Income Tax Officer, Ward-1(2), Hyderabad V. Ayyappa Infra Projects Private Limited, Hyderabad

ITA 1323/Hyd/2018

• Counselvise Citation: [2018] 119 COUNSELVISE.COM (IT) 2280 (ITAT-HYDERABAD)
• Duration Of Justice: 4 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 14-11-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2014-2015
• Appeal Filed On: 20-06-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: R S ARAVIND DAKSHAN
• Keywords: Retrospective amendment
• Section: 143(3); 115JB

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A , HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN , ACCOUNTANT MEMBER ITA NO. 1323 / HYD/201 8 ASSESSMENT YEAR: 201 4 - 1 5 ITO, WARD - 1(2) HYDERABAD. VS. M/S AYYAPPA INFRA PROJECTS PVT LTD., HYDERABAD. PAN AAGCA8840B (APPLICANT) (RESPONDENT) REVENUE BY : SH RI R.S. ARAVIND DAKSHAN ASSESSEE BY : SH R I K.C. DEVDAS DATE OF HEARING : 31 - 10 - 2018 DATE OF PRONOUNCEMENT : 14 - 11 - 201 8 ORDER PER P. MADHAVI DEVI, J.M.: THIS IS REVENUE S APPEAL FOR THE A.Y 2014 - 15 AGAINST THE ORDER OF THE CIT(A) - 1, HYDERABAD DATED 16.04.2018 ALLOWING THE CLAIM OF DEDUCTION U/S 80IA OF THE IT ACT TO THE ASSESSEE. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APPEAL: I. THE ORDER OF THE LD. CIT(A) IS E RRONEOUS ON FACTS AS WELL AS IN LAW. II. THE LD. CIT(A) ERRED ON FACTS AND IN LAW IN ALLOWING THE BENEFIT OF DEDUCTION OF RS.2,86,17,035/ - CLAIMED BY THE ASSESSEE U/S 80IA OF THE IT ACT. 2 ITA.NO . 1323 /HYD/201 8 M/S AYYAPPA INFRA PROJECTS PVT LTD. , HYDERABAD. III. THE LD. CIT(A) OUGHT TO HAVE APPRECIATED THAT THE ASSESSEE HAS E XECUTED ONLY WORKS CONTRACT AS PER THE SPECIFICATIONS OF CONTRACTEE DEPARTMENTS AND NOT A DEVELOPER OF INFRASTRUCTURE FACILITY AS ENVISAGED U/S 80IA OF THE IT ACT. IV. THE LD. CIT(A) OUGHT TO HAVE CONSIDERED THAT IN VIEW OF THE EXPLANATION TO SEC. 80IA(13) AS SUBSTITUTED BY THE FINANCE (NO.2) ACT, 2009 WITH RETROSPECTIVE EFFECT FROM 01.04.2000, ANY UNDERTAKING OR ENTERPRISE WHO EXECUTES WORKS CONTRACT AS A CONTRACTOR DOE S NOT QUALIFY FOR DEDUCTION U/S 80IA OF THE IT ACT. V. THE LD. CIT(A) OUGHT TO HAVE FURTHER APPRECIATED THAT THE DECISION OF THE ITAT, PUNE IN THE CASE OF M/S B T PATEL & SONS REFERRED IN THE FIRST APPELLATE ORDER IS NOT APPLICABLE TO THE CASE OF THE ASSES SEE AS THE ASSESSEE HAS EXECUTED ONLY WORKS CONTRACT DURING THE YEAR AND THEREFORE, THE PROFITS DERIVED FROM SUCH WORKS CONTRACT ARE NOT ELIGIBLE FOR DEDUCTION U/S 80IA OF THE IT ACT. VI. THE APPELLANT CRAVES LEAVE TO ADD, SUBSTITUTE, AMEND, ALTER ANY OF T HE GROUNDS OF THE APPEAL AS STATED ABOVE. FOR THESE AND OTHER GROUNDS OF APPEAL THAT MAY BE URGED AT THE TIME OF THE HEARING OF APPEAL, IT IS PRAYED THAT ADDITION MADE BY THE A.O ON ACCOUNT OF DISALLOWANCE OF DEDUCTION CLAIMED BY THE ASSESSEE U/S 80IA BE RESTORED. 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE , A CIVIL CONTRACTOR, FILED ITS RETURN OF INCOME FOR THE A.Y 2014 - 15 ON 29.09.2014 ADMITTING TOTAL INCOME OF RS. 7, 62 ,1 8 , 202 / - UNDER THE NORMAL PROVISIONS OF IT ACT AFTER CLAIMING DEDUCTION U/S 80IA OF THE IT ACT AT RS. 2,86,17,035/ - AND RS. 7,74, 66 , 238 / - UNDER 115JB OF THE IT ACT. 3. DURING THE ASSESSMENT PROCEEDINGS U/S 143(3) OF THE IT ACT THE A.O OBSERVED THAT THE ASSESSEE EXECUTED WORKS RELATING TO MUNICIPALITIES AT HYDERABAD, VIJAYAWADA AND VISA KHAPATNAM AND HAS CLAIMED DEDUCTION U/S 80IA OF THE 3 ITA.NO . 1323 /HYD/201 8 M/S AYYAPPA INFRA PROJECTS PVT LTD. , HYDERABAD. IT ACT ON THE PROFITS FROM SUCH WORKS AT 100%. HE OBSERVED A THAT THE ASSESSEE IS ONLY CIVIL CONTRACTOR AND THAT IT HAS NO R AT E AFTER DEVELOP MENT OF THE FACILITY . T HEREFORE , THE A.O WAS OF THE OPINION THAT THE ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION U/S 80IA OF THE IT ACT. HE ALSO CONSIDERED THAT THE CIT(A) FOR THE A.Y 2010 - 11, 2011 - 12 AND 2012 - 13 HAS ALLOWED THE DEDUCTION U/S 80IA OF THE IT ACT , AND THAT THE DEPARTMENT IS IN FURTHE R APPEAL BEFORE THE ITAT AGAINST THE ORDER OF THE CIT(A) FOR THE A.Y 2010 - 11 AND 2011 - 12 AND THAT THE DEPARTMENT IN FURTHER APPEAL BEFORE THE HONBLE ITAT FOR THE A.Y 2008 - 09, 2009 - 10 AND 2010 - 11. THEREFORE, IN ORDER TO KEEP THE ISSUE ALIVE, THE A.O DISAL LOWED THE CLAIM OF DEDUCTION U/S 80IA OF THE IT ACT AND BROUGHT IT TO TAX. 4. AGGRIEVED, THE ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) , WHO FOLLOWED THE DECISION OF THE TRIBUNAL IN THE ASSESSEES OWN CASE FOR THE EARLIER ASSESSMENT YEARS TO ALLOW TH E DEDUCTION U/S 80IA OF THE IT ACT . A GGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 4. BOTH THE PARTIES WERE HEARD AT LENGTH . THE LD. COUNSEL FOR THE ASSESSEE HAS FILED THE COPIES OF THE ORDERS 4 ITA.NO . 1323 /HYD/201 8 M/S AYYAPPA INFRA PROJECTS PVT LTD. , HYDERABAD. OF THE CIT(A) IN THE ASSESSEES OWN CASE FOR THE A.YS 2014 - 15 AND THE ITAT ORDERS FOR THE A.Y 2010 - 11,2011 - 12, 2012 - 13 AND 2013 - 14. WE FIND THAT THIS VERY SAME ISSUE HA D ARISEN IN THE EARLIER ASSESSMENT YEARS AND THIS TRIBUNAL HAS BEEN CONSISTENTLY HOLDING THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80IA OF THE IT ACT. FOR THE SAKE OF READY REFERENCE THE RELEVANT PARAS OF THE ORDER OF THE TRIBUNAL FOR THE A.Y 2012 - 13 , TO WHICH BOTH OF US ARE SIGNATORIES, IS REPRODUCED HEREUNDER: 4. HAVING REGARD TO THE RIV AL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT FOR A.YS 2008 - 09 ONWARDS, THE AO HAS BEEN DISALLOWING THE ASSESSEE CLAIM OF DEDUCTION U/S 80IA OF THE ACT ON THE GROUND THAT THE ASSESSEE IS NOT DEVELOPING THE INFRASTRUCTURE WITH ITS OWN FUNDS BUT I S DEVELOPING WITH THE FUNDS PROVIDED BY THE GOVT. WE FIND THAT THIS ISSUE WAS CONSIDERED AT LENGTH IN TRIBUNALS ORDER FOR THE A.Y 2010 - 11. THE RELEVANT PARAGRAPHS ARE REPRODUCED HEREUNDER FOR READY REFERENCE: 3. AS FAR AS THE FIRST EFFECTIVE GRIEVANCE OF THE ASSESSEE IN THIS APPEAL CONCERNING DISALLOWANCE OF DEDUCTION UNDER S.80IA IS CONCERNED, CONTAINED IN GROUND NO.2 ABOVE, WE FIND THAT SIMILAR ISSUE WAS CONSIDERED BY THIS TRIBUNAL IN ASSESSEE'S OWN CASE FOR THE ASSESSMENT YEAR 2005 - 06 TO 2007 - 08 IN ITA NOS.269/HYD/2009, ITA NO.1165/HYD/2009 AND ITA NO.1171/HYD/2010 RESPECTIVELY VIDE ORDER DATED 16.3.2012. THE TRIBUNAL BY THE SAID ORDER HAS DECIDED THE ISSUE IN THE FOLLOWING MANNER - '31. FINDINGS: WE HAVE CONSIDERED THE ELABORATE SUBMISSIONS MADE BY BOTH THE PARTIES AND ALSO PERUSED THE MATERIALS AVAILABLE ON RECORD. WE 5 ITA.NO . 1323 /HYD/201 8 M/S AYYAPPA INFRA PROJECTS PVT LTD. , HYDERABAD. HAVE ALSO GONE THROUGH ALL THE CASE LAWS CITED BY BOTH THE PARTIES. WE FIND THAT THE PROVISIONS OF SECTION 80IA (4) OF THE ACT WHEN INTRODUCED AFRESH BY THE FINANCE ACT , 1999, THE PROVISIONS UNDER SECTION 80IA (4 A) OF 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 V ERY FACT THAT THE LEGISLATURE MENTIONED THE WORDS (I) 'DEVELOPING' OR (II) 'OPERATING AND MAINTAINING' OR (III) 'DEVELOPING, OPERATING AND MAINTAINING' CLEARLY INDICATES THAT ANY ENTERPRISE WHICH CARRIED ON ANY OF THESE THREE ACTIVITIES WOULD BECOME ELIGIB LE FOR DEDUCTION. THEREFORE, THERE IS NO AMBIGUITY IN THE INCOME - TAX ACT . WE FIND THAT WHERE A N 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 TAX BENEFIT UNDER SECTION 80 IA OF THE ACT. IN CONTRAST TO THIS, A ASSESSEE, WHO ENTE RS 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 WOR D '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 SECTION, 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 ELIGIB LE FOR DEDUCTION UNDER SECTION 80IA (4) AND NOT ANY OTHER PERSON LIKE INDIVIDUAL, HUF, FIRM E TC. 32. WE ALSO FIND THAT ACCORDING TO SUB - CLAUSE (A), CLAUSE (I) OF SUB SECTION (4) OF SECTION 8 0 - IA THE WORD 'IT' DENOTES THE ENTERPRISE CARRYING ON THE BUSINESS. THE WORD 'IT' CANN OT BE RELATED TO THE INFRASTRUCTURE FACILITY, PARTICULARLY IN VIEW OF THE FACT THAT INFRASTRUCTURE FACILITY INCLUDES RAIL SYSTEM, HIGHWAY 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 NO 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 DEVELO PER 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 ASSESSEE IS AKIN TO WORKS CONTRACT AND HE IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA (4) OF THE ACT. WHETHER 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 AN D A CONCLUSION HAS TO BE DRAWN ABOUT THE NATURE OF THE WORK UNDERTAKEN BY THE ASSESSEE. THE 6 ITA.NO . 1323 /HYD/201 8 M/S AYYAPPA INFRA PROJECTS PVT LTD. , HYDERABAD. AGREEMENT ENTERED INTO WITH THE GOVERNMENT OR THE GOVERNMENT BODY MAY BE A MERE WORKS CONTRACT OR FOR DEVELOPMENT OF INFRASTRUCTURE. IT IS TO BE SEEN FROM THE AGREE MENTS ENTERED INTO BY THE 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 TI LL 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 TH E WORKS ARE TO BE EXECUTED BY THE ASSESSEE. IT MAY 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 DE VELOP INFRASTRUCTURE WHETHER IT INVOLVES CONSTRUCTION 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 ASSESSEE IS NOT ENTRUSTED WITH ANY SPECIFIC WORK TO BE DONE BY THE ASSESSEE. THE MATERIAL REQUIRED IS TO BE BROUGHT IN BY THE ASSESSEE BY STICKING TO THE QUALITY AND QUANTITY IRRESPECTIVE OF THE COST OF SUCH MATERIAL. THE GOVERNMENT DOES NOT PROVIDE ANY MATERIAL TO THE ASSESSEE. IT PROVIDES THE WORKS IN PA CKAGES AND NOT AS A WORKS CONTRACT. THE ASSESSEE UTILIZES ITS FUNDS, ITS EXPERTISE, ITS EMPLOYEES AND TAKES THE RESPONSIBILITY OF DEVELOPING THE INFRASTRUCTURE FACILITY. THE LOSSES SUFFERED EITHER BY THE GOVT. OR THE PEOPLE IN THE PROCESS OF SUCH DEVELOPME NT 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 FOR A PERIOD OF 12 TO 24 MO NTHS. DURING THIS PERIOD, IF ANY DAMAGES ARE OCCURRED IT SHALL BE THE RESPONSIBILITY OF THE ASSESSEE. FURTHER, DURING THIS PERIOD, THE ENTIRE INFRASTRUCTURE SHALL HAVE TO BE MAINTAINED BY THE ASSESSEE ALONE WITHOUT HINDRANCE TO THE REGULAR TRAFFIC. THEREFO RE, 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 CONSIDERED AS A MERE WORKS CONTRACT BUT HAS TO BE CONSIDERED AS A DEVELOPMENT OF INF RASTRUCTURE FACILITY. THEREFORE, THE ASSESSEE IS A DEVELOPER AND NOT A WORKS CONTRACTOR AS PRESUMED BY THE REVENUE. THE CIRCULAR ISSUED BY THE BOARD, RELIED ON BY LEARNED COUNSEL FOR THE ASSESSEE, CLEARLY INDICATE THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTIO N UNDER SECTION 80IA (4) OF THE 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 T HE PURPOSE OF THE AGREEMENT A PERSON MAY BE CALLED AS A CONTRACTOR AS HE ENTERED INTO A CONTRACT. BUT THE WORD 'CONTRACTOR' IS 7 ITA.NO . 1323 /HYD/201 8 M/S AYYAPPA INFRA PROJECTS PVT LTD. , HYDERABAD. USED TO DENOTE A PERSON ENTERING INTO AN AGREEMENT FOR UNDERTAKING THE DEVELOPMENT OF INFRASTRUCTURE FACILITY. EVERY AGREEMENT EN TERED INTO IS A CONTRACT. 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 CAN NOT BE VIEWED DIFFERENTLY. EVERY CONTRACTOR MAY NOT BE A DEVELOPER BUT EVERY DEVELOPER DEVELOPING INFRASTRUCTURE FACILITY ON BEHALF OF THE GOVERNMENT IS A CONTRACTOR. 35. WE FIND THAT THE DECISION RELIED ON BY THE LEARNED COUNSEL FOR THE ASSESSEE IN THE CA SE OF CIT VS. LAXMI CIVIL ENGINEERING WORKS [SUPRA] SQUARELY APPLICABLE TO THE ISSUE UNDER DISPUTE WHICH IS IN FAVOUR OF THE ASSESSEE WHEREIN IT WAS HELD THAT MERE DEVELOPMENT OF A INFRASTRUCTURE FACILITY IS AN ELIGIBLE ACTIVITY 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 ACT, INTENDED TO COVER THE ENTITIES CARRYING OUT DEVELOPING, OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY KEEPING IN MIND THE PRESENT BUSINESS MODELS AND INTEND TO GRANT THE INCENTIVES TO SUCH ENTITIES. THE CBDT, ON SEVERAL OCCASIONS, CLARIFIED THAT PURE DEVELOPER SHOULD ALSO BE ELIGIBLE TO CLAIM DEDUCTION 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 FIND THAT, TO AVOID MISUSE OF THE AFORESAID AMENDMENT, A N EXPLANATION WAS INSERTED IN SECTION 80IA OF THE ACT, IN THE FINANCE ACT - 2007 AND 2009, TO CLAR IFY THAT MERE WORKS CONTRACT WOULD NOT BE ELIGIBLE FOR DEDUCTIONS UNDER SECTION 80IA OF THE AC T. BUT, CERTAINLY, THE EXPLANATION CANNOT BE READ TO DO AWAY WITH THE ELIGIBILITY OF THE DEVELOPER; OTHERWISE, THE 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 DI STINCT 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 BENEFIT HAS ALL ALONG BEEN TO ENCOURAGE INVESTMENT IN DEVELOPMENT OF INFRASTRUCTURE SECTOR AND NOT FOR THE PERSONS WHO MERELY EXECUTE THE CIVIL CONSTRUCTION WORK. IT CATEGORICALLY STATES THAT THE DEDUCTION UNDER SECTION 80IA OF THE ACT IS AVAILABLE TO DEVELOPERS WHO UNDERTAKES ENTREPRENEURIAL AND INVESTMENT RISK AND NOT FOR THE CONTRACT ORS, WHO UNDERTAKES ONLY BUSINESS RISK. WITHOUT ANY DOUBT, THE LEARNED COUNSEL FOR THE ASSESSEE CLEARLY DEMONSTRATED BEFORE US THAT THE ASSESSEE AT PRESENT HAS UNDERTAKEN HUGE RISKS IN TERMS OF DEPLOYMENT OF TECHNICAL PERSONNEL, PLANT AND MACHINERY, TECHNI CAL KNOW - HOW, EXPERTISE AND FINANCIAL RESOURCES. FURTHER, THE ORDER OF TRIBUNAL IN THE CASE OF B.T.PATIL CITED SUPRA IS PRIOR 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 FACILITY, PRIOR TO AMENDMENT TH E 'OR' BETWEEN THREE ACTIVITIES WAS NOT THERE, AFTER THE AMENDMENT 'OR' HAS BEEN INSERTED 8 ITA.NO . 1323 /HYD/201 8 M/S AYYAPPA INFRA PROJECTS PVT LTD. , HYDERABAD. 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 LIABILI TY 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 PRO - RATA BASIS OF TURNOVER. THE ASSESSING OFFICER IS DI RECTED TO EXAMINE AND GRANT DEDUCTION ON ELIGIBLE TURNOVER AS DIRECTED ABOVE. IT IS NEEDLESS TO SAY THAT IN SIMILAR CIRCUMSTANCES, SIMILAR VIEW HAS BEEN TAKEN BY THE CHENNAI BENCH OF THE TRIBUNAL AND DEDUCTION U/S. 80IA WAS GRANTED IN THE CASE OF M/S. CHET TINAD LIGNITE TRANSPORT SERVICES (P) LTD., IN ITA 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 THE TRIBUNAL HAS TAKEN THE SAME VIEW BY INTER - ALIA HOLDING AS F OLLOWS: '7. MOREOVER, THE REASONS FOR INTRODUCING THE EXPLANATION WERE CLARIFIED AS PROVIDING A TAX BENEFIT BECAUSE MODERNISATION REQUIRES A MASSIVE EXPANSION AND QUALITATIVE IMPROVEMENT IN INFRASTRUCTURES LIKE EXPRESSWAYS, HIGHWAYS, AIRPORTS, PORTS AND RA PID URBAN RAIL TRANSPORT SYSTEMS. FOR THAT PURPOSE, PRIVATE SECTOR PARTICIPATION BY WAY OF INVESTMENT IN DEVELOPMENT OF THE INFRASTRUCTURE SECTOR AND NOT FOR THE PERSONS WHO MERELY EXECUTE THE CIVIL CONSTRUCTION WORK OR ANY OTHER WORK CONTRACT HAS BEEN ENC OURAGED BY GIVING TAX BENEFITS. THUS THE PROVISIONS OF SECTION 80IA SHALL NOT APPLY TO A PERSON WHO EXECUTES A WORKS CONTRACT ENTERED INTO WITH THE UNDERTAKING OR ENTERPRISE REFERRED TO IN THE SECTIO N BUT WHERE A PERSON 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 O F 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 9 ITA.NO . 1323 /HYD/201 8 M/S AYYAPPA INFRA PROJECTS PVT LTD. , HYDERABAD. 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 CAREFULLY PERUSED THE ENTIRE RECORD. THE FIRST ISSUE OF T HE APPEAL 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 UNDER SECTION 80IA(4) OF THE ACT. THE SECTION 80IA(4) APPLIES TO ANY E NTERPRISE, WHICH CARRIES ON THE BUSINESS OF (I) DEVELOPING OR (II) OPERATING AND MAINTAINING OR (III) DEVELOPING, OPERATING AND MAINTAINING ANY INFRASTRUCTURE FACILITIES, WHICH FULFIL ALL THE ABOVE CONDITIONS. THERE CANNOT BE ANY QUESTION OF PROVIDING A CO NDITION FOR SUCH AN ENTERPRISE TO START OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY ON OR AFTER 01.04.1995. FROM THE ASSESSMENT YEAR 2000 - 01, DEDUCTION IS AVAILABLE IF THE ASSESSEE IS CARRYING OUT THE BUSINESS OF ANY ONE OF THE ABOVE MENTIONED TH REE TYPES OF ACTIVITIES. 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 I NFRASTRUCTURE FACILITY 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 DE VELOPMENT OF INFRASTRUCTURE FACILITY CARRIED OUT BY THE ASSESSEE, IT CANNOT BE SAID THAT THE ASSESSEE DID NOT DEVELOP THE INFRASTRUCTURE FACILITY. IF THE INTERPRETATION DONE BY THE ASSESSING OFFICER IS ACCEPTED, NO ENTERPRISE CARRYING ON THE BUSINESS OF ON LY DEVELOPING HE INFRASTRUCTURE FACILITY WOULD BE ENTITLED TO DEDUCTION UNDER SECTION 80IA(4) , WHICH IS NOT THE INTENTION OF THE LAW. AN ENTERPRISE, WHO DEVELOP THE INFRASTRUCTURE FACILITY IS NOT PAID BY THE GOVERNMENT, THE ENTIRE COST OF DEVELOPMENT WOULD BE A LOSS IN THE HANDS OF THE DEVELOPER AS HE IS NOT OPERATING THE INFRASTRUCTURE FACILITY. T HE LEGISLATURE HAS PROVIDED THAT THE INCOME OF THE DEVELOPER OF THE INFRASTRUCTURE PROJECT WOULD BE 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 INFRASTR UCTURE FACILITY. OSTENSIBLY, A DEVELOPER WOULD HAVE INCOME ONLY IF HE IS PAID FOR THE DEVELOPMENT OF INFRASTRUCTURE FACILITY, FOR THE SIMPLE REASON THAT HE IS NOT HAVING THE RIGHT/AUTHORIZATION TO OPERATE THE INFRASTRUCTURE FACILITY AND TO COLLECT TOLL THE RE FROM, HAS NO OTHER SOURCE OF RECOUPMENT OF HIS COST OF DEVELOPMENT. WHILE FILING THE RETURN, THE ASSESSEE HAD MADE CLAIM UNDER SECTION 80IA(4) OF THE ACT. 10 ITA.NO . 1323 /HYD/201 8 M/S AYYAPPA INFRA PROJECTS PVT LTD. , HYDERABAD. 4. THE ASSESSEE HAS ALSO PRODUCED ALL SIX AGREEMENTS REGARDING SIX PROJECTS UNDERTAKEN B EFORE THE ASSESSING OFFICER, WHOSE COPIES ARE AVAILABLE BEFORE US ALSO. IT IS A FACT THAT EVEN AFTER TAKING A CONTRACT FROM THE GOVERNMENT, IF THE ASSESSEE DEVELOPS INFRASTRUCTURE FACILITIES, IT WOULD BE REGARDED AS A 'DEVELOPER' AND NOT AS A 'WORKS CONTRA CTOR'. THE ASSESSEE FIRM HAS CARRIED ON ENTIRE CONSTRUCTION/DEVELOPMENT OF THE INFRASTRUCTURE FACILITIES AND SATISFY ALL THE CONDITIONS OF SECTION 80IA(4)(I)(A) . IT IS UNDENIABLE FACT THAT THE ASSESSEE HAS TAKEN DEVELOPMENT OF INFRASTRUCTURE FACILITY AGREEMENT FROM THE STATE GOVERNMENT/LOCAL AUTHORITY. A CONTRACTOR WHO DEVELOPS THE INFRASTRUCTURE FACILITY BECOMES A DEVELOPER TO CLAIM EXEMPTION UNDER SECTION 80IA(4) . THE HON'BLE BOMBAY BENCH OF ITAT WHILE DECIDING THE CASE OF PATEL ENGINEERING LTD. VS. DCIT IN ITA NO.1221/MUM/2004 HAS GONE TO THE EXTENT OF HOLDING 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 GOVERNMENTS, WAS ELIGIBL E FOR DEDUCTION UNDER SECTION 80IA(4) . 5. WE HAVE ALSO TAKEN A SIMILAR VIEW IN ITA NO. 554/MEDS/2010 IN THE CASE OF EAST COAST CONSTRUCTIONS & INDUSTRIES 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 INFRASTRUCTURE FACILITY'. A PERSON WHO ENTERS INTO CON TRACT WITH ANOTHER PERSON FOR EXECUTING 'WORKS CONTRACTS' IS NOT ELIGIBLE FOR SUCH A BENEFIT. EXPLANATION TO SECTION 80IA WAS INSERTED BY FINANCE ACT , 2007 WITH RETROSPECTIVE EFFECT FROM 1.4.2000 WHICH HAS FURTHER BEEN AMENDED BY FINANCE (NO.2) ACT, 2009 WITH RETROSPECTIVE EFFECT FROM 1.4.2000. THE AMENDMENT IN THIS EXPLANATION WAS NECESSITATED DUE TO CONTRARY JUDICIAL DECISION ON THIS ISSUE. THUS, WE CAN UNEQUIVOCALLY NOW SAY THAT ANY UN DERTAKING OR ENTERPRISE WHICH EXECUTES THE INFRASTRUCTURE DEVELOPMENT PROJECT, AS REFERRED TO IN SUB - SECTION(4) AS A WORKS CONTRACT AWARDED BY ANY PERSON INCLUDING THE CENTRAL OR STATE GOVERNMENT, IS NOT ELIGIBLE FOR TAX BENEFIT U/S 80IA(4). HAVING SAID TH AT, NOW WE EXAMINE THE FACTS OF THIS CASE. THE ASSESSEE - COMPANY WAS GIVEN THIS BENEFIT IN ASSESSMENT YEAR 2003 - 04 BY THE DEPARTMENT ON IDENTICAL FACTS AFTER CONSIDERING THE EXPLANATION AND AMENDMENT THERETO. TO TRACE THE HISTORY OF THIS DEDUCTION, WE FIND THAT ORIGINALLY, IN THE PROVISION OF SECTION 80IA , THERE WAS NO MENTION OF ANY DEVELOPMENT OF 'INFRASTRUCTURE FACILITY'. IT IS ONLY WITH EFFECT FROM 1.4.2000, THIS SECTION WAS DIVIDED INTO TWO PORTIONS 80IA AND 80IB. SECTION 80IA(4) PRESCRIBES ABOUT THE DEDUCTION AVAILABLE TO A DEVELO PER WHO DEVELOPS INFRASTRUCTURE FACILITIES. IN VIEW OF THE AMENDMENT INSERTED BY THE FINANCE ACT , 2007, WITH RETROSPECTIVE EFFECT FROM 1.4.2000, THE DEDUCTION U/S 80IA IS AVAILABLE TO THOSE ASSESSEES WHO ARE 'INVESTING AND DEVELOPING INFRASTRUCTURE FACILITY' AND NOT TO 11 ITA.NO . 1323 /HYD/201 8 M/S AYYAPPA INFRA PROJECTS PVT LTD. , HYDERABAD. PERSONS WHO SIMPLY EXECUTES 'WORKS - CONTRACTS'. EXPLANATION IN QUESTION, AS IT STANDS TODAY, READS AS UNDER: 'EXPLANATION - FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT NOTHING CONTAINED IN THIS SECTION(I.E. 80IA) SHALL APPLY TO A PERSON WHO EXECUTES A WORKS CONTRACT ENTERED INTO WITH THE UNDERTAKING OR ENTERPRISE, AS THE C ASE MAY BE.' IN CONTRAST TO THIS, A PERSON WHO ENTERS INTO A CONTRACT WITH ANOTHER PERSON (I.E., UNDERTAKING OR ENTERPRISE REFERRED TO IN SECTION 80 - IA ) FOR EXECUTING WORKS CONTRACT, WILL NOT BE ELIGIBLE FOR TAX BENEFIT UNDER SECTION 80 - IA. 10. WE HAVE FOUND THAT THE ASSESSEE - COMPANY IS A WORKS CONTRACTOR, WHO HAS ENTERED INTO AGREEMENT WITH THE LOCAL BODIES TO EXECUTE CERTAIN PART OF THE WORK AWARDED TO IT THROUGH CONTRACT FOR INFRASTRUCTURE FACILITY. IT IS TRUE THAT WHERE A PERSON WHO MAKES INFRASTRUCTURE AND HIMSELF EXECUTES DEVELOPMENT WORK AND CARRIES OUT CIVIL WORK WILL BE ELIGIBLE FOR TAX BENEFIT U/S 80IA OF THE ACT. IN CONTRAST TO THIS, A PERSON WHO ENTERS INTO A CONTRACT WITH ANOTHER PERSON FOR EXECUTING WORKS CONTRACT, WILL NOT BE ELIGIBLE FOR TAX BENEFIT U/S 80IA. IT WAS CLARIFIED BY THE CIRCULAR NO. 3 OF 2008 DATED 12.3.2008 THAT THE P ROVISIONS OF SECTION 80IA SHALL NOT APPLY TO A PERSON WHO EXECUTES ONLY WORK CONTRACTS AND ONLY THOSE WHO MAKE THE DEVELOPMENT WORK WILL BE ELIGIBLE FOR TAX BENEFIT U/S 80IA OF THE ACT. BE THAT AS IT MAY, WHEN WE APPLY THIS PROVISION IN ITS LETTERS AND SPIRIT, WE FIND THAT THIS ASS ESSEE IS VERILY ELIGIBLE FOR DEDUCTION U/S 80IA, AS THE ASSESSEE - COMPANY FULFILS ALL THE RELEVANT CONDITIONS. THE FACTS OF THIS CASE GO TO PROVE THAT THE ASSESSEE IS A 'DEVELOPER' OF INFRASTRUCTURE FACILITIES. THE REASONS FOR OUR ABOVE CONCLUSION ARE GIVEN IN THE FOLLOWING PARAS. FIRSTLY, THE ASSESSEE - COMPANY NOT ONLY DESIGNS BUT ALSO CREATES NEW PRODUCTS. THE ASSESSEE HAD UNDERTAKEN FOUR PROJECTS DURING THE RELEVANT YEAR AND EXECUTED, CONSTRUCTED, DELIVERED AND MAINTAINED BY IT. AS PER THE DEFINITION OF AD VANCED LAW LEXICON [PLACED AT PAGE 533 OF THE PAPER BOOK] 'DEVELOPER' MEANS - A PERSON ENGAGED IN DEVELOPMENT OR OPERATION OR MAINTENANCE OF SPECIAL ECONOMIC ZONE, AND ALSO INCLUDES ANY PERSON AUTHORIZED FOR SUCH PURPOSE BY ANY SUCH DEVELOPER. THE 'WORKS C ONTRACT' MEANS AN AGREEMENT IN WRITING FOR THE EXECUTION OF ANY WORK RELATING TO CONSTRUCTION, REPAIR, OR MAINTENANCE OF ANY BUILDING OR SUPERSTRUCTURE, DAM, WEIR, CANAL, RESERVOIR, TANK, LAKE, ROAD, WELL, BRIDGE, CULVERT, FACTORY, WORKSHOP, POWERHOUSE, TR ANSFORMERS OR SUCH OTHER WORKS OF THE STATE GOVERNMENT OR PUBLIC UNDERTAKINGS AS THE STATESUSHEE HITECH CONSTRUCTIONS P. LTD., HYDERABAD 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 UNDERTAKING AND INCLUDES AN AGREEMENT FOR THE SUPPLY OF GOODS OR MATERIAL AND ALL OTHER MATTERS RELATING TO EXECUTION OF ANY OF THE SAID WORKS. THE CASE OF ACIT VS INDWELL LIANINGS PVT. LTD (SUPRA), ON WHICH 12 ITA.NO . 1323 /HYD/201 8 M/S AYYAPPA INFRA PROJECTS PVT LTD. , HYDERABAD. THE ASSESSING OFFICER HAS PLACED RELIANCE IS ALSO RELEVANT AND WE EXTRACT CERTAIN RELEVANT PORTION OF THIS DECISION FOR READY REFERENCE: VIDE FINANCE ACT, 2007, AN EXPLANATION WAS INSERTED WITH RETROSPECTIVE EFFECT FROM APRIL, 2000 AFTER SUB - SECTION (13) OF SECTION 80 - IA, WHICH READS AS UNDER : 'FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT NOTHING CONTAINED IN THIS SECTION SHALL APPLY TO A PERSON WHO EXECUTES A WORKS CONTRACT ENTERED INTO WITH THE UNDERTAKING OR ENTERPRISE, AS THE CASE MAY BE.' ACCORDING TO ATTORNEY'S POCKET DICTIONARY, IN RELATION TO A CORPORATION OR BUSINESS, THE TERM 'UNDERTAKING' DENOTES ITS WHOLE ENTERPRISE AND THE WORD 'ENTERPRISE' CONNOTES ALL THE RELATED ACTIVITIES PERFORMED EITHER THROUGH UNIFIED OPERATION OR COMMON CONTROL BY ANY PERSON OR PERSONS FOR A COMMON BUSINESS PURPOSE. THE MENS LEGIS WITH REFERENCE TO DEVELOPER OF INFRASTRUCTURE FACILITY CAN BE GATHERED FROM THE MEMORANDUM EXPLAINING THE PROVISIONS IN THE FINANCE BILL, 2007, REPORTED IN [2007] 289 ITR (ST.) 292 AT PAGE 312, WHICH READS AS UNDER : ' SECTION 80 - IA , INTER ALIA, PROVIDES FOR A TEN - YEAR TAX BENEFIT TO AN ENTERPRISE OR AN UNDERTAKING ENGAGED IN DEVELOPMENT OF INFRASTRUCTURE FACILITIES, INDUSTRIAL PARKS AND SPECIAL ECONOMIC ZONES. THE TAX BENEFIT WAS INTRODUCED FOR THE REASON THAT INDUSTRIAL MODERNIZATI ON REQUIRES A PASSIVE EXPANSION OF, AND QUALITATIVE IMPROVEMENT IN, INFRASTRUCTURE (VIZ., EXPRESSWAYS, HIGHWAYS, AIRPORTS, PORTS AND RAPID URBAN RAIL TRANSPORT SYSTEMS) WHICH WAS LACKING IN OUR COUNTRY. THE PURPOSE OF THE TAX BENEFIT HAS ALL ALONG BEEN FOR ENCOURAGING PRIVATE SECTOR PARTICIPATION BY WAY OF INVESTMENT IN DEVELOPMENT OF THE INFRASTRUCTURE SECTOR AND NOT FOR THE PERSONS WHO MERELY EXECUTE THE CIVIL CONSTRUCTION WORK OR ANY OTHER WORKS CONTRACT. ACCORDINGLY, IT IS PROPOSED TO CLARIFY THAT THE P ROVISIONS OF SECTION 80 - IA SHALL NOT APPLY TO A PERSON WHO EXECUTES A WORKS CONTRACT ENTERED INTO WITH THE UNDERTAKING OR ENTERPRISE REFERRED TO IN THE SAID SECTION. THUS, IN A CASE WHERE A PERSON MAKES THE INVESTMENT AND HIMSELF EXECUTES THE DEVELOPMENT WORK, I.E., CARRIES OUT THE CIVIL CONSTRUCTION WORK, HE WILL BE ELIGIBLE FOR TAX BENEFIT UNDER SECTION 80 - LA. IN CONTRAST TO THIS, A PERSON WHO ENTERS INTO A CONTRACT WITH ANOTHER PERSON (I.E., UNDERTAKING OR ENTERPRISE REFERRED TO IN SECTION 80 - IA ) FOR 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.' 13 ITA.NO . 1323 /HYD/201 8 M/S AYYAPPA INFRA PROJECTS PVT LTD. , HYDERABAD. IT IS M ADE ABUNDANTLY CLEAR THAT THE PRESCRIPTION OF SECTION 80 - IA SHALL NOT APPLY TO A PERSON WHO EXECUTES WORK CONTRACTS ENTERED INTO WITH AN UNDERTAKING OR ENTERPRISE. THUS, IN A CASE WHERE A PERSON WHO MAKES INVESTMENT AND HIMSELF EXECUTES DEVELOPMENT WORKS AND CARRIES OUT CIVIL WORKS, WILL BE ELIGIBLE FOR TAX BENEFIT UNDER SECTION 80 - IA OF THE ACT. IN CONTRAST TO THIS, A PERSON WHO ENTERS INTO A CONTRACT WITH ANOTHER PERSON FOR EXECUTING WORKS CONTRACT WILL NOT BE ELIGIBLE FOR 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 SUPPLY PROJECT OF THE GUJARAT WATER SUPPLY AND SEWERAGE BOARD. AS SUCH, THE BENEFIT OF SECTION 80 - IA CANNOT BE EXTENDED TO THE ASSESSEE. THE DECISIONS RELIED UPON BY THE ASSESSEE WERE RENDERED PRIOR TO THE AMENDMENT AND AS SUCH NOT RELEVANT FOR DECIDING THIS ISSUE. WE, THEREFORE, RESTORE THE ORDER OF THE ASSESSI NG OFFICER AND REVERSE THE ORDER OF THE COMMISSIONER OF INCOME - TAX (APPEALS). ' 11. TO FURTHER ELABORATE THE DISCUSSION ON THIS ISSUE, PARAS 5 & 6 OF THE DECISION OF ITAT PUNE BENCH RENDERED IN THE 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) WHETHER THE CONTRACTOR IS SYNONYMOUS WITH THE DEVELOPER WITHIN THE MEANING OF SECTION 80IA (4)(I) OF THE ACT; (II) WHETHER THE CONDITION PLACED IN CLAUSE (C) IS APPLICABLE TO THE C ASE OF A DEVELOPER, WHO IS NOT CARRYING ON BUSINESS OF OPERATING AND MAINTAINING THE INFRASTRUCTURAL FACILITIES. IN OUR OPINION, THE ANSWER TO THESE QUESTION ARE PROVIDED BY THE JUDGMENT OF THE BOMBAY HIGH COURT IN THE CASE OF ABG HEAVY ENGG LTD (SUPRA). I N THIS REGARD, WE PERUSED THE ABOVE CITED PARA - 22 OF THE SAID JUDGMENT AND FOR THE SAKE OF COMPLETENESS, THE SAID PARAGRAPH IS REPRODUCED AS UNDER: - '22. THE SUBMISSION WHICH WAS URGED ON BEHALF OF THE REVENUE IS THAT CLAUSE (III) OF SUB - SECTION (4A) OF SECTION 80 - LA , ONE OF THE CONDITIONS IMPOSED WAS THAT THE ENTERPRISE MUST START OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY ON OR AFTER 1ST APRIL, 1995. THE SAME REQUIREMENT IS EMBODIED IN SUB CLAUSE (1) OF SUB - CLAUSE (4) OF THE AMENDED PROVISIONS. IT WAS U RGED THAT SINCE THE ASSESSEE WAS NOT OPERATING AND MAINTAINING THE FACILITY, HE DID NOT FULFIL THE CONDITION. THE SUBMISSION IS FALLACIOUS BOTH IN FACT AND IN LAW. ' THAT THE ASSESSEE WAS MAINTAINING THE FACILITY IS NOT IN DISPUTE. THE FACILITY WAS COMMENC ED AFTER 1ST APRIL, 1995. THEREFORE, THE REQUIREMENT WAS MET IN FACT. MOREOVER, AS A MATTER OF LAW, WHAT THE CONDITION ESSENTIALLY MEANS IS THAT THE INFRASTRUCTURE FACILITY SHOULD HAVE BEEN OPERATIONAL AFTER 1ST APRIL, 1995. AFTER SECTION 80IA WAS AMENDED BY 14 ITA.NO . 1323 /HYD/201 8 M/S AYYAPPA INFRA PROJECTS PVT LTD. , HYDERABAD. THE FINANCE ACT , 2001, THE SECTION APPLIES TO AN ENTERPRISE CARRYING ON THE BUSINESS OF (I) DEV ELOPING; OR (II) OPERATING AND MAINTAINING; OR (III) DEVELOPING, OPERATING AND MAINTAINING ANY INFRASTRUCTURE FACILITY' WHICH FULFILS CERTAIN CONDITIONS. THOSE CONDITIONS ARE (I) OWNERSHIP OF THE ENTERPRISES BY A COMPANY REGISTERED IN INDIA OR BY A CONSORT IUMS; (II) AN AGREEMENT WITH THE CENTRAL OR STATE GOVERNMENT, LOCAL AUTHORITY OR STATUTORY BODY; AND (III) THE START OF OPERATION AND MAINTENANCE OF THE INFRASTRUCTURE FACILITY SHOULD COMMENCE AFTER 1ST APRIL, 1995. THE REQUIREMENT THAT OPERATION AND MAINT ENANCE OF THE INFRASTRUCTURE FACILITY SHOULD COMMENCE AFTER 1ST APRIL, 1995 HAS TO BE HARMONIOUSLY CONSTRUED WITH THE MAIN PROVISION UNDER WHICH DEDUCTION IS AVAILABLE TO AN ASSESSEE WHO DEVELOPS OR OPERATES AND MAINTAINS, OR DEVELOPS, OPERATES AND MAINTAI NS AN INFRASTRUCTURE FACILITY'. A HARMONIOUS READING OF THE PROVISIONS IN ITS ENTIRETY WOULD LEAD TO THE CONCLUSION THAT THE DEDUCTION IS AVAILABLE TO AN ENTERPRISE WHICH (I) DEVELOPS, OR OPERATES AND MAINTAINS; OR (III) DEVELOPS, MAINTAIN AND OPERATES THA T INFRASTRUCTURE FACILITY. HOWEVER, THE COMMENCEMENT OF THE OPERATION AND MAINTENANCE: OF THE INFRASTRUCTURE FACILITY SHOULD BE AFTER 1' APRIL, 1995. IN THE PRESENT CASE THE ASSESSEE CLEARLY FULFILLED THIS CONDITION '. BEFORE THE AMENDMENT THAT WAS BROUGHT ABOUT BY PARLIAMENT BY FINANCE ACT , 2001 WE HAVE ALREADY NOTED THAT THE CONSISTENT LINE OF CI RCULARS OF THE BOARD POSTULATED THE SAME POSITION. THE AMENDMENT MADE BY PARLIAMENT TO S. 80 - IA(4 ) OF THE ACT, SET THE MATTER BEYOND ANY CONTROVERSY BY STIPULATING THAT THE THREE CONDITIONS FOR DEVELOPMENT, OPERATION AND MAINTENANCE WERE NOT INTENDED TO BE CUMULATIVE IN NATURE 6. THE ABOVE JUDGMENT OF THE HON'BLE HIGH COURT IS DELIVERED IN THE CASE OF ABG HEAVY ENGG LTD (SUPRA), WHO IS A CONTRACTOR FOR THE INP TRUST AND THAT CONTACTOR, ASSESSEE IS FOUND TO BE AN ELIGIBLE DEVELOPER FOR MAKING CLAIM OF DEDUCTION U/S SECTION 80IA (4) OF THE ACT. FROM THE ABOVE, IT IS EVIDENT THAT THE PERSON WHO ONLY DEV ELOPS THE INFRASTRUCTURE DO NOT HAVE THE OCCASION TO OPERATE AND MAINTAIN THE INFRASTRUCTURE. IT IS FURTHER EVIDENT THAT THE HARMONIOUS READING IS NECESSARY AND MANDATORY IN VIEW OF HIGH COURT'S JUDGMENT IN THE CASE OF AN ENTERPRISE CARRYING ON BUSINESS OR DEVELOPING WHICH IS THE CASE OF THE ASSESSEE, ALL THE CONDITIONS REFERRED TO CLAUSE (I) OF SECTI ON 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 DOES NOT OPERATE AND MAINTAIN INFRASTRUCTURAL FACILITIES, CANNOT BE EXPECTED TO FULFI L THE CONDITION AT SUB CLAUSE (C) WHICH IS AN IMPOSSIBILITY AND THE REQUIREMENTS TO FULFIL THE SAID CONDITION SHALL AMOUNT TO ABSURDITY AND THEREFORE UNCALLED FOR. THEREFORE, WE FIND REQUIREMENT OF HARMONIOUS READING OF SUB - CLAUSE (C) VIS - - VIS OF CLAUSE ( I) 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 EVENTUALLY IS ENTITLED FOR THE DEDUCTION UNDER SECTION 80IA (4) OF THE ACT. ACCORDINGLY, THE MODIFIED GROUND, WHICH IS COMMON IN ALL THE FOUR APPEALS IS ALLOWED IN FAVOUR OF THE ASSESSEE. ' 15 ITA.NO . 1323 /HYD/201 8 M/S AYYAPPA INFRA PROJECTS PVT LTD. , HYDERABAD. 12. LET US REMIND OURSELVES THAT THE HON'BLE SUPREME COURT IN THE CASE OF BAJAJ TEMPO LTD VS CIT , 196 ITR 188, HAS ORDAINED THAT TAXING STATUTE GRANTING INCENTIVES FOR PROMOTING 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 'DEVELO PER'. IN FACT, IN EVERY DEVELOPMENT THE TERM 'DEVELOPER' WILL DEFINITELY BE A 'WORKS CONTRACTOR' BUT EVERY WORKS CONTRACTOR MAY NOT BE A 'DEVELOPER'. A 'DEVELOPER' IS A SPECIFIC KIND OF WORKS CONTRACTOR TO BE ELIGIBLE FOR DEDUCTION U/S 80IA(4) WHO FULFILS ALL THE CONDITIONS NAMELY, IF THE ASSESSEE DEVELOPS THE INFRASTRUCTURE 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 ENTIRE TY WOULD LEAD TO THE CONCLUSION THAT THIS DEDUCTION IS AVAILABLE TO AN ENTERPRISE WHO - DEVELOPS OR OPERATES AND ALSO MAINTAINS; OR DEVELOPS, MAINTAINS AND OPERATES THAT INFRASTRUCTURE FACILITY. THE PROVISION FOR GIVING THE IMPUGNED INCENTIVES HAS BEEN EXA MINED, RE - EXAMINED, MODIFIED AND AMENDED AFTER GIVING CONSCIOUS AND DELIBERATE DISCUSSIONS BY THE CONCERNED LAW MAKERS. TO OUR GREAT CHAGRIN EVEN AFTER THIS CONSCIOUS EXERCISE AN ENTITY WHO EXECUTES THE WORKS CONTRACT ENTERED INTO BETWEEN LOCAL AUTHORITY/C ENTRAL OR STATE GOVERNMENT AND MAKES A DEVELOPMENT OF AN INFRASTRUCTURE HAS NOT BEEN EXCLUDED FROM THE SCOPE OF THIS PROVISION. AND RIGHTLY SO, BECAUSE WHAT INFRASTRUCTURE IS REQUIRED IN PUBLIC DOMAIN IS THE OUTLOOK/DUTY OF A LOCAL AUTHORITY OR OF A CENTRA L/STATE GOVERNMENT. WHEN A CERTAIN INFRASTRUCTURE IS NEEDED, THE CONCERNED AUTHORITIES HAVE A BROADER PICTURE IN THEIR MIND AIMING AT ACQUIRING CERTAIN FACILITY FOR WHICH INFRASTRUCTURE DEVELOPMENT IS REQUIRED. SO, TO SAY, WHEN ANY ASSESSEE/ENTERPRISE AGRE ES UNDER A CONTRACT 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 PROVISION IN SO FAR AS THE CONDITIONS REQUIRED TO BE FU LFILLED TO BE ELIGIBLE FOR THIS INCENTIVE HAD TO BE PROVIDED BY THE JURIDICAL FORUMS DEALING WITH THIS ISSUE. AFTER IN - DEPTH DELIBERATIONS, DISCUSSIONS AND EXAMINATION OF THESE PROVISIONS, FINALLY, IT HAS BEEN RESOLVED THAT IF AN ENTERPRISE EVEN AFTER ENTE RING INTO A CONTRACT WITH A LOCAL AUTHORITY OR THE GOVERNMENTS, MAY BE CENTRAL OR STATE, IN CASE IT CONSTRUCTS THE INFRASTRUCTURE FACILITY, OPERATES IT AND ALSO MAINTAINS THE SAME, IT WOULD BE ELIGIBLE FOR 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, BRIDGE UNDERPASS, SEWERAGE, WATER SUPPLY ETC. FOR VARIOUS LOCAL BODIES, RAILWAYS, CENTRAL/STATE GOVERNMENTS. IN FACT, AS P ER THE TERMS OF AGREEMENT, EVEN THE INITIAL PROPOSALS FORMULATED BY THE DEPARTMENT WHICH ARE STATED TO BE TENTATIVE, THE ASSESSEE HAS THE LIBERTY TO MAKE DIFFERENT PROPOSALS WITHOUT DETRIMENTAL TO THE GENERAL FEATURES OF THE DEPARTMENTAL PROPOSAL, LIKE ROA D 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 16 ITA.NO . 1323 /HYD/201 8 M/S AYYAPPA INFRA PROJECTS PVT LTD. , HYDERABAD. MAINTAINE D AND SECURITY IS ALSO MAINTAINED THEREAFTER. SO, THIS IS A CASE OF TRANSFER OF PROPERTY IN CHATTEL AND NOT A CONTRACT OF SERVICE. A 'DEVELOPER' AS PER THE ADVANCED LAW LEXICON MEANS 'A PERSON ENGAGED IN DEVELOPMENT OR OPERATION OR MAINTENANCE OF SPECIAL E CONOMIC ZONE, AND ALSO INCLUDES ANY PERSON AUTHORIZED FOR SUCH PURPOSE BY ANY SUCH DEVELOPER'. IN THE CASE OF ACIT VS BHARAT UDYOG LTD, 'F' BENCH OF ITAT MUMBAI, HAS CONCLUDED THAT ANY ASSESSEE WHO IS ENGAGED IN DEVELOPING THE INFRASTRUCTURE FACILITY AND A LSO OPERATING AND MAINTAINING THE SAME, IS ENTITLED TO THE BENEFIT OF DEDUCTION U/S 80IA(4). A COPY OF THIS DECISION IS ENCLOSED AT PAGE 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 INTO A CONTRACT WITH ANOTH ER PERSON WILL BE TREATED AS A 'CONTRACTOR' UNDOUBTEDLY; AND THAT ASSESSEE HAVING ENTERED INTO AN AGREEMENT WITH THE GOVERNMENT OF MAHARASHTRA AND ALSO WITH APSEB FOR DEVELOPMENT OF THE INFRASTRUCTURE PROJECTS, IS OBVIOUSLY A CONTRACTOR BUT DOES NOT DEROGA TE THE ASSESSEE FROM 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 ASSESSEE SHOULD DEVELOP THE INFRASTRUCTURE FACILITY AS PER THE AGREEMENT WITH THE CENTRAL GOVERNMENT, STATE GOVERNMENT OR A LOCAL AUTHORITY. SO, ENTERING INT O 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 INFRASTRUCTURE FACILITY AS PER THE AGREEMENT WITH MAHARASHTRA GOVERNMENT/APSEB, THEREFORE, MERELY BECAUSE IN THE AGR EEMENT FOR DEVELOPMENT OF INFRASTRUCTURE FACILITY THE ASSESSEE IS REFERRED TO AS A CONTRACTOR OR BECAUSE SOME BASIC SPECIFICATIONS 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 U/S 80IA(4). THE FACTS OF THE PRESENT CASE ARE EXACTLY IDENTICAL TO THE FACTS OF THAT CASE RENDERED BY ITAT MUMBAI BENCH IN WHICH UNDER IDENTICAL FACTS AND CIRCUMSTANCES, THE ASSESSEE HAS BEEN HELD TO BE ELIGIBLE FOR DEDUCTION U/S 80IA( 4). SECTION 80IA(4)(I)(B) REQUIRES DEVELOPMENT OF INFRASTRUCTURE FACILITY AND TRANSFER THEREOF AS PER AGREEMENT AND IT CANNOT BE DISPUTED IN VIEW OF THE MATERIAL ON RECORD THAT THE ASSESSEE HAS TRANSFERRED THE INFRASTRUCTURE FACILITY DEVELOPED BY IT BY HANDING OVER THE POSSESSION T HEREOF TO THE CONCERNED AUTHORITY AS REQUIRED BY THE AGREEMENT. THE HANDING OVER OF THE POSSESSION OF DEVELOPED INFRASTRUCTURE FACILITY/PROJECT IS THE TRANSFER OF THE INFRASTRUCTURE FACILITY/PROJECT BY THE ASSESSEE TO THE AUTHORITY. THE HANDING OVER OF THE INFRASTRUCTURE FACILITY/PROJECT BY THE DEVELOPER TO THE GOVERNMENT OR AUTHORITY TAKES PLACE AFTER RECOUPMENT OF THE DEVELOPER'S COSTS WHETHER IT BE 'BT' OR 'BOT' OR 'BOOT' BECAUSE IN 'BOT' AND 'BOOT' THIS RECOUPMENT IS BY WAY OF COLLECTION OF TOLL THERE F ROM 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 DEVELOPMENT 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 WORK OF A MERE 'DEV ELOPER'. RATHER, THE STATUTORY PROVISION AS CONTAINED IN SECTION 80IA WHICH PROVIDES FOR 17 ITA.NO . 1323 /HYD/201 8 M/S AYYAPPA INFRA PROJECTS PVT LTD. , HYDERABAD. DEDU CTION OF INFRASTRUCTURE 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 INFRASTRUCTURE FACILITY AS PER THE AGREEMENT WITH THE CENTRAL/STATE GOVERNMENT/LOCAL AUTHORITY. ENTERING INTO A LAWFUL AGREEMENT AND THEREBY BECOMING SHOULD, I N NO WAY BE A BAR TO THE ONE BEING A 'DEVELOPER'. IN THIS REGARD, AS WE HAVE ALREADY STATED, THE DECISION OF ACIT VS BHARAT UDYOG LTD, 118 ITD 336 AND PATEL ENGINEERING LTD VS DY. CIT , 84 TTJ 646, ARE RELEVANT. AS PER CIRCULAR NO. 4/2010[F.NO. 178/14/2010 - ITA - I] DATED 18.5.2010, WIDENING OF EXISTING ROADS CONSTITUTES CREATION OF NEW INFRASTRUCTURE FACILITY FOR THE PURPOSE OF SECTION 80IA(4)(I) . THE ASSESSEE IS NOT REQUIRED TO DEVELOP THE ENTIRE ROAD IN ORDER TO QUALIFY FOR DEDUCTION U/S 80IA AS HAS BEEN HELD BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS ABG HEAVY INDUSTRIES LTD, 322 ITR 323. THE NEWLY INSERTED EXPLANATION 2 TO SECTION 80IA VIDE FINANCE ACT , 2007, DOES NOT APPLY TO A WORKS CONTRACT ENTERED INTO BY THE GOVERNMENT AND THE E NTERPRISE. IT APPLIES TO A WORK CONTRACT ENTERED INTO BETWEEN THE ENTERPRISE AND OTHER PARTY 'THE SUB - CONTRACTOR'. THE AMENDMENT AIMS AT DENYING DEDUCTION TO THE SUB CONTRACTOR WHO EXECUTES A WORK CONTRACT WITH THE ENTERPRISE AS HELD BY THE ITAT, JAIPUR 'A ' BENCH IN THE CASE OF OM METAL INFRA PROJECTS LTD VS CIT - I, JAIPUR , IN I.T.A. NO. 722 & 723 /JP/2008 DATED 31.12.2008. THE RELIANCE BY THE LD. CIT(A) ON THE DECISION 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 DECISION THE DEFINITION AND DIFFERENCE BETWEEN WORKS CONT RACTOR AND A DEVELOPER HAS BEEN EXAMINED IN DETAIL. THE MAIN THRUST OF THE DECISION IS THAT A DEVELOPER NEED NOT BE THE OWNER OF THE LAND ON WHICH DEVELOPMENT IS MADE. ALTHOUGH THAT DECISION WAS RENDERED IN THE CONTEXT OF A DEVELOPER OF BUILDINGS AND THE D EDUCTION WAS IN RESPECT OF 80IB(10), BUT THE DEFINITION OF 'DEVELOPER' GIVEN IN THAT CASE IS ALSO RELEVANT FOR THIS PURPOSE. MOREOVER, WE ARE IN AGREEMENT THAT IN INCENTIVE PROVISIONS, THE CONSTRUCTION SHOULD BE LIBERALLY GIVEN AS HELD BY THE HON'BLE SUPRE ME COURT RENDERED IN THE CASE OF BAJAJ TEMPO LTD VS CIT,196 ITR 188. THUS, WHEN THE ASSESSEE MAKES INVESTMENT AND HIMSELF EXECUTES DEVELOPMENT WORK AND CARRIES OUT CIVIL WORKS, HE IS ELIGIBLE FOR TAX BENEFIT U/S 80IA OF THE ACT. ACCORDINGLY, WITH THE FOREG OING DISCUSSION, WE HOLD THAT THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 80IA(4) OF THE ACT, AND THEREFORE, WE ORDER TO DELETE THE ADDITION MADE IN THIS RESPECT.' 6. THEREFORE, BY FOLLOWING THE ABOVE ARGUMENTS AND REASONING, WE CONFIRM THE FINDINGS OF THE L D. CIT(A) AND DO NOT FIND ANY VALID MERIT IN THE REVENUE'S APPEAL. ACCORDINGLY, THE APPEAL STANDS DISMISSED. 39. IN VIEW OF THE ABOVE DISCUSSION, WE ARE INCLINED TO PARTLY ALLOW THE GROUND RELATING TO CLAIMING OF DEDUCTION U/S. 80IA.OF THE ACT IN ALL THESE APPEALS.' 18 ITA.NO . 1323 /HYD/201 8 M/S AYYAPPA INFRA PROJECTS PVT LTD. , HYDERABAD. 9. AS FOR T HE DECISION OF THE TRIBUNAL RELIED UPON BY THE LEARNED DEPARTMENTAL REPRESENTATIVE IN THE CASE OF B.T. PATIL & SONS BELGAUM CONSTRUCTIONS PVT. LTD, BELGAUM VIS. ACIT CIRCLE 2, KOLHAPUR (126 TTJ 577(TM), L ITR 730)(TRIB)(MUM.) HAS BEEN OVERRULED BY THE DIVI SION BENCH IN ITA NO. 1408 & 1409/PN/2003 FOR ASSESSMENT YEARS 2000 - 01 AND 2001 - 02, WHEREBY DEDUCTION UNDER S. 801A(2) OF THE ACT HAVE BEEN ALLOWED BY THE. TRIBUNAL, COMPLYING WITH THE FOLLOWING DIRECTIONS OF HON'BLE BOMBAY HIGH COURT IN ITXA NO. 1307 OF 2 0LL 2000 - 01 AND FOR 1640 OF 2011 FOR ASSESSMENT YEAR 2001 - 02. 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 C ONSIDERATION ALL DECISIONS INCLUDING THE DECISION OF THIS COURT IN THE MATTER OF CIT V IS. ABG HEAVY INDUSTRIES LTD. REPORTED IN 322 ITR PAGE 323. ALL CONTENTIONS ARE KEPT OPEN. 3. THE APPEAL IS DISMISSED IN ABOVE TERMS.' ADMITTEDLY, IN THE CASE OFBT PAT IL & SONS BELGAUM CONSTRUCTIONS LTD. (SUPRA) DECIDED BY THE DIVISION BENCH WHILE GIVING EFFECT TO THE THIRD MEMBER DECISION, IT WAS HELD AS FOLLOWS (FOR THE SAKE OF CLARITY FULL ORDER HAS BEEN EXTRACTED): 'BACKGROUND OF THE CASE IS THAT THE ASSESSING OFFI CER PASSED AN ASSESSMENT ORDER DISALLOWING THE ASSESSEE'S CLAIM FOR DEDUCTION ULS.80IA(4) OF THE ACT. THE CIT(A) CONFIRMED THE ORDER OF THE ASSESSING OFFICER. MATTER WAS CARRIED BEFORE THE ITAT. HOWEVER, WHILE PASSING THE ORDER, THE JUDICIAL MEMBER AND THE 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 PE RTAINS 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 BEN CH 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 ENTITLE D 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 OPINION OF THE THIRD MEMBER AS PER THE PROVISIONS OF SECTION 255(4) OF THE ACT. 2. THE SAID APPEALS WERE P ENDING BEFORE THE DIVISION BENCH OF THE TRIBUNAL TO GIVE EFFECT TO THE OPINION OF THE THIRD MEMBER AS PER THE 19 ITA.NO . 1323 /HYD/201 8 M/S AYYAPPA INFRA PROJECTS PVT LTD. , HYDERABAD. 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 ASSE SSEE 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 BEI NG APPEAL NUMBER ITXA 1307 OF 2011 FOR A.Y. 2000 - 01 AND 1640 OF 2011 FOR A.Y. 2001 - 02 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 COURT THE TR IBUNAL 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 THE THIRD MEMBER AS PER THE PR OVISIONS 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 CONTRARY TO THE OPINION GIVEN B Y THE THIRD MEMBER OF THE TRIBUNAL. MEANWHILE THE APPEAL FILED BY THE ASSESSEE AGAINST THE ORDER OF THE TRIBUNAL DISMISSING THE APPEALS OF THE ASSESSEE IN LIMINE, BEFORE THE HON'BLE BOMBAY HIGH COURT CAME UP FOR HEARING ON 24/0112013. IN THE COURSE OF HEAR ING 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 MISCELLANEOUS 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 CONSIDER THE ABG HEAVY INDUSTRIES DECISION ON THE ISSUE WHILE GIVING EFFECT TO THE OPINION OF THE THIRD MEMBER AS PER THE PROVISIONS OF SECTION 255(4) OF THE ACT. 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 THE ABG HEAVY INDUSTRIES AND OTHER DECISIONS WHILE PASSING THEIR ORDER GIVING EFFECT TO THE OPINION OF T HE THIRD MEMBER AS PER THE PROVISIONS OF SECTION 255(4) OF THE ACT. THE RELEVANT PORTION OF THE SAID ORDER OF HON'BLE JURISDICTIONAL HIGH COURT IN ITXA NO.L307 OF 2011 FOR A.Y. 2000 - 01 AND 1640 OF2011 FOR AY. 2001 - 02 IS AS UNDER: '1. SINCE THE TRIBUNAL HA S RECALLED THE IMPUGNED ORDER,DATED 23.03.2011, THE APPELLANT IS WITHDRAWING ITS APPEAL. 20 ITA.NO . 1323 /HYD/201 8 M/S AYYAPPA INFRA PROJECTS PVT LTD. , HYDERABAD. 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 BE FORE US IS WHETHER THE TRIBUNAL WHILE 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 COUR T 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 ALLOWING THE DEDUCTION U/S. 80IA( 4) OF THE ACT WHILE GIVING EFFECT TO THE OPINION OF THE THIRD MEMBER AS PER THE PROVISIONS OF SECTION 255(4) OF THE ACT. FOLLOWING THE DIRECTIONS OF THE HON'BLE BOMBAY HIGH COURT BEING THE JURISDICTION AL HIGH COURT, THE TRIBUNAL IS BOUND TO FOLLOW THE DIRECTIONS AND WE DO ACCORDINGLY. 7. STAND OF ASSESSEE BEFORE US IS THAT ISSUE AT HAND IS COVERED BY THE DECISION OF THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF ABG HEAVY INDUSTRIES LTD. & OTHERS (SUPRA) . IN VIEW OF THE AMENDMENT TO SECTION 80IA(4A) BY FINANCE ACT, 1999 EFFECTIVE FROM 01.04.2000 TO AVAIL THE DEDUCTION UNDER SUCH SECTION 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 IN SERTED BETWEEN DEVELOPING AND MAINTAINING & OPERATING I.E. DEVELOPING OR MAINTAINING & OPERATING. IN CASE OF ABO HEAVY INDUSTRIES LTD. & OTHERS (SUPRA), THE HON'BLE BOMBAY HIGH COURT HAS OBSERVED AS UNDER: 'WITH EFFECT FROM IST APRIL, 2000, BY THE FINANC E ACT OF 1999, CERTAIN CHANGES WERE BROUGHT ABOUT. SECTION 80 - IA & 80 - IR WERE SUBSTITUTED FOR SECTION 80 - LA. 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 OOVT. 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, 21 ITA.NO . 1323 /HYD/201 8 M/S AYYAPPA INFRA PROJECTS PVT LTD. , HYDERABAD. MAINTAINING & OPERATIN G 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 AVAI LABLE. 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 SUC H AMENDMENT WILL BE APPLICABLE RETROSPECTIVELY FROM THE A.Y. 2000 - 01 & ONWARDS. IN ORDER TO 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 COU RT IN THE CASE OF ABO 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 C ASE 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 OBS ERVED BY THE THIRD MEMBER. ANOTHER SIGNIFICANT WORD USED HERE IS 'OWNED', WHICH INDICATES THAT THE INFRASTRUCTURE FACILITY SHOULD BE 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 SUB CLAUSE (A) OF SECTION 80LA(4)(I). THE INFRASTRUCTURE 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 ABO HEAVY INDUSTRIES (SU PRA) INTER ALIA HELD THAT THE ASSESSEE HAS SHOULDERED OUT INVESTMENT & TECHNICAL RISK IN RESPECT OF THE WORK EXECUTED AND IT IS LIABLE FOR LIQUIDATED DAMAGES IF FAILED TO FULFIL THE OBLIGATION LAID DOWN IN THE AGREEMENT. THE LIABILITY WHICH HAS BEEN ASSUME D 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 C ONDITIONS OF BEING A DEVELOPER AS SUBSEQUENTLY INTERPRETED BY THE HON'BLE BOMBAY HIGH COURT. WITH REGARD TO CLARIFLCATORY AMENDMENT TO SUB - SECTION (13) OF SECTION 80IA BY FINANCE ACT 2007 & 2009 WHEREBY THE ASSESSEE IS NOT HELD ELIGIBLE FOR DEDUCTION U/S 8 0IA(4A). IN THIS REGARD, WE FIND THAT THE AMENDMENT OF 2007 DEBARS THE SUB - CONTRACTOR FROM AVAILING BENEFITS U/S. 80IA(4A) . THE AMENDMENT OF 22 ITA.NO . 1323 /HYD/201 8 M/S AYYAPPA INFRA PROJECTS PVT LTD. , HYDERABAD. 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 DOWN IN THE AGREEMENT AND ALSO SECURING BY BANK GUARANTEE. AS THE ASSESSEE HAS FULFILLED THE SAID CONDIT IONS IS EVIDENT AS DISCUSSED ABOVE. PRACTICALLY, THE OPINION OF THE THIRD MEMBER OF THE HON'BLE TRIBUNAL HAS BEEN OVERRULED BY THE HON'BLE BOMBAY HIGH COURT THAT EVEN A CONTRACTOR IS A DEVELOPER AND FURTHER INTERPRETATION OF THE AMENDMENTS BY FINANCE ACT 2 009 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 I S NO LONGER GOOD LAW. MORE SPECIFICALLY IN 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 PER PROVISIONS 255(4) OF THE ACT THE HON'BLE TRIBUNAL WAS CLEARLY DIRECTED TO CONSIDER THE SAID DECISIONS AND ALLOW THE DEDUCTION U/S. 80LA OF THE ACT FOR ALL THE PROJECTS UNDERTAKEN BY THE ASSESSEE. 11. THE ASSESSEE COMPANY HAS BEEN INCLUDED AS A SUB CONTRACTOR FOR THE ALL THE OTHER PROJECTS EITHER THE CONTRACTS ARE DIRECTLY I N 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 - CONTRA CT 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 PEE HAD PROPOSED A JOINT VENTURE TO THE RELEVANT AUTHORITIES FOR THE EXECUTION OF THE SAID PR OJECT. AS THE PROJECT WAS BEING FINANCED BY WORLD BANK THE RELEVANT AUTHORITIES FORWARDED THE PROPOSAL TO WORLD BANK. WORLD BANK HOWEVER DID NOT ACCEPT THE PROPOSAL BUT THEY SUGGESTED THAT MIS. PATEL ENGINEERING COMPANY LTD., MAY EMPLOY THE ASSESSEE COMPAN Y 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 SU B - CONTRACTOR FOR THE ABOVE 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 CONT RACTOR 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 IN FAVOUR OF THE ASSESSEE COMPANY FOR THE EXECU TION OF THE WORK. POWER OF ATTORNEY IS GIVEN BY PRIME 23 ITA.NO . 1323 /HYD/201 8 M/S AYYAPPA INFRA PROJECTS PVT LTD. , HYDERABAD. CONTRACTOR TO SUB CONTRACTOR AND ACCEPTED AND EXCEEDED BY PROJECT AUTHORITIES. 12. THE FACT THAT THE ASSESSEE HAS A TRIPARTITE AGREEMENT WITH THE RELEVANT AMHORITIES MAKES THE ASSESSEE A PARTY TO THE M AIN CONTRACT WORK ITSELF AND WHICH CLEARLY SHOWS THAT THE ASSESSEE ON THEIR OWN RIGHT ARE COMRACTORS 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 T:LE BENEFIT 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 C ONDITIONS THEY ARE ENTITLED 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 INCOME TAX OFFICER, 79 ITD 213, WHEREIN THE ENTIRE PROJECT WAS ASSIGNED BY THE PARTY GE TTING THE TENDER TO ANOTHER COMPANY. IN SUCH CIRCUMSTANCES THE ITAT INDORE, HAS HELD AS UNDER: IT IS A SETTLED POSITION OF LAW THAT THAT WHILE CONSTRUING THE TAX PROVISIONS BESIDES 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 INTERPRET ED 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 WI TH 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 C LAIM 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 24 ITA.NO . 1323 /HYD/201 8 M/S AYYAPPA INFRA PROJECTS PVT LTD. , HYDERABAD. JU RISTIC 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 ASSESS EE COMPANY HAD RECTIFIED ALL ACT AND DEEDS OF ITS PROMOTER 'U' AND OWNED ALL THE ASSETS AND LIABILITIES OF ITS PROMOTER THROUGH AN AGREEMENT OF ASSIGNMENT EXECUTED BETWEEN THE ASSESSEE AND 'A' AFTER OBTAINING APPROVAL FROM THE STATE GOVERNMENT, THE ASSESSE E 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 A MBIGUITY HERE AND THERE. IFIT 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 - SECTI ON (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 ASSESSEE THAT WITH REGARDS TO BHIMA SINA LINK TUNNEL PROJECT, THE ORIGINAL AGREEMENT IS BETWEEN THE OWN ER AND JOINT VENTURE FROM CONSISTING OF THE ASSESSEE COMPANY AND MIS. SWAPNALI CONSTRUCTIONS WHICH WAS FORMED TO SHARE THE WORK IN 60% & 40%. M/S. SWAPNALI CONSTRUCTIONS EXPRESSED THEIR INABILITY 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 JOINT VENTURE FIRM. AND JOINT VENTURE FIRM IN TURN ISSUED R.A. BILLS TO THE OWNERS. JOINT VENTURE FIRM HAD NOT EXECUTED ANY PORTION OF WORK UNDER THE PROJECT. THE JOINT VENTURE FIRM HAS FILED ITS RETURN OF INCOME WITH NIL PROFIT OR LOSS. I N FACT THE WORK COMPLETION CERTIFICATE ISSUED BY PROJECT AUTHORITIES IS IN FAVOUR OF THE ASSESSEE COMPANY ONLY AND NOT IN FAVOUR OF JOINT VENTURE, ALSO THE WHOLE AMOUNT OF INITIAL SECURITY DEPOSIT, THE BANK GUARANTEES WERE GIVEN BY THE ASSESSEE COMPANY ONL Y 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 OF THE WORK AND TO THAT EFFECT IT HAD 25 ITA.NO . 1323 /HYD/201 8 M/S AYYAPPA INFRA PROJECTS PVT LTD. , HYDERABAD. ALREADY SUBMITTED NECESSARY INSTRUMENT LIKE 'ASSIGNMENT DEED, 'POWER OF ATTORNEY'. UNDE RTAKING WITH BANKERS ETC. 14. IN THIS BACKGROUND, THE ASSESSEE COULD CERTAINLY CLAIM. THE DEDUCTIONS UNDER THE PROVISION OF SECTION 80IA. ONE HAS TO SEE THE SUBSTANCE AND NOT THE FORM ESSENTIALLY, TBOUGH IT WAS A JOINT VENTURE, IT WAS CONVERTED INTO ASSES SEE'S VENTURE. THE OTHER VENTURER WITHDREW AND THE ENTIRE WORK WAS EXECUTED BY THE ASSESSEE THOUGH IN TBE 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 T HE QUESTION OF JOINT VENTURE DOES NOT ARISE. THE VENTURE WAS FULLY CARRIED OUT BY 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 CON TRACT 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 OF THIRD MEMBER U/S.255(4) OF THE ACT, WE TAKE VIEW IN CONFORMITY WITH ORDER OF JURISDICTIONAL HIGH COURT IN CASE OF ABO HEAVY INDUSTRIES LTD. (SUPRA) AVAILABLE AT THIS TIME THOUGH CONTRA RY TO THE OPINION EXPRESSED 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 T HE ASSESSEE WITH REGARD TO THE PROJECTS IN QUESTION FOR BOTH THE YEARS. THE MATTER IS DISPOSED OFF ACCORDINGLY.' 10. IN VIEW OF THE ABOVE POSITION, THE THIRD MEMBER DECISION OF THE TRIBUNAL IN THE CASE OF B.T. PATIL & SONS BELGAUM CONSTRUCTIONS PVT. LTD. (SUPRA), RELIED UPON BY THE LEARNED DEPARTMENTAL REPRESENTATIVE, IS NO LONGER A GOOD LAW, AND AS SUCH, WE ARE NOT INCLINED TO FOLLOW THE SAME. 11. IN THE LIGHT OF THE ABOVE DISCUSSION, MODIFYING THE ORDERS OF THE COMMISSIONERS (APPEAL) FOR BOTH THE YEARS UNDER APPEAL, WE DIRECT THE ASSESSING OFFICER TO ALLOW THE CLAIMS OF THE ASSESSEE WITH REGARD TO DEDUCTION UNDER S.80IA OF THE ACT IN RESPECT OF EXECUTION OF CIVIL CONTRACTS ON OWN ACCOUNT. 12. IN THE RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE ALLOWED'. 5. SINCE THIS IS THE 5 TH YEAR OF THE ASSESSEES CLAIM OF DEDUCTION U/S 80IA AND THE AO HAS FOLLOWED THE ORDER OF HIS PREDECESSORS IN THE ASSESSEE OWN CASE IN THE EARLIER A.YS AND THE ITAT HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE IN THE EARLIER A. YS WHICH HAVE BEEN 26 ITA.NO . 1323 /HYD/201 8 M/S AYYAPPA INFRA PROJECTS PVT LTD. , HYDERABAD. FOLLOWED BY THE CIT (A) FOR THE RELEVANT A.Y, WE DO NOT SEE ANY REASON TO INTERFERE WITH THE ORDER OF THE CIT (A). 5. THE FACTS AND CIRCUMSTANCES OF THE CASE BEING THE SAME DURING THE RELEVANT ASSESSMENT YEARS, AND SINCE THE CIT(A) HAS FOLLOWED THE PRECEDENT S I.E THE ORDER OF ITAT , W E DO NOT SEE ANY REASON TO INTERFERE WITH SAME . A CCORDINGLY, THE REVENUES APPEAL IS DISMISSED. 6 . IN THE RESULT , THE APPEAL FILED BY THE REVENUE IS DISMISSED. PRONOUNCED IN THE OPEN COURT ON 14 TH NOVEMBER , 2018 . SD/ - SD/ - ( S. RIFAUR RAHMAN ) (P. MADHAVI DEVI) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED: 14 TH NOVEMBER , 2018 KRK 1) M/S AYYAPPA INFRA PROJECTS PVT LTD., H.NO. 6 - 3 - 970/1, FLAT NO. 201, T.L. KAPADIA LANE, SOMAJIGUDA, HYD 82. 2) ITO, WARD 1 ( 2 ) , HYDERABAD . 3) CIT(A) - 1 , HYDERABAD 4) PR .CIT, RANGE - 1 , HYDERABAD. 5 ) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABAD. 6 ) GUARD FILE. 27 ITA.NO . 1323 /HYD/201 8 M/S AYYAPPA INFRA PROJECTS PVT LTD. , HYDERABAD. DESCRIPTION DATE INTLS 1. DRAFT DICTATED ON 08 - 01 - 18 2. DRAFT PLACED BEFORE AUTHOR 08 - 01 - 18 3 DRAFT PROPOSED & PLACED BEFORE THE SECOND MEMBER 4 DRAFT DISCUSSED/APPROVED BY SECOND MEMBER 5 APPROVED DRAFT COMES TO THE SR.P.S./PS 6. KEPT FOR PRONOUNCEMENT ON 7. FILE SENT TO THE BENCH CLERK 8 DATE O N WHICH FILE GOES TO THE HEAD CLERK 9 DATE OF DISPATCH OF ORDER