELOPER MAY NOT POSSESS THE WHEREWITHAL, EXPERTISE OR RESOURCES T O OPERATE A FACILITY, ONCE CONSTRUCTED PARLIAMENT EVENTUALLY STEPPED IN TO CLA RIFY THAT IT WAS NOT INVARIABLY NECESSARY FOR A DEVELOPER TO OPERATE AND MAINTAIN THE FACILITY. PARLIAMENT WHEN IT AMENDED THE LAW WAS OBVIOUSLY AW ARE OF THE ADMINISTRATIVE PRACTICE RESULTING IN THE CIRCULARS OF THE CENTRAL BOARD OF DIRECT TAXES. THE FACT THAT IN SUCH A SCHEME. AN ENTERPRISE WOULD NO T OPERATE THE FACILITY ITSELF WAS NOT REGARDED AS BEING A STATUTORY BAR TO THE EN TITLEMENT TO A DEDUCTION UNDER SECTION 80-IA OF THE ACT. ' 8.5 FROM THE ABOVE IT IS CLEAR THAT EVEN IF AN ASSE SSEE IS MERELY DEVELOPING THE INFRASTRUCTURAL FACILITY (WITHOUT OPERATING AND MAI NTAINING THE SAME), IT IS ENTITLED TO DEDUCTION U/S 80-1A. FURTHER, CONDITION (B) LAID OU T IN SUB-SECTION 4 OF SECTION 80-IA MANDATES THE EXISTENCE OF AN AGREEMENT WITH THE GOV ERNMENT. MOREOVER, IF SECTION 80-IA GRANTS DEDUCTION ON PROFITS FROM THE ACTIVITY OF DEVELOPMENT CARRIED OUT IN PURSUANCE OF AN AGREEMENT WITH THE GOVERNMENT IT PR ESUPPOSES THAT ASSESSEE WILL EARN SOME PROFITS FROM MERE DEVELOPMENT (WITHOUT OPERATI NG AND MAINTAINING) OF THE INFRASTRUCTURE FACILITY. NOW THE RELEVANT QUESTION THAT ARISES HERE IS THAT HOW WOULD AN ASSESSEE ENGAGED IN MERE DEVELOPMENTAL ACTIVITY (AN D NO OPERATION) PURSUANT TO AN AGREEMENT WITH THE GOVERNMENT EARN PROFITS? THE OBV IOUS ANSWER IS THAT THE ASSESSEE WILL RECOVER ITS COST OF DEVELOPMENT FROM THE GOVER NMENT OTHERWISE THE ENTIRE COST OF DEVELOPMENT WILL BE A LOSS IN ITS HANDS. THUS, IF D EDUCTION U/S 80-IA IS DENIED ON THE GROUND THAT THE ASSESSEE HAD RECEIVED PAYMENTS FROM GOVERNMENT, THEN AN ASSESSEE ITA NO.1291-1292/KOL/2013 A.YS 06 -07 & 09-10 DCIT CC-XXVIII, KOL. V. M/S SPML INFRA LT D PAGE 25 WHO IS ONLY A ' DEVELOPER ' (AND NOT AN OPERATOR) WILL NEVER BE ENTITLED TO D EDUCTION U/S 80-IA, WHICH IS CLEARLY NOT THE INTENTION OF LEGISL ATURE AS DISCUSSED BY THE BOMBAY HIGH COURT IN CASE OF ABG HEAVY INDUSTRIES LTD. THU S, MERELY BECAUSE THE ASSESSEE WAS PAID BY THE GOVERNMENT FOR DEVELOPMENT WORK IT CANNOT BE DENIED DEDUCTION UNDER SECTION 80-IA(4). THE CONTENTION OF THE ASSES SEE FINDS STRENGTH FROM THE FOLLOWING JUDGMENTS: THE ITAT (MUMBAI) IN CASE OF ACIT V. BHARAT UDYOG LTD. (2009) 123 TTJ 0689 : (2009) 23 DTR 0433 : (2009) 118 ITD 0336 : (2008) 2 4 SOT 0412 AFTER THE AMENDMENT EFFECTED BY FINANCE ACT, 1999 W.E.F. 1ST APRIL, 2000, THE DEDUCTION UNDER S. 80-IA(4) HAS BECOME AV AILABLE TO ANY ENTERPRISE CARRYING ON THE BUSINESS OF (I) DEVELOPI NG, OR (II) MAINTAINING AND OPERATING, OR (III) DEVELOPING, MAINTAINING AND OPERATING ANY INFRASTRUCTURE FACILITY. SUB-CL. (C) OF CL. (I) OF S. 80-IA(4) IS OBVIOUSLY APPLICABLE TO AN ENTERPRISE WHICH IS ENGAGED IN OP ERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY ON OR AFTE R 1ST APRIL, 1995. IT IS NOT APPLICABLE TO THE CASE OF AN ENTERPRISE WHICH I S ENGAGED IN MERE DEVELOPMENT OF INFRASTRUCTURE FACILITY AND NOT IT S OPERATION AND MAINTENANCE. THEREFORE, THE QUESTION OF OPERATIN G AND MAINTAINING OF INFRASTRUCTURE FACILITY BY SUCH ENTERPRISE BEFOR E OR AFTER ANY CUT OFF DATE CANNOT ARISE. HOWEVER, IF THE CONTENTION OF TH E DEPARTMENTAL REPRESENTATIVE IS ACCEPTED, IT WOULD OBVIOUSLY/UNDE RSTANDABLY LEAD TO MANIFESTLY ABSURD RESULTS. WHEN THE ACT PROVIDES FO R DEDUCTION UNDISPUTEDLY FOR AN ENTERPRISE WHO IS ONLY DEVELOP ING THE INFRASTRUCTURE FACILITY, UNACCOMPANIED BY OPERATIN G AND MAINTAINING THEREOF BY SUCH PERSON, THERE CANNOT BE ANY QUESTIO N OF PROVIDING A CONDITION FOR SUCH AN ENTERPRISE TO START OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY ON OR AFTER 1ST APRIL, 1995 . SINCE THE ASSESSEE IS ONLY A DEVELOPER OF THE INFRASTRUCTURE PROJECT AND IT IS NOT MAINTAINING AND OPERATING THE INFRASTRUCTURE FACILITY, SUB-CL. (C) OF CL. (I) OF SUB-S. (4) OF S. 80-IA IS NOT APPLICABLE. THE INTERPRETATION O F REVENUE IS ABSURD ALSO IN VIEW OF THE RATIONALE OF THE PROVISIONS OF S. 80-IA(4)(I). FROM THE ASST. YR. 2000-01, DEDUCTION IS AVAILABLE IF THE AS SESSEE CARRIES ON THE BUSINESS OF ANY ONE OF THE THREE TYPES OF ACTIVITIE S. WHEN AN ASSESSEE IS ONLY DEVELOPING AN INFRASTRUCTURE FACILITY PROJECT AND IS NOT MAINTAINING NOR OPERATING IT, OBVIOUSLY SUCH AN ASSESSEE WILL B E PAID FOR THE COST INCURRED BY IT; OTHERWISE, HOW WILL THE PERSON WHO DEVELOPS THE INFRASTRUCTURE FACILITY PROJECT, REALISE ITS COST ? IF THE INFRASTRUCTURE FACILITY, JUST AFTER ITS DEVELOPMENT, IS TRANSFERRE D TO THE GOVERNMENT, NATURALLY THE COST WOULD BE PAID BY THE GOVERNMENT. THEREFORE, MERELY BECAUSE THE TRANSFEREE HAS PAID FOR THE DEVELOPMENT OF INFRASTRUCTURE ITA NO.1291-1292/KOL/2013 A.YS 06 -07 & 09-10 DCIT CC-XXVIII, KOL. V. M/S SPML INFRA LT D PAGE 26 FACILITY CARRIED OUT BY THE ASSESSEE, IT CANNOT BE SAID THAT THE ASSESSEE DID NOT DEVELOP THE INFRASTRUCTURE FACILITY. IF THE INTERPRETATION CANVASSED BY THE REVENUE AUTHORITIES IS ACCEPTED, N O ENTERPRISE, CARRYING ON THE BUSINESS OF ONLY DEVELOPING THE INF RASTRUCTURE FACILITY, WOULD BE ENTITLED TO DEDUCTION UNDER S. 80-IA(4), W HICH IS NOT THE INTENTION OF THE LAW. IF A PERSON WHO ONLY DEVELOPS THE INFRASTRUCTURE FACILITY IS NOT PAID BY THE GOVERNMENT, THE ENTIRE COST OF DEVELOPMENT WOULD BE A LOSS IN THE HANDS OF THE DEVELOPER AS HE IS NOT OPERATING THE INFRASTRUCTURE FACILITY. WHEN THE LEGISLATURE HAS P ROVIDED THAT THE INCOME OF THE DEVELOPER OF THE INFRASTRUCTURE PROJE CT WOULD BE ELIGIBLE FOR DEDUCTION, IT PRESUPPOSES THAT THERE CAN BE INC OME TO DEVELOPER, I.E., TO THE PERSON WHO IS CARRYING ON THE ACTIVITY OF ON LY DEVELOPING INFRASTRUCTURE FACILITY. OBVIOUS AS IT IS, A DEVELO PER WOULD HAVE INCOME ONLY IF HE IS PAID FOR DEVELOPMENT OF INFRASTRUCTUR E FACILITY, FOR THE SIMPLE REASON THAT HE IS NOT HAVING THE RIGHT/AUTHO RISATION TO OPERATE THE INFRASTRUCTURE FACILITY AND TO COLLECT TOLL THEREFR OM, AND HAS NO OTHER SOURCE OF RECOUPMENT OF HIS COST OF DEVELOPMENT. CO NSIDERED AS SUCH, THE BUSINESS ACTIVITY OF THE NATURE OF BUILD AND TR ANSFER ALSO FALLS WITHIN ELIGIBLE CONSTRUCTION ACTIVITY, THAT IS, ACTIVITY E LIGIBLE FOR DEDUCTION UNDER S. 80-IA INASMUCH AS MERE DEVELOPMENT AS SU CH AND UNASSOCIATED/ UNACCOMPANIED WITH OPERATE AND MAI NTENANCE ALSO FALLS WITHIN SUCH BUSINESS ACTIVITY AS IS ELIGIBLE FOR DEDUCTION UNDER S. 80-IA. THEREFORE, MERELY BECAUSE THE PRESENT ASSESS EE WAS PAID BY THE GOVERNMENT FOR DEVELOPMENT WORK, IT CANNOT BE DENIE D DEDUCTION UNDER S. 80-IA(4). A PERSON WHO ENTERS INTO A CONTRACT WI TH ANOTHER PERSON WILL BE A CONTRACTOR NO DOUBT; AND THE ASSESSEE HAV ING ENTERED INTO AN AGREEMENT WITH THE GOVERNMENT AGENCIES FOR DEVELOPM ENT OF THE INFRASTRUCTURE PROJECTS, IS OBVIOUSLY A CONTRACTOR BUT THAT DOES NOT DEROGATE THE ASSESSEE FROM BEING A DEVELOPER AS WEL L. THE TERM 'CONTRACTOR' IS NOT ESSENTIALLY CONTRADICTORY TO TH E TERM ' DEVELOPER '. ON THE OTHER HAND, RATHER S. 80-IA(4) ITSELF PROVIDES THAT ASSESSEE SHOULD DEVELOP THE INFRASTRUCTURE FACILITY AS PER AGREEMEN T 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. THEREFORE, M ERELY BECAUSE IN THE AGREEMENT FOR DEVELOPMENT OF INFRASTRUCTURE FACILIT Y, ASSESSEE IS REFERRED TO AS CONTRACTOR OR BECAUSE SOME BASIC SPECIFICATIO NS ARE LAID DOWN, IT DOES NOT DETRACT THE ASSESSEE FROM THE POSITION OF BEING A DEVELOPER; NOR WILL IT DEBAR THE ASSESSEE FROM CLAIMING DEDUCTION UNDER S. 80-IA(4). THEREFORE, AN ASSESSEE WHO IS ONLY ENGAGED IN THE D EVELOPING THE INFRASTRUCTURAL FACILITY I.E., ROAD AND NOT ENGAGED IN THE OPERATING AND MAINTAINING THE SAID FACILITY IS ENTITLED TO THE B ENEFITS OF THE DEDUCTION UNDER S. 80-IA(4).PATEL ENGINEERING LTD. VS. DY. C IT (2004) 84 TTJ (MUMBAI) 646 FOLLOWED. PROVISIONS OF SUB-CL. (C) OF CL. (I) OF S. 80-IA(4) ARE INAPPLICABLE TO THE ASSESSEE WHICH IS ENGAGED I N MERE DEVELOPING OF THE INFRASTRUCTURE FACILITY AND, THEREFORE, AN ASSE SSEE WHO IS ONLY ITA NO.1291-1292/KOL/2013 A.YS 06 -07 & 09-10 DCIT CC-XXVIII, KOL. V. M/S SPML INFRA LT D PAGE 27 ENGAGED IN DEVELOPING THE INFRASTRUCTURE FACILITY A ND NOT IN OPERATING AND MAINTAINING THE SAID FACILITY IS ENTITLED TO T HE BENEFIT OF DEDUCTION UNDER S. 80-IA(4); MERELY BECAUSE ASSESSEE IS REFER RED TO AS CONTRACTOR IN THE AGREEMENT FOR DEVELOPMENT OF INFRASTRUCTURE FACILITY OR SOME BASIC SPECIFICATIONS ARE LAID DOWN, WOULD NOT DEBAR THE A SSESSEE FROM CLAIMING DEDUCTION UNDER S. 80-IA(4). IF A PERSON WHO ONLY DEVELOPS THE INFRASTRUCTURE FA CILITY WAS NOT PAID BY THE GOVERNMENT, THE ENTIRE COST OF DEVELOPMENT WOULD BE A LOSS IN THE HANDS OF THE DEVELOPER AS HE WAS NOT OPERATING THE INFRASTRUCTUR E FACILITY. MERELY BECAUSE THE ASSESSEE WAS PAID BY THE GOVERNMENT FOR DEVELOPMENT WORK IT COULD NOT BE DENIED DEDUCTION UNDER SECTION 80-IA(4). THE CHENNAI BENCH OF TRIBUNAL IN CASE OF R.R. CONSTRUCTIONS, CHENNAI VS. DEPARTMENT OF INCOME TAX HELD THAT 'WHEN AN ASSESSEE IS ONLY DEVELOPING AN INFRASTRUCTURE FACILITY PROJECT AND IS NOT MAINTAINING NOR OPERATING IT, OBVIOUSLY SUCH AN ASSESSEE WILL BE PAID FOR THE COST INCURRED BY IT; OTHERWISE, HOW WILL THE PERSON, WHO DEVELOPS THE INFRASTRUCTURE FA CILITY PROJECT, REALIZE ITS COST? IF THE INFRASTRUCTURE FACILITY, JUST AFTER ITS DEVELOPMENT , IS TRANSFERRED TO THE GOVERNMENT, NATURALLY THE COST WOULD BE PAID BY THE GOVERNMENT. THEREFORE, MERELY BECAUSE THE TRANSFEREE HAD PAID FOR THE DEVELOPMENT OF INFRASTR UCTURE FACILITY CARRIED OUT BY THE ASSESSEE, IT CANNOT BE SAID THAT THE ASSESSEE DID N OT DEVELOP THE INFRASTRUCTURE FACILITY. IF THE INTERPRETATION DONE BY THE ASSESSING OFFICER IS ACCEPTED, NO ENTERPRISE CARRYING ON THE BUSINESS OF ONLY DEVELOPING HE INFRASTRUCTUR E FACILITY WOULD BE ENTITLED TO DEDUCTION UNDER SECTION 80IA(4), WHICH IS NOT THE I NTENTION OF THE LAW. AN ENTERPRISE, WHICH DEVELOPS THE INFRASTRUCTURE FACILITY IS NOT P AID BY THE GOVERNMENT, THE ENTIRE COST OF DEVELOPMENT WOULD BE A LOSS IN THE HANDS OF THE DEVELOPER AS HE IS NOT OPERATING THE INFRASTRUCTURE FACILITY. THE LEGISLAT URE HAS PROVIDED THAT THE INCOME OF THE DEVELOPER OF THE INFRASTRUCTURE PROJECT WOULD B E ELIGIBLE FOR DEDUCTION. IT PRESUPPOSES THAT THERE CAN BE INCOME TO DEVELOPER I .E. TO THE PERSON WHO IS CARRYING ON THE ACTIVITY OF ONLY DEVELOPMENT INFRASTRUCTURE FACILITY. OSTENSIBLY, A DEVELOPER WOULD HAVE INCOME ONLY IF HE IS PAID FOR THE DEVELO PMENT OF INFRASTRUCTURE FACILITY, FOR THE SIMPLE REASON THAT HE IS NOT HAVING THE RIGHT/A UTHORIZATION TO OPERATE THE INFRASTRUCTURE FACILITY AND TO COLLECT TOLL THERE F ROM, HAS NO OTHER SOURCE OF RECOUPMENT OF HIS COST OF DEVELOPMENT. ITA NO.1291-1292/KOL/2013 A.YS 06 -07 & 09-10 DCIT CC-XXVIII, KOL. V. M/S SPML INFRA LT D PAGE 28 THE INDORE BENCH OF THE TRIBUNAL IN CASE OF SANEE INFRASTRUCTURE PVT. LTD. VS. ACIT [138 ITD 433] HELD THAT 'AS PER OUR CONSIDERED VIEW , AFTER AMENDMENT BY THE FINANCE ACT, 2002 FOR CLAIM OF DEDUCTION U/S 80IA(4) INFRAS TRUCTURE FACILITY IS ONLY REQUIRED TO BE DEVELOPED AND THERE IS NO CONDITION THAT ASSESSE E SHOULD ALSO OPERATE THE SAME. THUS, AFTER AMENDMENT, WHEN THE ASSESSEE IS NOT REQ UIRED TO OPERATE THE FACILITY, THE PAYMENT FOR DEVELOPMENT OF SUCH INFRASTRUCTURE IS R EQUIRED TO BE MADE BY THE GOVERNMENT ONLY. 'AFTER AMENDMENT, WHEN ASSESSEE UNDERTAKES TO DEVEL OP THE INFRASTRUCTURE FACILITY ONLY, IT IS THE GOVERNMENT WHO WILL MAKE P AYMENT TO ASSESSEE IN RESPECT OF INFRASTRUCTURE FACILITY DEVELOPED BY IT IN TERMS OF AGREEMENT SO ENTERED WITH GOVERNMENT. THUS, WE DO NOT FIND ANY INFRINGEMENT O F CONDITIONS {OR CLAIM OF DEDUCTION' 8.6 THUS FROM THE ABOVE, IT IS CLEAR THAT THE FACT THAT THE ASSESSEE HAD RECEIVED PAYMENTS FROM THE GOVERNMENT IN PROGRESS OF ITS WOR K HAS NO BEARING ON ELIGIBILITY OF DEDUCTION U/S 80- IA. FURTHER, THE REVENUE IN ALL T HE GROUNDS HAS CONTENDED THAT THE CONTRACTS ENTERED INTO BY THE ASSESSEE WERE MERELY ' CONSTRUCTION CONTRACTS ' SINCE THE ASSESSEE IS NOT EXPOSED TO ANY ENTREPRENEURIAL AND INVESTMENT RISK. IN THIS REGARD, THE AO HAS OBSERVED THAT THE ASSESSEE IS EXECUTING THE CONTRACT AGAINST PREDETERMINED REVENUE W.R.T THE ABOVE, IT IS SUBMITTED THAT UNDER THE IMPUGNED CONTRACTS, THE ASSESSEE WAS MERELY CARRYING OUT THE CIVIL CONSTRUCTION WORK . IT WAS RESPONSIBLE FOR OVERALL DEVELOPMENT OF THE INFRASTRUCTURE FACILITY. IT WAS MERELY PROVIDED WITH THE SITE WHICH IT HAD TO DEVELOP INTO AN INFRASTRUCTURAL FACILITY BY DEPLOYING HIS RESOURCES I.E. MATERIAL, PLANT & MACHINERY, LABOUR, SUPERVISORS ET C. IT WAS RESPONSIBLE FOR ANY DAMAGE/LOSS CAUSED TO ANY PROPERTY OR LIFE IN COURS E OF EXECUTION OF THE WORKS. IT WAS EVEN RESPONSIBLE FOR REMEDYING OF THE DEFECTS IN TH E WORKS AT ITS COST. IT WAS ALSO REQUIRED TO OPERATE AND MAINTAIN THE INFRASTRUCTURE FACILITY. HENCE, IT CANNOT BE SAID THAT THE CONTRACT WITH THE GOVERNMENT WAS TO CARRY OUT MERE CIVIL CONSTRUCTION. ATTENTION IN THIS REGARD IS INVITED TO THE FOLLOWIN G: (I) THE ITAT (AHMEDABAD) IN CASE OF SUGAM CONSTRUCT ION (P) LTD. VS. ITO [56 SOT 45] HELD THAT 'IT IS ALSO GATHERED (A) THAT A D EVELOPER IS A PERSON WHO UNDERTAKES THE RESPONSIBILITY TO DEVELOP A PROJECT . (B) THAT A DEVELOPER IS THEREFORE NOT A CIVIL CONTRACTOR SIMPLICITOR. (C) T HAT IF WE APPLY THE COMMERCIAL ITA NO.1291-1292/KOL/2013 A.YS 06 -07 & 09-10 DCIT CC-XXVIII, KOL. V. M/S SPML INFRA LT D PAGE 29 ASPECT, THEN A DEVELOPER HAS TO EXECUTE BOTH MANAGE RIAL AS WELL AS FINANCIAL RESPONSIBILITY. (D) THAT THE ROLE OF A DEVELOPER, A CCORDING TO US, IS LARGER THAN THAT OF A CONTRACTOR. (E) THAT WHEN A PERSON IS ACT ING AS A DEVELOPER, THEN HE IS UNDER OBLIGATION TO DESIGN THE PROJECT, IT IS ANOTH ER ASPECT THAT SUCH DESIGN HAS TO BE APPROVED BY THE OWNER OF THE PROJECT, I. E. T HE GOVERNMENT IN THE PRESENT CASE. (F) THAT HE HAS NOT ONLY TO EXECUTE THE CONST RUCTION WORK IN THE CAPACITY OF A CONTRACTOR BUT ALSO HE IS ASSIGNED WITH THE DU TY TO DEVELOP, MAINTAIN AND OPERATE SUCH PROJECT. (G) THAT TO ASCERTAIN WHETHER A CIVIL CONSTRUCTION WORK IS ASSIGNED ON DEVELOPMENT BASIS OR CONTRACT BASIS CAN ONLY BE DECIDED ON THE BASIS OF THE TERMS AND CONDITIONS OF THE AGREEMENT. ONLY ON THE BASIS OF THE TERMS AND CONDITIONS IT CAN BE ASCERTAINED ABOUT TH E NATURE OF THE CONTRACT ASSIGNED THAT WHETHER IT IS A ' WORK CONTRACT ' OR A ' DEVELOPMENT CONTRACT '. (H) THAT IN A DEVELOPMENT CONTRACT' RESPONSIBILITY IS F ULLY ASSIGNED TO THE DEVELOPER FOR EXECUTION AND COMPLETION OF WORK. (I) THAT ALTHOUGH THE OWNERSHIP OF THE SITE OR THE OWNERSHIP OVER THE LAN D REMAINS WITH THE OWNER BUT DURING THE PERIOD OF DEVELOPMENT AGREEMENT THE DEVELOPER EXERCISE COMPLETE DOMAIN OVER THE LAND OR THE PROJECT. THAT A DEVELOPER IS NOT EXPECTED TO RAISE BILLS AT EVERY STEP OF CONSTRUCTION BUT HE IS EXPECTED TO CHARGE THE COST OF CONSTRUCTION PLUS MARK-UP OF HIS PROFIT FROM THE ASSIGNEE OF THE CONTRACT. (K) THAT A DEVELOPER IS THEREFORE EXPECTED TO ARRANGE F INANCES AND ALSO TO UNDERTAKE RISK. (I) THAT IN CONTRAST TO THE RIGHTS OF A ' CONTRACTOR ' A ' DEVELOPER ' IS AUTHORIZED TO RAISE FUNDS EITHER BY PRIVATE PLACEME NT OR BY FINANCIAL INSTITUTIONS ON THE BASIS OF THE PROJECT. THESE ARE FEW BROAD QU ALITIES OF A DEVELOPER THROUGH WHICH THE CHARACTER OF A DEVELOPER CAN BE DEFINED. ' (II) ITAT(HYDERABAD) IN CASE OF KOYA AND CO. CONSTR UCTION (P) LTD. VS ACIT [51 SOT 203] HELD THAT 'THE EXPLANATORY MEMORANDUM TO FINANCE ACT 2007 STATES THAT THE PURPOSE OF THE TAX BENEFIT HAS ALL LONG BEEN TO ENCOURAGE INVESTMENT IN DEVELOPMENT OF INFRASTRUCTURE SECTOR AND NOT FOR THE PERSONS WHO MERELY EXECUTE THE CIVIL CONSTRUCTION WORK. IT CATE GORICALLY STATES THAT THE DEDUCTION UNDER SECTION 80IA OF THE ACT IS AVAILABL E TO DEVELOPERS WHO UNDERTAKES ENTREPRENEURIAL AND INVESTMENT RISK AND NOT FOR THE CONTRACTORS, WHO ITA NO.1291-1292/KOL/2013 A.YS 06 -07 & 09-10 DCIT CC-XXVIII, KOL. V. M/S SPML INFRA LT D PAGE 30 UNDERTAKES ONLY BUSINESS RISK. WITHOUT ANY DOUBT, T HE LEARNED COUNSEL FOR THE ASSESSEE CLEARLY DEMONSTRATED BEFORE THE COURT THAT THE ASSESSEE AT PRESENT HAS UNDERTAKEN HUGE RISKS IN TERMS OF DEPLOYMENT OF TEC HNICAL PERSONNEL, PLANT AND MACHINERY, TECHNICAL KNOWHOW, EXPERTISE AND FINANCI AL RESOURCES. ' THUS THE FACT THAT THE ASSESSEE DEPLOYS ITS RESOURC ES (MATERIAL, MACHINERY, LABOUR ETC.) IN THE CONSTRUCTION WORK CLEARLY EXHIBITS THE RISKS UNDERTAKEN BY THE ASSESSEE. FURTHER, THE ASSESSEE VIDE THE AGREEMENTS HAS CLEARLY DEMONS TRATED THE VARIOUS RISKS UNDERTAKEN BY IT. THE ASSESSEE WAS TO FURNISH A SEC URITY DEPOSIT TO THE EMPLOYER AND INDEMNIFY THE EMPLOYER OF ANY LOSSES/DAMAGE CAUSED TO ANY PROPERTY/LIFE IN COURSE OF EXECUTION OF WORKS. FURTHER, IT WAS RESPONSIBLE FOR THE CORRECTION OF DEFECTS ARISING IN THE WORKS AT IT COST. THUS, IT CANNOT BE SAID THAT THE ASSESSEE HAD NOT UNDERTAKEN ANY RISK. THE ITAT (HYDERABAD] IN CASE OF SIVA SWATHI CONSTRUCTION (P) LTD. (SUPRA) HELD THAT 'FURTHER REASON GIVEN BY THE LD. CIT(A) FOR DENYING DEDUCTION UNDER S.80IA TO THE ASSESSEE IS THAT THE ASSESSEE HAS NOT UNDERTAKEN AN Y RISKS. THE OBSERVATIONS OF THE LD. CIT(A) IN THIS BEHALF ARE ALSO NOT VALID AND CORREC T. IT WAS CLEARLY MENTIONED IN THE AGREEMENT THAT THE ASSESSEE SHALL EXECUTE AND FURNI SH INDEMNITY BOND FOR A PERIOD OF FOUR YEARS, INDEMNIFYING THE GOVERNMENT AGAINST ANY LOSS OR EXPENDITURE INCURRED, TO REPAIR ANY DEFECT NOTICED DUE TO FAULTY WORKING DON E BY THE CONTRACTOR OR SUBSTANDARD MATERIAL USED BY THE CONTRACTOR. FURTHER, IT IS ALS O MENTIONED IN THE CONTRACT AGREEMENT THAT THE ASSESSEE SHALL NOT CLAIM FOR ANY LOSS DUE TO FORESEEN CIRCUMSTANCES, INCLUDING SUSPENSION OF WORK DUE TO CAUSE. IT IS ALSO PROVIDE D THAT IN THE EVENT OF ACCIDENT TO PEOPLE EMPLOYED BY THE ASSESSEE RESULTING IN COMPEN SATION TO BE PAID AS PER THE WORKMEN'S COMPENSATION ACT THE SAME SHALL BE PAID B Y THE CONTRACTOR, VIZ. THE ASSESSEE ONLY. IN VIEW OF THE VARIOUS SPECIFIC CLAU SES IN THE AGREEMENT FASTENING THE RISKS TO BE UNDERTAKEN BY THE ASSESSEE, DISCUSSED A BOVE, IT CANNOT BE SAID THAT THE ASSESSEE HAS NOT UNDERTAKEN ANY RISK. 8.7 FROM THE ABOVE, IT IS CLEAR THAT THE CONTENTION OF THE AO THAT THE ASSESSEE HAD NOT UNDERTAKEN ANY ENTREPRENEURIAL AND INVESTMENT R ISK IS AN INCORRECT INTERPRETATION OF ITA NO.1291-1292/KOL/2013 A.YS 06 -07 & 09-10 DCIT CC-XXVIII, KOL. V. M/S SPML INFRA LT D PAGE 31 THE FACTS. LASTLY, WITH REGARD TO THE PROJECT O&M, BANGALORE (ON WHICH A DEDUCTION OF RS. 35,16,9411- WAS CLAIMED), IT IS SUBMITTED THAT IT IS AN OPERATION AND MAINTENANCE PROJECT, TO WHICH EXPLANATION TO SECTION 80-IA(13) DOES NOT APPLY. EXPLANATION TO SECTION 80-IA(13) MERELY DISTINGUISHES BETWEEN A DE VELOPER AND WORKS CONTRACTOR. IT CLARIFIES THAT A WORKS CONTRACTOR SHALL NOT BE INCL UDED IN THE CATEGORY OF 'DEVELOPER' U/S 80-1A. THUS, THE EXPLANATION CLEARLY DOES NOT APPLY TO O&M PROJECTS. HENCE, DEDUCTION OF RS. 35,16,9411- CLAIMED FOR THE AFORES AID PROJECT U/S 80-IA CANNOT BE DENIED BY INVOKING THE EXPLANATION TO SECTION 80-1A . 9. FROM THE PERUSAL OF THE TERMS AND CONDITIONS IN THE AGREEMENT, IT IS CLEAR THAT THE ASSESSEE WAS NOT A WORKS CONTRACTOR SIMPLICITOR AND WAS A DEVELOPER AND HENCE EXPLANATION TO SECTION 80- IA(13) DOES NOT APPLY TO THE ASSESSEE. FURTHER, IN ADDITION TO DEVELOPING THE INFRASTRUCTURE FACILITY, THE ASSE SSEE WAS EVEN OPERATING AND MAINTAINING THE SAME. THUS, CLEARLY THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80-1A. IN OUR CONSIDERED VIEW DO NOT FIND ANY REASON TO INTER FERE IN THE ORDER OF LD. CIT(A). HENCE THIS GROUND OF APPEAL OF THE REVENUE IS DISMI SSED. 10. IN THE RESULT, REVENUES APPEAL IS DISMISSED. COMING TO ITA NO.1292/KOL/2013 FOR A.Y 09-10. 11. REVENUE HAS RAISED PER ITS APPEAL AS UNDER:- A) THAT THE ORDER OF THE LD. CIT(A) IS BAD IN LAW A S THE SAME HAS BEEN PASSED IN THE NAME OF M/S SUBHASH PROJECTS & MARKETING LTD WHILE THE NAME OF THE ASSESSEE HAS CHANGED TO M/S SPML INFRA LTD W.E.F. 12.04.2010, B) THAT THE LD. CIT(A) HAS SERVED A COPY OF THE REM AND REPORT FURNISHED BY THIS OFFICE TO THE ASSESSEE BUT HAS NOT PROVIDED ANY OPP ORTUNITY TO THIS OFFICE TO OFFER ITS COMMENTS ON THE REJOINDER FILED BY THE ASSESSEE IN RESPONSE TO THE SAID REMAND REPORT AND, THUS, HAS VIOLATED THE PRINCIPLES OF NA TURAL JUSTICE, C) THAT THE LD. CIT(A) HAS FAILED TO APPRECIATE THA T THE DEFINITION OF THE TERM 'WORKS CONTRACT' AS OCCURRING IN EXPLANATION BELOW SECTION 80-IA(13) HAS NOT BEEN PROVIDED IN THE INCOME-TAX ACT AND, HENCE, THE SAME HAS TO B E IMPORTED FROM THE RELATED ACTS. D) THAT THE LD. CIT(A) HAS FAILED TO APPRECIATE THA T THE DEFINITIONS OF THE TERM 'WORKS CONTRACT' AS PER CENTRAL SALES TAX ACT AND WEST BEN GAL VALUE ADDED TAX ACT, ARE APPLICABLE IN THE CASE OF THE ASSESSEE SINCE THE SA ID ACTS ARE APPLICABLE TO THE CONTRACTS EXECUTED BY THE ASSESSEE, ITA NO.1291-1292/KOL/2013 A.YS 06 -07 & 09-10 DCIT CC-XXVIII, KOL. V. M/S SPML INFRA LT D PAGE 32 E) THAT THE LD. CIT(A) HAS FAILED TO APPRECIATE THA T CONSIDERING THE DEFINITION OF 'WORKS CONTRACT' AS PER CENTRAL SALES TAX ACT AND W EST BENGAL VALUE ADDED TAX ACT, THE ASSESSEE-COMPANY IS SIMPLY A CONTRACTOR WHO MER ELY EXECUTED WORKS CONTRACT AND HENCE NOT ENTITLED TO THE DEDUCTION U/S 80LA WITHIN THE SCOPE OF EXPLANATION BELOW SECTION 80-IA(13) OF THE ACT F) THAT THE LD. CITCA) HAS FAILED TO INTERPRET THE LEGISLATIVE INTENT OF THE PROVISIONS OF SECTION 80-IA TO THE EXTENT SPELT OUT IN CBDT'S CIR CULAR NO. 3 OF 2008 DATED 12.03.2008, WHICH STATES THAT THE INCENTIVE OF DEDU CTION U/S 80-IA HAS ALL ALONG BEEN INTENDED TO BENEFIT DEVELOPERS WHO UNDERTAKE ENTREP RENEURIAL RISK AND INVESTMENT RISK AND NOT CONTRACTORS WHO ONLY UNDERTAKE BUSINESS RIS K, G) THAT THE LD. CIT(A) HAS FAILED TO UNDERSTAND THE DIFFERENCE BETWEEN THE ' DEVELOPMENT AGREEMENT ' AND ' CONSTRUCTION CONTRACT ' WHERE IN THE FORMER'S CASE, THERE IS NO COMMITMENT IN TERMS OF REVENUE TO BE GE NERATED WHILE IN THE CASE OF THE LATER, THERE IS ALWAYS A FIXED COMMITMENT OF REVENU E, H) THAT THE LD. CIT(A) HAS FAILED TO APPRECIATE THA T WHEN AN ASSESSEE EXECUTE A CONTRACT AGAINST A PRE-DETERMINED AMOUNT OF REVENUE , IT CEASE TO UNDERTAKE ANY ENTREPRENEURIAL RISK AND INVESTMENT RISK AND THUS L OSES THE CHARACTER OF A ' DEVELOPER ' TO WHICH THE INCENTIVE OF DEDUCTION U/S 80-IA HAS A LL ALONG BEEN AIMED, I) THAT THE LD. CLTCA) HAS FAILED TO APPRECIATE THA T THE SIMPLE FACT THAT TAX WAS DEDUCTED U/S 194C FROM ALL THE ALLEGED 'ELIGIBLE PR OJECTS' MAKES IT CLEAR THAT THE ASSESSEE WAS INTO A SIMPLE CONSTRUCTION CONTRACT AN D THUS WAS NOT ENTITLED TO DEDUCTION U/S 80-IA, J) THAT THE LD. CITCA) HAS FAILED TO REALISE THAT W HEN AN ASSESSEE EXECUTES A PROJECT OF INFRASTRUCTURE DEVELOPMENT WITH THE ADVANCE RECE IVED FROM THE GOVERNMENT OR THE LOCAL AUTHORITIES, THE VERY PURPOSE AND INTENT OF P RIVATE SECTOR PARTICIPATION IN THE DEVELOPMENT OF INFRASTRUCTURE IS DEFEATED AND, ACCO RDINGLY, THE ASSESSEE CEASES TO BE ENTITLED TO THE DEDUCTION. GOING BOTH BY WORDS AND SPIRIT OF SECTION 80-IA, K) THAT THE LD. CITCA) HAS ERRED IN FACTS AS WELL A S IN THE CIRCUMSTANCES OF THE CASE IN PLACING RELIANCE UPON THE DECISIONS OF VARIOUS C OURTS OF LAW WHICH ARE YET TO REACH FINALITY, 1) THAT IN VIEW OF THE GROUNDS (C) TO (K) ABOVE, TH E LD. CIT(A) HAS ERRED IN FACTS AS WELL AS IN THE CIRCUMSTANCES OF THE CASE IN DIRECTI NG TO DELETE THE DISALLOWANCE OF DEDUCTION U/S 80-IA TO THE TUNE OF RS.61,86,38,683/ - M) THAT AS REGARDS THE DISALLOWANCE OF DEDUCTION U/ S 80G, THE LD. CIT(A) HAS ERRED IN LAW IN ADMITTING ADDITIONAL EVIDENCE WITHOUT HAV ING RECORDED THE REASONS FOR SUCH ADMISSION AND CONSEQUENTLY, IN DIRECTING TO RESTRIC T THE DISALLOWANCE TO RS.2,50,000/-; AND N) THAT THE DEPARTMENT CRAVES THE RIGHT TO ADD, DEL ETE, MODIFY OR ABROGATE THE GROUNDS OF APPEAL DURING THE COURSE OF HEARING OF T HE CASE. 12. THE FIRST INTER-CONNECTED ISSUE RAISED IN GROUN D NO. (A) TO (L) BY REVENUE IS THAT LD. CIT(A) ERRED IN ALLOWING DEDUCTION UNDER SECTIO N 80-IA OF THE ACT. ITA NO.1291-1292/KOL/2013 A.YS 06 -07 & 09-10 DCIT CC-XXVIII, KOL. V. M/S SPML INFRA LT D PAGE 33 13. WE HAVE ALREADY DECIDED THE SAME ISSUE IN FAVOU R OF THE ASSESSEE IN ITA 1291/KOL/2013 OF REVENUES APPEAL, SINCE THE FACTS ARE EXACTLY I DENTICAL BOTH THE PARTIES ARE AGREED WHATEVER VIEW TAKEN IN THE ABOVE APPEAL IN ITA NO. 1291/KOL/2013, MAY BE TAKEN IN ITA NO. 1292/KOL/201 3 FOR A.Y.09-10 ALSO. WE HOLD ACCORDINGLY. 14. THE SECOND ISSUE RAISED BY REVENUE IN THIS APPE AL IS THAT LD. CIT(A) ERRED IN ADMITTING THE ADDITIONAL EVIDENCE WITHOUT RECORDING THE REASONS AND RESTRICTING THE DISALLOWANCE TO RS.2.50 LACS FOR THE DEDUCTION U/S. 80G OF THE ACT. 15. AT THE TIME OF FRAMING OF ASSESSMENT, ASSESSEE DID NOT PRODUCE THE CERTIFICATE OF DONATION GIVEN TO SHRUTAKEVALI EDUCATION TRUST FOR RS, 10 LAKH AS SPECIFIED U/S 80G(5)(VI) OF THE ACT. ACCORDINGLY, AO DISALLOWED T HE SAME AND ADDED TO THE TOTAL INCOME OF ASSESSEE. 16. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE LD. CIT(A) WHO DELETED THE ADDITION BY OBSERVING AS UNDER:- 8.2 I HAVE CONSIDERED THE RIVAL SUBMISSIONS AND PE RUSED THE MATERIAL ON RECORD. I FIND THAT THE APPELLANT HAS PRODUCED RECE IPTS FOR RS.5,00,000/- ONLY IN SUPPORT OF ITS CLAIM U/S. 80G. I FIND MERIT IN THE ARGUMENT OF THE AO THAT THE BANK STATEMENT ALONE DOES NOT CONCLUSIVELY ESTABLIS H THE CLAIM AS MADE BY THE APPELLANT. IN VIEW OF THE ABOVE, THE AO IS DIRECTED TO ALLOW THE CLAIM TO THE EXTENT OF DONATION OF RS.5,00,000/- FOR WHICH RECEI PT HAS BEEN PRODUCED BY THE APPELLANT. GROUND NO 4 IS PEARLY ALLOWED. GROUND NO 1 AND 5 ARE GENERAL IN NATURE. BEING AGGRIEVED BY THIS ORDER OF LD. CIT(A) REVENUE IS IN APPEAL BEFORE US. 17. BEFORE US LD DR SUBMITTED THAT LD. CIT(A) HAS A LLOWED THE DEDUCTION U/S 80G ON THE ADDITIONAL EVIDENCE WITHOUT RECORDING THE RE ASONS FOR SUCH ADMISSION AND HE SUPPORTED THE ORDER OF AO. ON THE OTHER HAND, LD AR RELIED ON THE ORDER OF LD. CIT(A). ITA NO.1291-1292/KOL/2013 A.YS 06 -07 & 09-10 DCIT CC-XXVIII, KOL. V. M/S SPML INFRA LT D PAGE 34 18. WE HAVE HEARD RIVAL CONTENTIONS AND PERUSED THE MATERIALS AVAILABLE ON RECORD. AT THE OUTSET, IT WAS FOUND THAT LD. CIT(A) HAS GRA NTED RELIEF TO ASSESSEE U/S. 80G OF THE ACT AFTER HAVING REMAND REPORT FROM AO WHICH IS DULY RECORDED IN HIS APPELLATE ORDER. CONSIDERING THE TOTALITY OF THE FACTS AND CI RCUMSTANCES AND IN OUR CONSIDERED VIEW, WE DO NOT FIND ANY REASON TO INTERFERE IN THE ORDER OF LD. CIT(A). ACCORDINGLY, WE UPHOLD THE SAME. THIS GROUND OF REVENUES APPEAL IS DISMISSED. 19. IN THE RESULT, REVENUES APPEAL IS DISMISSED. 20. IN COMBINED RESULT, BOTH THE APPEAL OF REVENUE STAN D DISMISSED. ORDER PRONOUNCED IN OPEN COURT ON 24/08/2016 SD/- SD/- (S.S.VISWANETHRA RAVI) (WASEEM AHMED) JUDICIAL MEMBER ACCOUNTANT MEMBER *DKP ! - 24/08/2016 / KOLKATA / COPY OF ORDER FORWARDED TO:- 1. /APPELLANT-DCIT, CC-XXVIII, 4 TH FLOOR, AAYAKAR POORVA, 110, SHANTI PALL Y, KOLKATA-700 107 2. /RESPONDENT-M/S SPML INFRA LT. (ERSTWHILE M/S SUBHA SH PROJECT & MARKETING LTD.) 22, CAMAC STREET, KOLKATA-700 016 3. '# % / CONCERNED CIT 4. % - / CIT (A) 5. &'( ))'# , '# / DR, ITAT, KOLKATA 6. (*+ / GUARD FILE. BY ORDER/ , /TRUE COPY/ / '#,
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