Somdutt Builders - NCC (JV), Hyderabad V. ACIT, Hyderabad

ITA 148/HYD/2009

• Counselvise Citation: [2017] 130 COUNSELVISE.COM (IT) 6160 (ITAT-HYDERABAD)
• Duration Of Justice: 8 year(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2017
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 09-02-2011
• Assessment Year: 2005-2006
• Appeal Filed On: 29-01-2009
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: U MINICHANDRAN
• Assessee Lawyers: S RAMA RAO
• Keywords: Source of fund; Retrospective amendment

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH B, HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI S. RIFAUR RAHMAN, ACCOUNTANT MEMBER ITA NOS. 148 & 481/HYD/2009 ASSESSMENT YEARS: 2005-06 & 2006-07 SOMDUTT BUILDERS NCC (JV), HYDERABAD. PAN AAQFS 2933Q VS. ASST. COMMISSIONER OF INCOME-TAX, CIRCLE 6(1), HYDERABAD. (ASSESSEE ) (RESPONDENT) ASSESSEE BY : SHRI S. RAMA RAO REVENUE BY : SMT. U. MINI CHANDRAN DATE OF HEARING : 26-12-2016 DATE OF PRONOUNCEMENT : 03-02-2017 O R D E R PER S. RIFAUR RAHMAN, A.M.: BOTH THESE APPEALS FILED BY THE ASSESSEE ARE DIREC TED AGAINST SEPARATE ORDERS OF CIT(A) - IV, HYDERABAD, FOR AY 2005-06 AND 2006- 07. AS IDENTICAL ISSUE IS INVOLVED IN BOTH THESE AP PEALS, THEY WERE CLUBBED AND HEARD TOGETHER, THEREFORE, WE FIND CONV ENIENT TO DISPOSE OFF THESE APPEALS BY WAY OF A COMMON ORDER. 2. BRIEFLY THE FACTS OF THE CASE AS TAKEN FROM AY 2 005-06, ARE THAT THE ASSESSEE HAD CLAIMED DEDUCTION U/S 80IA OF THE ACT ON THE ENTIRE BUSINESS PROFITS ARRIVED AT. IN SUPPORT OF ITS CLAI M, THE ASSESSEE SUBMITTED THAT TWO INFRASTRUCTURE FACILITIES WERE D EVELOPED BY THE ASSESSEE WHICH WERE ROADS AND STATED THAT ROADS ARE PART OF DEFINITION OF INFRASTRUCTURE FACILITY AS PER THE EX PLANATION TO SUB- CLAUSE (4) OF THE SAID SECTION. IT WAS SUBMITTED TH AT IT HAS SATISFIED THE STATED CONDITIONS IT IS OWNED BY A CONSORTIUM OF COMPANIES REGISTERED IN INDIA (BEING A JOINT VENTURE), IT HAS STARTED OPERATION 2 ITA NOS. 148 & 481/HYD09 SOMDUTT BUILDERS-NCC (JV) AFTER 01/04/1995 AND IT IS WORKING IN PURSUANCE OF AGREEMENTS WITH STATE GOVERNMENT OF RAJASTHAN (STATE ROAD PROJECT D IVISION, RAJKOT) AND A STATUTORY BODY (THE NHAI). FURTHER IT WAS SUB MITTED THAT IN RESPECT OF THE INFRASTRUCTURE FACILITIES MENTIONED IN SUB-CLAUSE (A), (B) & (C) OF CLAUSE (I) OF SUB-SECTION (II) OF 80IA , THEY ARE COVERED BY PROVISO AND THEREFORE, THE WORDS DEVELOPS AND BEGI NS TO OPERATE ARE TO BE SUBSTITUTED BY DEVELOP OR OPERATES AND MAINT AINS OR DEVELOPS, OPERATES AND MAINTAINS AND ACCORDINGLY PROFITS DER IVED IN COURSE OF DEVELOPMENT SHALL BE DEDUCTIBLE WITHOUT RECOURSE TO THE ACTIVITY OF OPERATION AND MAINTENANCE. 3. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E, THE AO WAS OF THE VIEW THAT DEDUCTION U/S 80IA COULD NOT BE AL LOWED TO THE ASSESSEE FOR THE FOLLOWING REASONS: I ) WHILE THE SEC. 80IA APPLIES TO A 'DEVELOPER', THE ASSESSEE IS NOT A 'DEVELOPER' BUT ONLY A CONTRACTOR AS MENTIONE D IN THE AGREEMENT BETWEEN THE ASSESSEE AND THE GOVERNMENT/ STATUTORY BODY ITSELF AND THE AGREEMENT WITH THE NHAI. THE AS SESSEE JOINT VENTURE HAD BEEN CALLED 'THE CONTRACTOR' THEREIN. A CCORDINGLY, THE ASSESSING OFFICER CONCLUDED THAT THE NHAI IS THE 'E MPLOYER' AND THE ASSESSEE IS THE 'CONTRACTOR'. II) THE ASSESSING OFFICER FURTHER OPINED THAT IN VI EW OF THE PROVISIONS OF SEC. 80-IA(4)(I)(A), THE INFRASTRUCTU RE FACILITY SHOULD BE OWNED BY THE ENTERPRISES FOR CLAIMING SUCH EXEMP TION. IN THE CASE OF THE ASSESSEE HOWEVER, THE OWNERSHIP WAS ALW AYS WITH THE NHAI ,AS THE ASSESSEE WAS ONLY A CONTRACTOR. III) REFERRING THE DEPARTMENTAL CIRCULAR NO. 717 D T. 14.08.1995, THE ASSESSING OFFICER OBSERVED THAT, IN THE INSTANT CASE THE ASSESSEE HAD NEITHER DEVELOPED A FACILITY ON BOT/BO OT OR SIMILAR OTHER BASIS NOR THE AGREEMENT WITH NHAI STI PULATES THE PERIOD GIVEN WHICH THE FACILITY HAS TO BE TRANSFERR ED TO THE BODY. SHE OBSERVED THAT THE ONLY REASON FOR THIS THAT THE ASSESSEE NEVER OWNED THE ENTERPRISE AND THEREFORE, THERE WAS NO QUESTION OF TRANSFER THEREOF. IV) THE ASSESSING OFFICER WAS OF THE VIEW THAT THE DECISION IN THE CASE OF PATEL ENGINEERING LTD. (SUPRA) DID NOT APPL Y TO THE ASSESSEE'S CASE AS IT WAS HELD THEREIN THAT THE DEV ELOPMENT OF INFRASTRUCTURE FACILITY DOES NOT MEAN THAT THE ENTI RE INFRASTRUCTURE PROJECT IS TO BE DEVELOPED BY ONE ENTERPRISE. THE P OINT BEFORE 3 ITA NOS. 148 & 481/HYD09 SOMDUTT BUILDERS-NCC (JV) THE HON'BLE TRIBUNAL THEREFORE, WAS WHETHER THE ENT IRE FACILITY SHOULD BE DEVELOPED OR EVEN A PART OF IT WOULD BE E LIGIBLE FOR DEDUCTION. IN THE ASSESSEE'S CASE HOWEVER, THE ISSU E WAS NOT OF 'WHOLE' OR 'PART' RATHER IT WAS WHETHER THE ASSESSE E COULD CLAIM DEDUCTION AS A 'DEVELOPER' WHILE IT WAS A 'CONTACTO R'. ACCORDINGLY, IT WAS HELD THAT THE SAID DECISION WAS NOT APPLICAB LE TO THE ASSESSEE'S CASE. 4. AGGRIEVED BY THE ORDER OF THE AO, THE ASSESSEE P REFERRED AN APPEAL BEFORE THE CIT(A) AND CONTENDED, INTER-ALIA, THAT THE ASSESSEE IS IN THE ELIGIBLE BUSINESS OF DEVELOPING THE INFRA STRUCTURE FACILITY BEING THE HIGH WAY PROJECT AND SATISFYING THE CONDI TIONS AS TO THE OWNERSHIP OF THE UNDERTAKING OR ENTERPRISE AS MENTI ONED IN CLAUSE (A) OF SUB-SECTION (4)(I) OF SECTION 80IA AND THE ASSES SEE ENTERED INTO AN AGREEMENT WITH THE NHAI FOR DEVELOPMENT OF A NEW IN FRASTRUCTURE FACILITY, BEING WIDENED TO 4 LANES AND UPGRADED THE EXISTING 2-LANE ROAD, AS SPECIFIED, ABOVE BY TRANSFORMING THE SAME INTO A NEW INFRASTRUCTURE FACILITY UNDER THE NATIONAL HIGHWAY DEVELOPMENT PROGRAMME, IT SHALL BE DECLARED AS ELIGIBLE FOR DE DUCTION U/S 80IA IN RESPECT OF THE PROFITS DERIVED FROM THE SAID ELIGIB LE BUSINESS. 5. AFTER CONSIDERING THE SUBMISSIONS OF THE ASSESSE E, THE CIT(A) ELABORATELY DISCUSSED/ANALYSED THE ISSUE WITH VARIO US CASE LAWS AND CONFIRMED THE DISALLOWANCE MADE BY THE AO. THE RELE VANT PARAS OF CIT(A) ARE EXTRACTED BELOW FOR THE SAKE OF CLARITY: 15. IN THE CASE OF THE ASSESSEE HOWEVER, IT IS SEEN THAT THE ASSESSEE HAS CLAIMED DEDUCTION OF RS.5,96,20,067/- U/S 80IA IN RESPECT OF THE PROFITS FROM PROJECTS WHEREIN IT WAS ONLY A CONTRACTOR AND HAD ACTED IN THAT CAPACITY FOR ITS E MPLOYER, THE NHAI. IT NEVER FUNDED ANY OF THE PROJECTS SO BEING DEVELOPED BY OTHERS BUT WAS GETTING ONLY PAYMENTS FROM GOVERNMEN T/STATUTORY BODIES/COMPANIES FOR UNDERTAKING THE CONTRACT WORK. THE ASSESSEE IS THEREFORE, SIMPLY CARRYING ON THE BUSIN ESS OF BUILDING THE INFRASTRUCTURE AS A CONTRACTOR AND NOT THAT OF DEVELOPING ANY INFRASTRUCTURE FACILITY. IT IS ALSO CLEAR THAT NONE OF THE CONTRACTS OR SUB CONTRACTS TAKEN BY THE ASSESSEE WERE OF THE BOT /BOOT MODEL. NONE OF THESE WERE CONCEIVED, DESIGNED AND P LANNED BY THE ASSESSEE FURTHER, IN NONE OF THE PROJECTS THE A SSESSEE UNDERTOOK THE OPERATION AND MAINTENANCE OF THE FACI LITY BUILT BY IT PARTLY. THE ASSESSEE DID NOT EVEN BUILD THE ENTIRE FACILITY RATHER IT CONSTRUCTED ONLY A PART OF IT. OBVIOUSLY, THE ENTIR E CAPITAL 4 ITA NOS. 148 & 481/HYD09 SOMDUTT BUILDERS-NCC (JV) INVESTMENT WAS THAT OF THE GOVERNMENT/LOCAL AUTHORI TY/STATUTORY BODY AND NO FUND CAME FROM THE ASSESSEE TOWARDS IT. THEREFORE, IT CANNOT BE SAID THAT THE ASSESSEE HAD ENTERED INT O THESE CONTRACTS FOR DEVELOPING AND INFRASTRUCTURE FACILIT Y, WHICH ENVISAGES CONCEIVING, DESIGNING, PLANNING, FINANCIN G, BUILDING AND OPERATING THE FACILITY. IN FACT, THE ASSESSEE W AS NEVER SUPPOSED TO OPERATE THE FACILITY TO RECOVER ITS INV ESTMENTS AND GET RETURNS THEREFROM. OBVIOUSLY, IT WAS PAID ON RU NNING BILL BASIS FOR ITS ACTIVITIES. THERE WAS NO STIPULATION IN ANY OF SUCH CONTRACTS THAT THE FACILITY SO BUILT WAS TO BE TRAN SFERRED OR HANDED OVER BACK TO THE OWNER OR TO THE EMPLOYER. THEREFOR E, I HAVE NO HESITATION IN CONCLUDING THAT SUCH CONTRACTS ARE NO T ENVISAGED BY THE LEGISLATURE FOR ALLOWING THE BENEFIT OF SEC. 80 -IA OF THE ACT. 16. FURTHER, IT CAN BE SEEN THAT THE DEDUCTION U/S. 80IA IS AVAILABLE FOR DEVELOPING A NEW INFRASTRUCTURE FACIL ITY. IT IS CONTENDED BY THE REPRESENTATIVE OF THE ASSESSEE THA T THE TERM 'NEW' IMPLIES A WIDE SPECTRUM OF ACTIVITIES INCLUDI NG MODERNIZATION, IMPROVEMENT, WIDENING, STRENGTHENING ETC WHEREBY A SUBSTANTIALLY NEW FACILITY COMES INTO EXI STENCE WHICH IS DIFFERENT FROM THE OLD ONE IN ITS USE AND UTILIT Y. ON THIS STRENGTH IT IS ARGUED THAT THE 4 LANING AND STRENGTHENING OF THE EXISTING 2 LANE SECTIONING OF A STRETCH OF NATIONAL HIGHWAY NO 2 AMOUNTED TO DEVELOPING OF A NEW INFRASTRUCTURE FACILITY. HOW EVER, IT IS CLEAR THAT DESPITE SUCH STRENGTHENING AND 4 LANING, THE F ACILITIES SO BUILT COULD NOT BE TERMED AS A NEW INFRASTRUCTURE F ACILITY: AS MANDATED BY SEC. 80IA, AS IT AMOUNTED ONLY TO RENO VATION AND MODERNIZATION OF THE EXISTING FACILITY. EVEN AFTER SUCH STRENGTHENING AND 4 LANING, NO NEW USER OR UTILITY WAS BROUGHT INTO EXISTENCE. OBVIOUSLY, EVEN AFTER THE AMENDMEN T BROUGHT IN BY FINANCE (NO.2) ACT, 2004, IN SUB-SECTION 80IA(2) AND IN 80IA(4)(IV)(C), SUBSTANTIAL RENOVATION MODERNIZATIO N' HAS BEEN RESTRICTED TO THE NET WORK AND IS NOT APPLICABLE TO OTHER INFRASTRUCTURES FACILITIES. THE ASSESSEE IS THEREFO RE, NOT ENTITLED TO DEDUCTION EVEN ON THIS ACCOUNT. 6. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSESS EE IS IN APPEAL BEFORE US RAISING THE FOLLOWING GROUNDS OF APPEAL, WHICH ARE COMMON IN BOTH THE AYS UNDER CONSIDERATION: 1. ON THE FACTS AND IN THE CIRCUMSTANCES THE ORDER OF THE CIT(A) IS ERRONEOUS IN LAW AND FACTS OF THE CASE. 2. THE LD. CIT(A) ERRED IN LAW AND FACTS OF THE CAS E IN CONFIRMING THE ACTION OF THE AO IN DISALLOWING THE CLAIM OF THE ASSESSEE UNDER SECTION 80IA OF THE INCOME-TAX ACT, 1961 IN RESPECT OF THE NEW INFRASTRUCTURE FACILITIES BEING HIGHWAY PROJECTS UNDER AN AGREEMENT WITH NATIONAL HIGHWAYS AUTHORITY OF INDIA AND GOVT. OF GUJARAT. 5 ITA NOS. 148 & 481/HYD09 SOMDUTT BUILDERS-NCC (JV) 7. LD. AR SUBMITTED THAT THE CASE UNDER CONSIDERATI ON IS SIMILAR TO THE CASE OF KMC CONSTRUCTION LTD., VIDE ORDER DATED 28/10/2013 IN ITA NOS. 1247 & 1248/HYD/2012 AND OTHERS AND RELIED UPON THE BOARDS CIRCULAR NO. 4/2010. HE SUBMITTED THAT THE AO HAS RELIED ON DEPARTMENTAL CIRCULAR NO. 717 DATED 14/08/1995, WHI CH IS PRIOR TO THE AMENDMENT IN SECTION 80IA(4). HE FURTHER SUBMITTED THAT SECTION 80IA(4) WAS INTRODUCED IN 01/04/2000 TO ENCOURAGE T HE INFRASTRUCTURE FACILITIES AND TO GIVE BENEFIT TO THE PRIVATE PARTI ES, WHO ARE IN THE BUSINESS OF DEVELOPING INFRASTRUCTURE FACILITIES. I NITIALLY, THE SECTION INTENDED TO GIVE BENEFIT TO THOSE WHO ARE IN DEVELO PING, OPERATING AND MAINTAINING THE PROJECTS IN LINE WITH BOT/BOOT MODE L. SUBSEQUENTLY, THE GOVT. HAS AMENDED THE SECTION 80IA TO ENCOURAGE FURTHER PARTICIPATION OF PRIVATE PARTIES IN DEVELOPMENT OF INFRASTRUCTURE FACILITIES. THE SECTION WAS AMENDED AND INTRODUCED THE WORD OR INSTEAD OF AND IN BETWEEN THE WORDS DEVELOP, AS UNDER: I) DEVELOPING OR, II) OPERATING AND MAINTAINING OR III) DEVELOPING, OPERATING AND MAINTAINING IT SHOWS THAT THE ASSESSEE IS NOT NECESSARY TO CAR RY ALL THE ACTIVITIES, EVEN IF HE DEVELOPS INFRASTRUCTURE FACILITY IS ENOU GH TO CLAIM THE BENEFIT UNDER THIS SECTION. HE FURTHER SUBMITTED TH AT THE DECISION OF THE COORDINATE BENCH OF TRIBUNAL OF HYDERABAD IN TH E CASE OF M/S SHUSEE HI TECH IN ITA NOS. 269/HYD/2009 AND OTHERS VIDE ORDER DATED 16/03/2012, IS SIMILAR TO THE FACTS UNDER CON SIDERATION. HE FURTHER SUBMITTED THAT THE ASSESSEE HAS CARRIED ON THE DEVELOPMENT ACTIVITIES INDEPENDENTLY ONCE IT IS ASSIGNED BY THE NHAI AND GOVT. OF RAJASTHAN TO DEVELOP TWO WAY HIGH WAY INTO FOUR LAN E HIGH WAY. IT IS SUBMITTED THAT NO DOUBT THE CONTRACT WAS GIVEN BY T HE GOVT. AGENCIES AND IT IS NOT A CONTRACT, BUT, IT IS AN INDEPENDENT VENTURE ON ITS OWN AND IT HAS DEVELOPED THE INFRASTRUCTURE INDEPENDENT LY BY INVESTING HUGE AMOUNT ON THE PROJECT. HE BROUGHT TO OUR NOTIC E THE BALANCE SHEET OF THE ASSESSEE, WHICH IS PART OF PAPER BOOK. AS PER THE BALANCE SHEET, THE ASSESSEE HAS TAKEN SECURED AND U NSECURED LOANS 6 ITA NOS. 148 & 481/HYD09 SOMDUTT BUILDERS-NCC (JV) TO THE EXTENT OF RS. 27.69 CRORES FROM VARIOUS AGEN CIES. IT SHOWS THAT THE ASSESSEE HAS INVESTED CONSIDERABLE AMOUNT IN TH ESE PROJECTS AND NOT MERELY ACTING AS CONTRACTEE. 8. LD. DR SUBMITTED THAT THE ASSESSEE IS NOT A DEVE LOPER, IT IS ONLY A CONTRACTEE AND THE REAL OWNERS ARE THE GOVT. THE GOVT. HAS GIVEN A CONTRACT TO THE ASSESSEE AND PAID THE CONTRACT MONE Y AS AND WHEN BILLS ARE RAISED BY THE ASSESSEE. SHE FURTHER SUBMI TTED THAT THE CASE OF SUSHEE HI TECH (SUPRA) REFERRED TO BY THE AR IS DISTINGUISHABLE TO THE FACTS OF THE CASE OF THE ASSESSEE. SHE SUBMITTE D THAT THE ASSESSEE HAS NOT TAKEN ANY ENTREPRENEURIAL RISK, BU T, ONLY BUSINESS RISK. FURTHER, SHE RELIED ON THE ORDER OF CIT(A). 9. CONSIDERED THE RIVAL SUBMISSIONS AND PERUSED THE MATERIAL FACTS ON RECORD. THE ISSUE IN DISPUTE IS SQUARELY COVERED BY THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE O F M/S KMC CONSTRUCTIONS LTD. IN ITA NOS. 996/HYD/2003 AND OTH ERS, VIDE ORDER DATED 16/03/2012, THE DECISION OF WHICH HAS BEEN FO LLOWED IN THE SUBSEQUENT YEARS IN OTHER CASES ALSO. THE COORDINAT E BENCH HAS ELABORATELY DISCUSSED THE ISSUE AS UNDER: 44. WE HAVE CONSIDERED THE ELABORATE SUBMISSIONS MADE BY BOTH THE PARTIES AND ALSO PERUSED THE MATERIALS AVAILABLE ON RECORD. WE HAVE ALSO GONE THROUGH ALL THE CASE LAWS CITED BY BOTH THE PARTIES. WE FIND THAT THE PR OVISIONS OF SECTION 80IA(4) OF THE ACT WHEN INTRODUCED AFRESH BY THE FINANCE ACT, 1999, TH E PROVISIONS UNDER SECTION 80IA(4A) OF THE ACT WERE DELETED FROM THE ACT. THE DEDUCTION AVAILABLE FOR ANY ENTERPRISE EARLIER UNDER SECTION 80IA (4A) ARE ALSO MADE AVAILABLE UND ER SECTION 80IA (4) ITSELF. FURTHER, THE VERY FACT THAT THE LEGISLATURE MENTIONED THE WORDS (I) DEVELOPING OR (II) OPERATING AND MAINTAINING OR (III) DEVELOPING, OPERATING AND MA INTAINING CLEARLY INDICATES THAT ANY ENTERPRISE WHICH CARRIED ON ANY OF THESE THREE ACTI VITIES WOULD BECOME ELIGIBLE FOR DEDUCTION. THEREFORE, THERE IS NO AMBIGUITY IN THE INCOME-TAX ACT. WE FIND THAT WHERE AN ASSESSEE INCURS EXPENDITURE ON ITS OWN FOR PURCH ASE OF MATERIALS AND TOWARDS LABOUR CHARGES AND ITSELF EXECUTES THE DEVELOPMENT WORK I. E., CARRIES OUT THE CIVIL CONSTRUCTION WORK, IT WILL BE ELIGIBLE FOR TAX BENEFIT UNDER SEC TION 80 IA OF THE ACT. IN CONTRAST TO THIS, A ASSESSEE, WHO ENTERS INTO A CONTRACT WITH ANOTHER P ERSON INCLUDING GOVERNMENT OR AN UNDERTAKING OR ENTERPRISE REFERRED TO IN SECTION 80 IA OF THE ACT, FOR EXECUTING WORKS CONTRACT, WILL NOT BE ELIGIBLE FOR THE TAX BENEFIT UNDER SECTION 80 IA OF THE ACT. WE FIND THAT THE WORD OWNED IN SUB-CLAUSE (A) OF CLAUSE ( 1) OF SUB SECTION (4) OF SECTION 80IA OF THE ACT REFER TO THE ENTERPRISE. BY READING OF THE SECTION, IT IS CLEAR THAT THE ENTERPRISES CARRYING ON DEVELOPMENT OF INFRASTRUCTURE DEVELOPME NT SHOULD BE OWNED BY THE COMPANY AND NOT THAT THE INFRASTRUCTURE FACILITY SH OULD BE OWNED BY A COMPANY. THE PROVISIONS ARE MADE APPLICABLE TO THE PERSON TO WHO M SUCH ENTERPRISE BELONGS TO IS 7 ITA NOS. 148 & 481/HYD09 SOMDUTT BUILDERS-NCC (JV) EXPLAINED IN SUB-CLAUSE (A). THEREFORE, THE WORD O WNERSHIP IS ATTRIBUTABLE ONLY TO THE ENTERPRISE CARRYING ON THE BUSINESS WHICH WOULD MEA N THAT ONLY COMPANIES ARE ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA(4) AND NOT ANY OTH ER PERSON LIKE INDIVIDUAL, HUF, FIRM ETC. 45. WE ALSO FIND THAT ACCORDING TO SUB-CLAUSE (A), CLAUSE (I) OF SUB SECTION (4) OF SECTION 80-IA THE WORD IT DENOTES THE ENTERPRISE CARRYING ON THE BUSINESS. THE WORD IT CANNOT BE RELATED TO THE INFRASTRUCTURE FACILITY, PARTICUL ARLY IN VIEW OF THE FACT THAT INFRASTRUCTURE FACILITY INCLUDES RAIL SYSTEM, HIGHWAY PROJECT, WAT ER 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 ENTER PRISE. THEREFORE, THERE IS NO REQUIREMENT THAT THE ASSESSEE SHOULD HAVE BEEN THE OWNER OF THE INFRASTRUCTURE FACILITY. 46. THE NEXT QUESTION IS TO BE ANSWERED IS WHETHER THE ASSESSEE IS A DEVELOPER OR MERE WORKS CONTRACTOR. THE REVENUE RELIED ON THE AMENDME NTS BROUGHT IN BY THE FINANCE ACT 2007 AND 2009 TO MENTION THAT THE ACTIVITY UNDERTAK EN 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 U NDERTAKEN HAS TO BE ANALYZED AND A CONCLUSION HAS TO BE DRAWN ABOUT THE NATURE OF THE WORK UNDERTAKEN BY THE ASSESSEE. THE AGREEMENT ENTERED INTO WITH THE GOVERNMENT OR T HE GOVERNMENT 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 AND THE GOV ERNMENT. WE FIND THAT THE GOVERNMENT/GOVERNMENT BODY HANDED OVER THE POSSESSI ON OF THE PREMISES OR THE EXISTING ROAD TO THE ASSESSEE TILL THE DEVELOPMENT OF INFRASTRUCTURE FACILITY. IT IS THE ASSESSEES RESPONSIBILITY TO DO ANY ACT TILL THE PO SSESSION OF PROPERTY IS HANDED OVER TO THE GOVERNMENT. IF THE EXISTING ROAD IS TO BE DEVEL OPED INTO A FOUR LANE ROAD, THE FIRST PHASE IS TO TAKE OVER THE EXISTING AND DEVELOPED RO AD. SECONDLY, THE ASSESSEE HAS TO ARRANGE FOR THE TRAFFIC AND SHALL FACILITATE THE PE OPLE TO USE THE FACILITY EVEN WHILE THE PROCESS OF DEVELOPMENT IS IN PROGRESS. ANY LOSS TO THE PUBLIC CAUSED IN THE PROCESS WOULD BE THE RESPONSIBILITY OF THE ASSESSEE. THE ASSESSEE HAS TO DEVELOP THE INFRASTRUCTURE FACILITY. IN THE PROCESS, ALL THE WORKS ARE TO BE E XECUTED BY THE ASSESSEE. IT MAY BE LAYING OF A DRAINAGE SYSTEM; MAY BE CONSTRUCTION OF A PROJ ECT; PROVISION OF WAY FOR THE CATTLE AND BULLOCK CARTS IN THE VILLAGE; PROVISION FOR TRA FFIC WITHOUT ANY HINDRANCE, THE ASSESSEES DUTY IS TO DEVELOP INFRASTRUCTURE WHETHE R IT INVOLVES CONSTRUCTION OF A PARTICULAR ITEM AS AGREED TO IN THE AGREEMENT OR NO T. 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 MATER IAL REQUIRED IS TO BE BROUGHT IN BY THE ASSESSEE BY STICKING TO THE QUALITY AND QUANTITY IR RESPECTIVE OF THE COST OF SUCH MATERIAL. THE GOVERNMENT DOES NOT PROVIDE ANY MATERIAL TO THE ASSESSEE. IT PROVIDES THE WORKS IN PACKAGES AND NOT AS A WORKS CONTRACT. ASSESSEE UTIL IZES ITS FUNDS, ITS EXPERTISE, ITS EMPLOYEES AND TAKES THE RESPONSIBILITY OF DEVELOPIN G THE INFRASTRUCTURE FACILITY. THE LOSSES SUFFERED EITHER BY THE GOVT. OR THE PEOPLE I N THE PROCESS OF SUCH DEVELOPMENT WOULD BE THAT OF THE ASSESSEE. THE ASSESSEE HANDS O VER THE DEVELOPED INFRASTRUCTURE FACILITY TO THE GOVERNMENT ON COMPLETION OF THE DEV ELOPMENT. THEREAFTER, THE ASSESSEE HAS TO UNDERTAKE MAINTENANCE OF THE SAID INFRASTRUC TURE FOR A PERIOD OF 12 TO 48 MONTHS. DURING THIS PERIOD, IF ANY DAMAGES ARE OCCURRED IT SHALL BE THE RESPONSIBILITY OF THE ASSESSEE. FURTHER, DURING THIS PERIOD, THE ENTIRE I NFRASTRUCTURE SHALL HAVE TO BE MAINTAINED BY THE ASSESSEE ALONE WITHOUT HINDRANCE TO THE REGULAR TRAFFIC. THEREFORE, IT IS CLEAR THAT FROM AN UN-DEVELOPED AREA, INFRASTRUC TURE IS DEVELOPED AND HANDED OVER TO THE GOVERNMENT AND AS EXPLAINED BY THE CBDT VIDE IT S CIRCULAR DATED 18-05-2010, SUCH 8 ITA NOS. 148 & 481/HYD09 SOMDUTT BUILDERS-NCC (JV) ACTIVITY IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80 IA(4) OF THE ACT. THIS CANNOT BE CONSIDERED AS A MERE WORKS CONTRACT BUT HAS TO BE C ONSIDERED AS A DEVELOPMENT OF INFRASTRUCTURE 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 DEDUCTION UNDER SECTION 80IA(4) OF THE ACT. THE DEPARTMENT IS NOT C ORRECT IN HOLDING THAT THE ASSESSEE IS A MERE CONTRACTOR OF THE WORK AND NOT A DEVELOPER. 47. 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 G OVERNMENT. SUCH AN AGREEMENT IS A CONTRACT AND FOR THE PURPOSE OF THE AGREEMENT A P ERSON MAY BE CALLED AS A CONTRACTOR AS HE ENTERED INTO A CONTRACT. BUT THE WORD CONTRA CTOR IS USED TO DENOTE A PERSON ENTERING INTO AN AGREEMENT FOR UNDERTAKING THE DEVE LOPMENT OF INFRASTRUCTURE FACILITY. EVERY AGREEMENT ENTERED INTO IS A CONTRACT. THE WOR D 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 CONTRAC TOR. THEREFORE, THE CONTRACTOR AND THE DEVELOPER CANNOT BE VIEWED DIFFERENTLY. EVERY CONTR ACTOR MAY NOT BE A DEVELOPER BUT EVERY DEVELOPER DEVELOPING INFRASTRUCTURE FACILITY ON BEHALF OF THE GOVERNMENT IS A CONTRACTOR. THEREFORE, THE FIRST APPELLATE AUTHORIT Y RIGHTLY HELD THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA (4) FOR T HE ASSESSMENT YEARS 2000-01, 2001-02 AND 2002-03. 48. WE FIND THAT THE DECISION RELIED ON BY THE LEAR NED COUNSEL FOR THE ASSESSEE IN THE CASE OF CIT VS. LAXMI CIVIL ENGINEERING WORKS [ITA NO. 7 66/PUN/09 DATED 8.6.2011] SQUARELY APPLICABLE TO THE ISSUE UNDER DISPUTE WHICH IS IN F AVOUR OF THE ASSESSEE WHEREIN IT WAS HELD THAT MERE DEVELOPMENT OF INFRASTRUCTURE FACILI TY IS AN ELIGIBLE ACTIVITY FOR CLAIMING DEDUCTION UNDER SECTION 80IA OF THE ACT AFTER CONSI DERING THE JUDGEMENT OF THE MUMBAI HIGH COURT IN THE CASE OF ABG HEAVY ENGINEERING [SU PRA].THE CASE OF ABG IS NOT THE PURE DEVELOPER WHEREAS, IN THE PRESENT CASE, THE ASSESSE E 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 FACILI TY 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 ALS O BE ELIGIBLE TO CLAIM DEDUCTION UNDER SECTION 80IA OF THE ACT, WHICH ULTIMATELY CULMINATE D 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 AFO RESAID AMENDMENT, AN EXPLANATION WAS INSERTED IN SECTION 80IA OF THE ACT, IN THE FIN ANCE ACT-2007 AND 2009, TO CLARIFY THAT MERE WORKS CONTRACT WOULD NOT BE ELIGIBLE FOR DEDUC TIONS UNDER SECTION 80IA OF THE ACT. BUT, CERTAINLY, THE EXPLANATION CANNOT BE READ TO D O AWAY WITH THE ELIGIBILITY OF THE DEVELOPER; OTHERWISE, THE PARLIAMENT WOULD HAVE SIM PLY REVERSED THE AMENDMENT MADE IN THE FINANCE ACT, 2001. THUS, THE AFORESAID EXPLA NATION WAS INSERTED, CERTAINLY, TO DENY THE TAX HOLIDAY TO THE ENTITIES WHO DOES ONLY MERE WORKS CONTACT OR SUB-CONTRACT AS DISTINCT FROM THE DEVELOPER. THIS IS CLEAR FROM THE EXPRESS INTENSION OF THE PARLIAMENT WHILE INTRODUCING THE EXPLANATION. THE EXPLANATORY MEMORANDUM TO FINANCE ACT 2007 STATES THAT THE PURPOSE OF THE TAX 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. WE HAVE CAREFULLY GONE THROUGH THE VARIOUS ACTIVITIES CARRIED ON BY THE AS SESSEE. AN ANALYSIS OF THE WORKS UNDERTAKEN BY THE ASSESSEE CLEARLY INDICATES THAT I T CARRIED ON THE ACTIVITIES OF 9 ITA NOS. 148 & 481/HYD09 SOMDUTT BUILDERS-NCC (JV) DEVELOPMENT OF INFRASTRUCTURE FACILITY. FOR CLARITY WE REPRODUCE ONE OF THE PROJECTED UNDERTAKEN BY THE ASSESSEE. NATURE OF WORK : WIDENING TO FOUR LANES AND STRENGT HENING OF EXISTING TWO LANE CARRIAGEWAY IN KM. 27.80 TO KM. 61.00 JAGATPUR-CHAN DIKHOL SECTION OF NATIONAL HIGHWAY NO.5 IN THE STATE OF ORISSA. THE SAID WORK IS FINANCED BY : OVERSEAS ECONOMIC CO -OPERATION FUND, JAPAN TO THE GOVERNMENT OF INDIA. THE GOVERNMENT OF INDIA AU THORIZED TO GET THE WORK DONE BY INVITATION OF TENDER. THE SOURCE OF FUNDS AS MENTIONED IN THE TENDER (HER EIN DOCUMENT AFTER REFERRED TO AS THE FUND) : THE GOVERNMENT OF INDI A HAS RECEIVED A LOAN FROM THE OVERSEAS ECONOMIC COOPERATION FUND TOWARDS THE COST OF WIDENING TO FOUR LANES AND STRENGTHENING OF EXISTING TWO LANE CARRIA GEWAY IN KM. 27.80 TO KM 61.00 IN JAGATPUR-CHANDIKHOL SECTION OF NH-5 IN THE STATE OF ORISSA, AND INTENDS TO APPLY PART OF THE PROCEEDS OF THIS LOAN TO ELIGIBLE PAYMENTS UNDER THE CONTRACT (HEREINAFTER REFERRED TO AS THE CONTR ACT) FOR WHICH THE NOTICE INVITING TENDERS HAS BEEN ISSUED BY THE EMPLOYER, A S AUTHORIZED BY THE GOVERNMENT OF INDIA. PAYMENT BY THE OVERSEAS ECONOM IC COOPERATION FUND(OECF) WILL BE MADE ONLY AT THE REQUEST OF THE GOVERNMENT OF INDIA AND UPON APPROVAL BY THE BANK IN ACCORDANCE WITH THE TE RMS AND CONDITIONS OF THE LOAN AGREEMENT. EXCEPT AS THE BANK MAY SPECIFICALLY OTHERWISE AGREE, NO PARTY OTHER THAN THE BORROWER SHALL DERIVE ANY RIGHTS FRO M THE LOAN AGREEMENT OR HAVE ANY CLAIM TO THE LOAN PROCEEDS. SCOPE OF WORK THE WORK BROADLY COMPRISES OF - A) CO NSTRUCTION OF ADDITIONAL TWO LANE CARRIAGEWAY BY THE SIDE OF EXISTING TWO LA NE ROAD IN KM 27.80 TO 61.00 B) STRENGTHENING OF EXISTING PAVEMENT BY PROV IDING BITUMINOUS STRENGTHENING OVERLAYS C) PROVISION OF CENTRAL MEDI AN, PAVEMENT SHOULDERS AND SERVICE ROADS. D) IMPROVEMENT OF JUNCTIONS/ GEOMETR ICS, PAVEMENT PROFILE CORRECTION, LANE MARKING AND PROVIDING ROAD SIGNAGE S. E) REPAIR/REHABILITATION OF EXISTING BRIDGES. F) CONSTRUCTION/RECONSTRUCTION OF BRIDGES. G) IMPROVEMENT OF DRAINAGE SYSTEM, WIDENING/PROVIDING CULVERTS, CA TTLE CROSSINGS ETC. H) OTHER MISCELLANEOUS ITEMS PERTINENT TO THE PROJECT. I) MA INTENANCE OF THE SAID INFRASTRUCTURE FOR A PERIOD OF 48 MONTHS (DURING TH E PERIOD OF DEVELOPMENT OF 36 MONTHS AND DEFECT LIABILITY PERIOD OF 12 MONTHS) 49. FOR THIS PURPOSE, THE POSSESSION OF THE SITE IS HANDED OVER TO THE ASSESSEE BY THE GOVERNMENT. THE ASSESSEE TAKES POSSESSION AND ACCES S TO THE PROPERTY AND THEREAFTER IT SHALL BE THE RESPONSIBILITY OF THE ASSESSEE TO D EVELOP THE SAID AREA INTO MORE USEFUL INFRASTRUCTURE FACILITY. IN THE PROCESS, EVERY ACT REQUIRED (WHETHER MENTIONED IN THE AGREEMENT OR NOT) IN CONVERTING THE AREA INTO MORE USEFUL ONE SHALL BE THAT OF THE ASSESSEE. THE ASSESSEE HAS TO UNDERTAKE THE RESPONS IBILITY OF MAINTENANCE OF THE EXISTING TRAFFIC AND THERE SHOULD NOT BE INCONVENIE NCE TO THE REGULAR TRAFFIC. THE DEVELOPED AREA AFTER COMPLETION OF THE DEVELOPMENT OF INFRASTRUCTURE IS HANDED OVER TO THE GOVERNMENT. AFTER HANDING OVER, THE ASSESSEE SHALL MAINTAIN THE INFRASTRUCTURE FOR A PERIOD OF 48 MONTHS AND ANY DEFECTS ARE TO BE RECTIFIED. 50. FROM THE ABOVE FACTS IT IS CLEAR THAT THE ASSES SEE IS CONVERTING THE AREA ENTRUSTED TO IT INTO MORE USEFUL AND MORE PROFITABLE AREA AND HA NDING OVER THE DEVELOPED ONE TO THE GOVERNMENT/GOVERNMENT BODIES. THEREFORE, THE AC TIVITY OF THE ASSESSEE IS TO 10 ITA NOS. 148 & 481/HYD09 SOMDUTT BUILDERS-NCC (JV) DEVELOP AN EXISTING TWO LANE ROAD INTO FOUR LANE R OAD THEREBY MAKING THE ROAD MORE USEFUL AND PROFITABLE. 51. WITHOUT ANY DOUBT, THE LEARNED COUNSEL FOR THE ASSESSEE CLEARLY DEMONSTRATED BEFORE US THAT THE ASSESSEE AT PRESENT HAS UNDERTAK EN HUGE RISKS IN TERMS OF DEPLOYMENT OF TECHNICAL PERSONNEL, PLANT AND MACHIN ERY, TECHNICAL KNOW-HOW, EXPERTISE AND FINANCIAL RESOURCES. 52. THEREFORE, IN OUR CONSIDERED VIEW, THE ASSESSEE SHOULD NOT BE DENIED THE DEDUCTION UNDER SECTION 80IA OF THE ACT AS THE CONTRACTS INVO LVE DEVELOPMENT/CONSTRUCTION, OPERATING/MAINTENANCE, FINANCIAL INVOLVEMENT, AND D EFECT CORRECTION AND LIABILITY PERIOD, THEN SUCH CONTRACTS CANNOT BE CALLED AS SIM PLE WORKS CONTRACT. IN OUR OPINION THE CONTRACTS WHICH CONTAIN ABOVE FEATURES ARE TO B E SEGREGATED AND ON THESE CONTRACTS DEDUCTION U/S. 80-IA HAS TO BE GRANTED AN D THE OTHER AGREEMENTS WHICH ARE IN THE NATURE OF PURE WORKS CONTRACTS HIT BY THE EX PLANATION TO SECTION 80IA(13), THOSE WORKS ARE NOT ENTITLE FOR DEDUCTION U/S 80IA OF THE ACT. THE PROFIT FROM SUCH IS TO BE COMPUTED BY ASSESSING OFFICER ON PRO-RATA BASIS OF TURNOVER. THE ASSESSING OFFICER IS DIRECTED TO EXAMINE ACCORDINGLY AND GRANT DEDUCTION ON ELIGIBLE TURNOVER AS DIRECTED ABOVE. IT IS NEEDLESS TO SAY THAT DEDUCTION U/S 80I A WAS GRANTED IN SIMILAR CASE BY THE CHENNAI BENCH OF THE TRIBUNAL AND DEDUCTION U/S. 80 IA WAS GRANTED IN THE CASE OF M/S. CHETTINAD LIGNITE TRANSPORT SERVICES (P) LTD., IN I TA NO. 2287/MDS/06 ORDER DATED 27TH JULY, 2007 FOR THE ASSESSMENT YEAR 2004-05. LATER I N ITA NO. 1179/MDS/08 VIDE ORDER DATED 26TH FEBRUARY, 2010 THE TRIBUNAL HAS TAKEN TH E SAME VIEW BY INTER-ALIA HOLDING AS FOLLOWS: 7. MOREOVER, THE REASONS FOR INTRODUCING THE EXPLA NATION WERE CLARIFIED AS PROVIDING A TAX BENEFIT BECAUSE MODERNISATION REQUI RES A MASSIVE EXPANSION AND QUALITATIVE IMPROVEMENT IN INFRASTRUCTURES LIKE EXPRESSWAYS, HIGHWAYS, AIRPORTS, PORTS AND RAPID URBAN RAIL TRANSPORT SYST EMS. FOR THAT PURPOSE, PRIVATE SECTOR PARTICIPATION BY WAY OF INVESTMENT I N DEVELOPMENT OF THE INFRASTRUCTURE SECTOR AND NOT FOR THE PERSONS WHO M ERELY EXECUTE THE CIVIL CONSTRUCTION WORK OR ANY OTHER WORK CONTRACT HAS BE EN ENCOURAGED BY GIVING TAX BENEFITS. THUS THE PROVISIONS OF SECTION 80IA S HALL NOT APPLY TO A PERSON WHO EXECUTES A WORKS CONTRACT ENTERED INTO WITH THE UNDERTAKING OR ENTERPRISE REFERRED TO IN THE SECTION BUT WHERE A PERSON MAKES THE INVESTMENT AND HIMSELF EXECUTES THE DEVELOPMENT WORK, HE CARRIES O UT THE CIVIL CONSTRUCTION WORK, HE WILL BE ELIGIBLE FOR THE TAX BENEFIT UNDER SECTION 80IA. 53. THE ABOVE ORDER WAS FOLLOWED IN SUBSEQUENT ASSE SSMENT YEARS 2007-2008 & 2008- 09 IN ITA NOS. 1312 & 1313/MDS/2011 VIDE ORDER DATE D 18.11.2011 IN THE CASE OF THE SAME ASSESSEE. 54. IT IS ALSO PERTINENT TO MENTION HEREIN THAT THI S TRIBUNAL IN SIMILAR CIRCUMSTANCES, IN THE CASE OF M/S. GVPR ENGINEERS LTD. HYDERABAD IN I TA NO. 347/H/08 VIDE ORDER DATED 29TH FEBRUARY 2012 HAS TAKEN SIMILAR VIEW AND GRANT ED DEDUCTION U/S 80IA OF THE ACT. WE ALSO CAME ACROSS AN ORDER OF THIS TRIBUNAL ON TH IS ISSUE IN THE CASE OF R.R. CONSTRUCTIONS WHEREIN THE CHENNAI BENCH OF THE TRIB UNAL IN ITS ORDER DATED 3.10.2011 IN I.T.A. NO. 2061/MDS/2010 FOR ASSESSMENT YEAR 200 7-08 CONFIRMED THE GRANTING OF DEDUCTION U/S. 80IA WHILE HOLDING AS FOLLOWS: 3. WE HAVE HEARD RIVAL SUBMISSIONS AND HAVE CAREFU LLY PERUSED THE ENTIRE RECORD. THE FIRST ISSUE OF THE APPEAL IS REGARDING CLAIM OF DED UCTION UNDER SECTION 80IA(4) OF THE 11 ITA NOS. 148 & 481/HYD09 SOMDUTT BUILDERS-NCC (JV) ACT. THE CASE OF THE REVENUE IS THAT THE ASSESSEE I S A WORKS CONTRACTOR AND NOT A DEVELOPER AS STIPULATED UNDER SECTION 80IA(4) OF THE ACT. THE SECTION 80IA(4) APPLIES TO ANY ENTERPRISE, WHICH CARRIES ON THE BUSINESS OF (I) DEVELOPING OR (II) OPERATING AND MAINTAINING OR (III) DEVELOPING, OPERATING AND MAIN TAINING ANY INFRASTRUCTURE FACILITIES, WHICH FULFIL ALL THE ABOVE CONDITIONS. THERE CANNOT BE ANY QUESTION OF PROVIDING A CONDITION FOR SUCH AN ENTERPRISE TO START OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY ON OR AFTER 01.04.1995. FROM THE ASSESSMEN T YEAR 2000-01, DEDUCTION IS AVAILABLE IF THE ASSESSEE IS CARRYING OUT THE BUSIN ESS OF ANY ONE OF THE ABOVE MENTIONED THREE TYPES OF ACTIVITIES. WHEN AN ASSESSEE IS ONLY DEVELOPING AN INFRASTRUCTURE FACILITY PROJECT AND IS NOT MAINTAINING NOR OPERATING IT, OB VIOUSLY SUCH AN ASSESSEE WILL BE PAID FOR THE COST INCURRED BY IT; OTHERWISE, HOW WILL TH E PERSON, WHO DEVELOPS THE INFRASTRUCTURE FACILITY PROJECT, REALIZE ITS COST? IF THE INFRASTRUCTURE FACILITY, JUST AFTER ITS DEVELOPMENT, IS TRANSFERRED TO THE GOVERNMENT, NATU RALLY THE COST WOULD BE PAID BY THE GOVERNMENT. THEREFORE, MERELY BECAUSE THE TRANSFERE E HAD PAID FOR THE DEVELOPMENT OF INFRASTRUCTURE FACILITY CARRIED OUT BY THE ASSES SEE, 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 ONLY DEVELOPING HE INFRASTRUCTURE FACILITY WOULD BE ENTITLED TO DEDUCT ION UNDER SECTION 80IA(4), WHICH IS NOT THE INTENTION OF THE LAW. AN ENTERPRISE, WHO DEVELO P THE INFRASTRUCTURE FACILITY IS NOT PAID BY THE GOVERNMENT, THE ENTIRE COST OF DEVELOPM ENT WOULD BE A LOSS IN THE HANDS OF THE DEVELOPER AS HE IS NOT OPERATING THE INFRASTRUC TURE FACILITY. THE LEGISLATURE HAS PROVIDED THAT THE INCOME OF THE DEVELOPER OF THE IN FRASTRUCTURE PROJECT WOULD BE ELIGIBLE FOR DEDUCTION, IT PRESUPPOSES THAT THERE C AN BE INCOME TO DEVELOPER I.E. TO THE PERSON WHO IS CARRYING ON THE ACTIVITY OF ONLY DEVE LOPMENT INFRASTRUCTURE FACILITY. OSTENSIBLY, A DEVELOPER WOULD HAVE INCOME ONLY IF H E IS PAID FOR THE DEVELOPMENT OF INFRASTRUCTURE FACILITY, FOR THE SIMPLE REASON THAT HE IS NOT HAVING THE RIGHT/AUTHORIZATION TO OPERATE THE INFRASTRUCTURE F ACILITY AND TO COLLECT TOLL THERE FROM, HAS NO OTHER SOURCE OF RECOUPMENT OF HIS COST OF DE VELOPMENT. WHILE FILING THE RETURN, THE ASSESSEE HAD MADE CLAIM UNDER SECTION 80IA(4) O F THE ACT. 4. THE ASSESSEE HAS ALSO PRODUCED ALL SIX AGREEMENT S REGARDING SIX PROJECTS UNDERTAKEN BEFORE THE ASSESSING OFFICER, WHOSE COPIES ARE AVAI LABLE BEFORE US ALSO. IT IS A FACT THAT EVEN AFTER TAKING A CONTRACT FROM THE GOVERNMENT, I F THE ASSESSEE DEVELOPS INFRASTRUCTURE FACILITIES, IT WOULD BE REGARDED AS A DEVELOPER AND NOT AS A WORKS CONTRACTOR. THE ASSESSEE FIRM HAS CARRIED ON ENTIR E CONSTRUCTION/DEVELOPMENT OF THE INFRASTRUCTURE FACILITIES AND SATISFY ALL THE CONDI TIONS OF SECTION 80IA(4)(I)(A). IT IS UNDENIABLE FACT THAT THE ASSESSEE HAS TAKEN DEVELOP MENT OF INFRASTRUCTURE FACILITY AGREEMENT FROM THE STATE GOVERNMENT/LOCAL AUTHORITY . A CONTRACTOR WHO DEVELOPS THE INFRASTRUCTURE FACILITY BECOMES A DEVELOPER TO CLAI M EXEMPTION UNDER SECTION 80IA(4). THE HONBLE BOMBAY BENCH OF ITAT WHILE DECIDING THE CASE OF PATEL ENGINEERING LTD. VS. DCIT IN ITA NO. 1221/MUM/2004 HAS GONE TO THE EXTEN T OF HOLDING THAT THE ASSESSEE, A CIVIL CONTRACTOR, HAVING EXECUTED A PART OF CONTRAC TS OF IRRIGATION AND WATER SUPPLY ON BUILD AND TRANSFER BASIS AND HANDED OVER THEM TO CONTRACTEE GOVERNMENTS, WAS ELIGIBLE 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 O RDER 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 12 ITA NOS. 148 & 481/HYD09 SOMDUTT BUILDERS-NCC (JV) INFRASTRUCTURE FACILITY. A PERSON WHO ENTERS INTO CONTRACT WITH ANOTHER PERSON FOR EXECUTING WORKS CONTRACTS IS NOT ELIGIBLE FOR SUC H A BENEFIT. EXPLANATION TO SECTION 80IA WAS INSERTED BY FINANCE ACT, 2007 WITH RETROSP ECTIVE EFFECT FROM 1.4.2000 WHICH HAS FURTHER BEEN AMENDED BY FINANCE (NO. 2) ACT, 20 09 WITH RETROSPECTIVE EFFECT FROM 1.4.2000. THE AMENDMENT IN THIS EXPLANATION WAS NEC ESSITATED DUE TO CONTRARY JUDICIAL DECISION ON THIS ISSUE. THUS, WE CAN UNEQUIVOCALLY NOW SAY THAT ANY UNDERTAKING OR ENTERPRISE WHICH EXECUTES THE INFRASTRUCTURE DEVELO PMENT PROJECT, AS REFERRED TO IN SUB- SECTION(4) AS A WORKS CONTRACT AWARDED BY ANY PERSO N INCLUDING THE CENTRAL OR STATE GOVERNMENT, IS NOT ELIGIBLE FOR TAX BENEFIT U/S 80I A(4). HAVING SAID THAT, NOW WE EXAMINE THE FACTS OF THIS CASE. THE ASSESSEE-COMPAN Y WAS GIVEN THIS BENEFIT IN ASSESSMENT YEAR 2003-04 BY THE DEPARTMENT ON IDENTI CAL FACTS AFTER CONSIDERING THE EXPLANATION AND AMENDMENT THERETO. TO TRACE THE HIS TORY 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 ONL Y WITH EFFECT FROM 1.4.2000, THIS SECTION WAS DIVIDED INTO TWO PORTIONS 80IA AND 80IB. SECTIO N 80IA(4) PRESCRIBES ABOUT THE DEDUCTION AVAILABLE TO A DEVELOPER WHO DEVELOPS INF RASTRUCTURE FACILITIES. IN VIEW OF THE AMENDMENT INSERTED BY THE FINANCE ACT, 2007, WITH R ETROSPECTIVE EFFECT FROM 1.4.2000, THE DEDUCTION U/S 80IA IS AVAILABLE TO THOSE ASSESS EES WHO ARE INVESTING AND DEVELOPING INFRASTRUCTURE FACILITY AND NOT TO PERS ONS WHO SIMPLY EXECUTES WORKSCONTRACTS. EXPLANATION IN QUESTION, AS IT ST ANDS TODAY, READS AS UNDER: EXPLANATION - FOR THE REMOVAL OF DOUBTS, IT IS HER EBY 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 CASE MAY BE. IN CONTRAST TO THIS, A PERSON WHO ENTERS INTO A CON TRACT WITH ANOTHER PERSON (I.E., UNDERTAKING OR ENTERPRISE REFERRED TO IN SEC TION 80-IA) FOR EXECUTING WORKS CONTRACT, WILL NOT BE ELIGIBLE FOR TAX BENEFIT UNDE R SECTION 80- IA. 10. WE HAVE FOUND THAT THE ASSESSEE-COMPANY IS A WO RKS CONTRACTOR, WHO HAS ENTERED INTO AGREEMENT WITH THE LOCAL BODIES TO EXECUTE CER TAIN 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 WOR K AND CARRIES OUT CIVIL WORK WILL BE ELIGIBLE FOR TAX BENEFIT U/S 80IA OF THE ACT. IN CO NTRAST 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 PROVISIONS OF SECTION 80IA SHALL NOT APPLY TO A PER SON WHO EXECUTES ONLY WORK CONTRACTS AND ONLY THOSE WHO MAKE THE DEVELOPMENT WORK WILL B E ELIGIBLE FOR TAX BENEFIT U/S 80IA OF THE ACT. BE THAT AS IT MAY, WHEN WE APPLY THIS P ROVISION IN ITS LETTERS AND SPIRIT, WE FIND THAT THIS ASSESSEE IS VERILY ELIGIBLE FOR DEDU CTION U/S 80IA, AS THE ASSESSEE-COMPANY FULFILS ALL THE RELEVANT CONDITIONS. THE FACTS OF T HIS CASE GO TO PROVE THAT THE ASSESSEE IS A DEVELOPER OF INFRASTRUCTURE FACILITIES. THE REA SONS FOR OUR ABOVE CONCLUSION ARE GIVEN IN THE FOLLOWING PARAS. FIRSTLY, THE ASSESSEE-COMPA NY NOT ONLY DESIGNS 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 ADVANCED LAW LEXICON [PLACED AT PAGE 533 OF THE PAP ER BOOK] DEVELOPER MEANS A PERSON ENGAGED IN DEVELOPMENT OR OPERATION OR MAINT ENANCE OF SPECIAL ECONOMIC ZONE, AND ALSO INCLUDES ANY PERSON AUTHORIZED FOR S UCH PURPOSE BY ANY SUCH DEVELOPER. THE WORKS CONTRACT MEANS AN AGREEMENT IN WRITING FOR THE EXECUTION OF ANY WORK RELATING TO CONSTRUCTION, REPAIR, OR MAINTENANCE OF ANY BUILDING OR SUPERSTRUCTURE, DAM, 13 ITA NOS. 148 & 481/HYD09 SOMDUTT BUILDERS-NCC (JV) WEIR, CANAL, RESERVOIR, TANK, LAKE, ROAD, WELL, BRI DGE, CULVERT, FACTORY, WORKSHOP, POWERHOUSE, TRANSFORMERS OR SUCH OTHER WORKS OF THE STATE GOVERNMENT OR PUBLIC UNDERTAKINGS AS THE STATE GOVERNMENT MAY BE BY NOTI FICATION, SPECIFY IN THIS BEHALF AT ANY OF ITS STAGES ENTERED INTO BY THE STATE GOVERNM ENT OR BY AN OFFICIAL OF THE STATE GOVERNMENT OR PUBLIC UNDERTAKING AND INCLUDES AN AG REEMENT FOR THE SUPPLY OF GOODS OR MATERIAL AND ALL OTHER MATTERS RELATING TO EXECU TION OF ANY OF THE SAID WORKS. THE CASE OF ACIT VS INDWELL LIANINGS PVT. LTD (SUPRA), ON WHICH THE ASSESSING OFFICER HAS PLACED RELIANCE IS ALSO RELEVANT AND WE EXTRACT CER TAIN 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 T HAT NOTHING CONTAINED IN THIS SECTION SHALL APPLY TO A PERSON WHO EXECUTES A WORK S CONTRACT ENTERED INTO WITH THE UNDERTAKING OR ENTERPRISE, AS THE CASE MAY BE.' ACCORDING TO ATTORNEY'S POCKET DICTIONARY, IN RELATION TO A CORP ORATION OR BUSINESS, THE TERM 'UNDERTAKING' DENOTES ITS WHOLE ENTERPRISE AND THE WORD 'ENTERPRISE' CONNOTES ALL THE RELATED ACTIVITIES PERFORMED EITHE R THROUGH UNIFIED OPERATION OR COMMON CONTROL BY ANY PERSON OR PERSONS FOR A CO MMON BUSINESS PURPOSE. THE MENS LEGIS WITH REFERENCE TO DEVELOPER OF INFRA STRUCTURE FACILITY CAN BE GATHERED FROM THE MEMORANDUM EXPLAINING THE PROVISI ONS 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 INFRASTRUC TURE FACILITIES, INDUSTRIAL PARKS AND SPECIAL ECONOMIC ZONES. THE TAX BENEFIT WAS INTRODUCED FOR THE REASON THAT INDUSTRIAL MODERNIZATION REQUIRES A PASSIVE EXPANSION OF, AND QUALITATIVE IM PROVEMENT IN, INFRASTRUCTURE (VIZ., EXPRESSWAYS, HIGHWAYS, AIRPORTS, PORTS AND R APID URBAN RAIL TRANSPORT SYSTEMS) WHICH WAS LACKING IN OUR COUNTRY. THE PURP OSE OF THE TAX BENEFIT HAS ALL ALONG BEEN FOR ENCOURAGING PRIVATE SECTOR PARTI CIPATION BY WAY OF INVESTMENT IN DEVELOPMENT OF THE INFRASTRUCTURE SEC TOR AND NOT FOR THE PERSONS WHO MERELY EXECUTE THE CIVIL CONSTRUCTION WORK OR A NY 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 ENTERED INTO WITH THE UNDERTAKING OR ENTERPRISE REFERRED TO IN THE SAID S ECTION. 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 W ILL 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 ENTERPRIS E REFERRED TO IN SECTION 80- IA) FOR EXECUTING WORKS CONTRACT, WILL NOT BE ELIGI BLE 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 YEA R 2000-01 AND SUBSEQUENT YEARS.' IT IS MADE ABUNDANTLY CLEAR THAT THE PRESCR IPTION OF SECTION 80- IA SHALL NOT APPLY TO A PERSON WHO EXECUTES WORK CONTRACTS E NTERED INTO WITH AN UNDERTAKING OR ENTERPRISE. THUS, IN A CASE WHERE A PERSON WHO MAKES INVESTMENT AND HIMSELF EXECUTES DEVELOPMENT WORKS A ND CARRIES OUT CIVIL 14 ITA NOS. 148 & 481/HYD09 SOMDUTT BUILDERS-NCC (JV) WORKS, WILL BE ELIGIBLE FOR TAX BENEFIT UNDER SECTI ON 80- IA OF THE ACT. IN CONTRAST TO THIS, A PERSON WHO ENTERS INTO A CONTRACT WITH A NOTHER PERSON FOR EXECUTING WORKS CONTRACT WILL NOT BE ELIGIBLE FOR THE TAX BEN EFIT 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 PRO JECT 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 REL EVANT FOR DECIDING THIS ISSUE. WE, THEREFORE, RESTORE THE ORDER OF THE ASSE SSING OFFICER AND REVERSE THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS). 11. TO FURTHER ELABORATE THE DISCUSSION ON THIS I SSUE, 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 CO NTRACTOR 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 CASE OF A DEVELOPER, WHO IS NOT CARRYING ON BUSINESS OF OPERATING AND MAINTA INING THE INFRASTRUCTURAL FACILITIES. IN OUR OPINION, THE ANSWER TO THESE QUE STION ARE PROVIDED BY THE JUDGMENT OF THE BOMBAY HIGH COURT IN THE CASE OF AB G HEAVY ENGG LTD (SUPRA). IN THIS REGARD, WE PERUSED THE ABOVE CITED PARA-22 OF THE SAID JUDGMENT AND FOR THE SAKE OF COMPLETENESS, THE SAID PARAGRAPH IS REPRODUCED AS UNDER:- '22. THE SUBMISSION WHICH WAS URGED ON BEHALF OF T HE 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 I S EMBODIED IN SUB CLAUSE (1) OF SUB-CLAUSE (4) OF THE AMENDED PROVISIONS. IT WAS URGED THAT SINCE THE ASSESSEE WAS NOT OPERATING AND MAINTAINING THE FACI LITY, HE DID NOT FULFIL THE CONDITION. THE SUBMISSION IS FALLACIOUS BOTH IN FAC T AND IN LAW. ' THAT THE ASSESSEE WAS MAINTAINING THE FACILITY IS NOT IN DISPUTE. THE FACILITY WAS COMMENCED AFTER 1ST APRIL, 1995. THEREFORE, THE REQUIREMENT WAS MET IN FACT. MOREOVER, AS A MATTER OF LAW, WHAT THE CONDIT ION ESSENTIALLY MEANS IS THAT THE INFRASTRUCTURE FACILITY SHOULD HAVE BEEN O PERATIONAL AFTER 1ST APRIL, 1995. AFTER SECTION 80IA WAS AMENDED BY THE FINANCE ACT, 2001, THE SECTION APPLIES TO AN ENTERPRISE CARRYING ON THE BUSINESS O F (I) DEVELOPING; OR (II) OPERATING AND MAINTAINING; OR (III) DEVELOPING, OPE RATING AND MAINTAINING ANY INFRASTRUCTURE FACILITY' WHICH FULFILS CERTAIN COND ITIONS. THOSE CONDITIONS ARE (I) OWNERSHIP OF THE ENTERPRISES BY A COMPANY REGISTERE D IN INDIA OR BY A CONSORTIUMS; (II) AN AGREEMENT WITH THE CENTRAL OR STATE GOVERNMENT, LOCAL AUTHORITY OR STATUTORY BODY; AND (III) THE START OF OPERATION AND MAINTENANCE OF THE INFRASTRUCTURE FACILITY SHOULD COMMENCE AFTER 1 ST APRIL, 1995. THE REQUIREMENT THAT OPERATION AND MAINTENANCE OF THE I NFRASTRUCTURE FACILITY SHOULD COMMENCE AFTER 1ST APRIL, 1995 HAS TO BE HAR MONIOUSLY CONSTRUED WITH THE MAIN PROVISION UNDER WHICH DEDUCTION IS AVAILAB LE TO AN ASSESSEE WHO DEVELOPS OR OPERATES AND MAINTAINS, OR DEVELOPS, OP ERATES AND MAINTAINS AN INFRASTRUCTURE FACILITY'. 15 ITA NOS. 148 & 481/HYD09 SOMDUTT BUILDERS-NCC (JV) A HARMONIOUS READING OF THE PROVISIONS IN ITS ENTIR ETY WOULD LEAD TO THE CONCLUSION THAT THE DEDUCTION IS AVAILABLE TO AN EN TERPRISE WHICH (I) DEVELOPS, OR OPERATES AND MAINTAINS; OR (III) DEVELOPS, MAINT AIN AND OPERATES THAT 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 CO NDITION '. BEFORE THE AMENDMENT THAT WAS BROUGHT ABOUT BY PARL IAMENT BY FINANCE ACT, 2001 WE HAVE ALREADY NOTED THAT THE CONSISTENT LINE OF CIRCULARS OF THE BOARD POSTULATED THE SAME POSITION. THE AMENDMENT MADE BY PARLIAMENT TO S. 80- IA(4) OF THE ACT, SET THE MATTER BEYOND ANY CONTROV ERSY BY STIPULATING THAT THE THREE CONDITIONS FOR DEVELOPMENT, OPERATION AND MAI NTENANCE 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 DEVE LOPER FOR MAKING CLAIM OF DEDUCTION U/S SECTION 80IA (4) OF THE ACT. FROM THE ABOVE, IT IS EVIDENT THAT THE PERSON WHO ONLY DEVELOPS THE INFRASTRUCTURE DO NOT HAVE THE OCCASION TO OPERATE AND MAINTAIN THE INFRASTRUCTURE. IT IS FURT HER EVIDENT THAT THE HARMONIOUS READING IS NECESSARY AND MANDATORY IN VI EW OF HIGH COURT'S JUDGMENT IN THE CASE OF AN ENTERPRISE CARRYING ON B USINESS OR DEVELOPING WHICH IS THE CASE OF THE ASSESSEE, ALL THE CONDITIONS REF ERRED TO CLAUSE (I) OF SECTION 80IA (4) SHOULD REFER TO THE CONDITIONS AS APPLICAB LE TO THE DEVELOPER. IN OTHER WORDS, THE DEVELOPER WHO IS ONLY DEVELOPING THE INF RASTRUCTURE FACILITIES SINCE HE DOES NOT OPERATE AND MAINTAIN INFRASTRUCTURAL FA CILITIES, CANNOT BE EXPECTED TO FULFIL THE CONDITION AT SUB CLAUSE ( C) WHICH IS AN IMPOSSIBILITY AND THE REQUIREMENTS TO FULFIL THE SAID CONDITION SHALL AMO UNT TO ABSURDITY AND THEREFORE UNCALLED FOR. THEREFORE, WE FIND REQUIREM ENT OF HARMONIOUS READING OF SUB-CLAUSE (C) VIS--VIS OF CLAUSE (I) OF SECTIO N 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. 12. LET US REMIND OURSELVES THAT THE HON'BLE SUPREM E COURT IN THE CASE OF BAJAJ TEMPO LTD VS CIT, 196 ITR 188, HAS ORDAINED THAT TAXING S TATUTE GRANTING INCENTIVES FOR PROMOTING GROWTH AND DEVELOPMENT SHOULD BE LIBERALL Y CONSTRUED. 13. NOW, THE QUESTION ARISES AS TO WHETHER THE TER M CONTRACTOR IS NOT ESSENTIALLY CONTRADICTORY TO THE TERM DEVELOPER. 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 NAMELY, I F THE ASSESSEE DEVELOPS THE INFRASTRUCTURE FACILITY IF IT OPERATES THE INFRASTR UCTURE FACILITY AND IF IT MAINTAINS THE INFRASTRUCTURE FACILITY OR TO PUT IT IN SIMPLER TER MS, THE HARMONIOUS READING OF THE PROVISIONS IN ITS ENTIRETY WOULD LEAD TO THE CONCLU SION THAT THIS DEDUCTION IS AVAILABLE TO AN ENTERPRISE WHO DEVELOPS OR OPERATES AND ALSO M AINTAINS; OR DEVELOPS, MAINTAINS AND OPERATES THAT INFRASTRUCTURE FACILITY. THE PROV ISION FOR GIVING THE IMPUGNED INCENTIVES HAS BEEN EXAMINED, RE-EXAMINED, MODIFIED AND AMENDED AFTER GIVING CONSCIOUS AND DELIBERATE DISCUSSIONS BY THE CONCERN ED LAW MAKERS. TO OUR GREAT CHAGRIN EVEN AFTER THIS CONSCIOUS EXERCISE AN ENTIT Y WHO EXECUTES THE WORKS CONTRACT 16 ITA NOS. 148 & 481/HYD09 SOMDUTT BUILDERS-NCC (JV) ENTERED INTO BETWEEN LOCAL AUTHORITY/CENTRAL OR STA TE GOVERNMENT AND MAKES A DEVELOPMENT OF AN INFRASTRUCTURE HAS NOT BEEN EXCLU DED FROM THE SCOPE OF THIS PROVISION. AND RIGHTLY SO, BECAUSE WHAT INFRASTRUCT URE IS REQUIRED IN PUBLIC DOMAIN IS THE OUTLOOK/DUTY OF A LOCAL AUTHORITY OR OF A CENTR AL/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 INFR ASTRUCTURE DEVELOPMENT IS REQUIRED. SO, TO SAY, WHEN ANY ASSESSEE/ENTERPRISE AGREES UND ER 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 FULFILLED TO B E 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, FI NALLY, IT HAS BEEN RESOLVED THAT IF AN ENTERPRISE EVEN AFTER ENTERING INTO A CONTRACT WITH A LOCAL AUTHORITY OR THE GOVERNMENTS, MAY BE CENTRAL OR STATE, IN CASE IT CO NSTRUCTS THE INFRASTRUCTURE FACILITY, OPERATES IT AND ALSO MAINTAINS THE SAME, IT WOULD B E ELIGIBLE FOR THIS DEDUCTION. 14. NOW, LET US EXAMINE THE FACTS OF THE GIVEN CAS E. 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 PER 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 DETRIME NTAL TO THE GENERAL FEATURES OF THE DEPARTMENTAL PROPOSAL, LIKE ROAD LEVEL/BOTTOM OF DE CK LEVEL, MFL, SILL LEVEL, LINEAR WATER WAY, WIDTH OF THE BRIDGE ETC. RIGHT FROM THE DRAWINGS TO THE WORK OF CONSTRUCTION HAS BEEN DONE BY THIS ASSESSEE AND HAS BORNE THE COST ITSELF. THE COMPANY HAS CONSTRUCTED, DELIVERED AND MAINTAINED AND SECUR ITY IS ALSO MAINTAINED THEREAFTER. SO, THIS IS A CASE OF TRANSFER OF PROPERTY IN CHATT EL 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 ECONOMIC 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 CON CLUDED THAT ANY ASSESSEE WHO IS ENGAGED IN DEVELOPING THE INFRASTRUCTURE FACILITY A ND ALSO 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 ANOTHER 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 F OR DEVELOPMENT OF THE INFRASTRUCTURE PROJECTS, IS OBVIOUSLY A CONTRACTOR BUT DOES NOT DEROGATE THE ASSESSEE FROM BEING A DEVELOPER AS WELL. THE TERM CONTRAC TOR 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 AUT HORITY. SO, ENTERING INTO A LAWFUL AGREEMENT AND THEREBY BECOMING A CONTRACTOR SHOULD IN NO WAY BE A BAR TO THE ONE BEING A DEVELOPER. THE ASSESSEE HAS DEVELOPED INF RASTRUCTURE FACILITY AS PER THE AGREEMENT WITH MAHARASHTRA GOVERNMENT/APSEB, THEREF ORE, MERELY BECAUSE IN THE AGREEMENT FOR DEVELOPMENT OF INFRASTRUCTURE FACILIT Y THE ASSESSEE IS REFERRED TO AS A CONTRACTOR OR BECAUSE SOME BASIC SPECIFICATIONS ARE LAID DOWN, IT DOES NOT DETRACT 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 PR ESENT CASE ARE EXACTLY IDENTICAL TO THE FACTS OF THAT CASE RENDERED BY ITAT MUMBAI BENC H IN WHICH UNDER IDENTICAL FACTS 17 ITA NOS. 148 & 481/HYD09 SOMDUTT BUILDERS-NCC (JV) AND CIRCUMSTANCES, THE ASSESSEE HAS BEEN HELD TO BE ELIGIBLE FOR DEDUCTION U/S 80IA(4). SECTION 80IA(4)(I)(B) REQUIRES DEVELOPMENT OF INFRA STRUCTURE FACILITY AND TRANSFER THEREOF AS PER AGREEMENT AND IT CANNOT BE DISPUTED IN VIEW OF THE MATERIAL ON RECORD THAT THE ASSESSEE HAS TRANSFERRED INFRASTRUCTURE FA CILITY DEVELOPED BY IT BY HANDING OVER THE POSSESSION THEREOF TO THE CONCERNED AUTHORITY A S REQUIRED BY THE AGREEMENT. THE HANDING OVER OF THE POSSESSION OF DEVELOPED INFRAST RUCTURE 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 DE VELOPERS COSTS WHETHER IT BE BT OR BOT OR BOOT BECAUSE IN BOT AND BOOT THIS RE COUPMENT IS BY WAY OF COLLECTION OF TOLL THERE FROM WHEREAS IN BT IT IS BY WAY OF PER IODICAL PAYMENT BY THE GOVERNMENT/AUTHORITY. THE LAND INVOLVED IN INFRASTR UCTURE FACILITY/PROJECT ALWAYS BELONGS TO THE GOVERNMENT/LOCAL AUTHORITY ETC., WHE THER IT BE THE CASE OF BOT OR BOOT AND IT IS HANDED OVER BY THE GOVERNMENT/AUTH ORITY 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 AL SO AVAILABLE TO THIS ASSESSEE WHICH HAS UNDERTAKEN WORK OF A MERE DEVELOPER. RATHER, THE STATUTORY PROVISION AS CONTAINED IN SECTION 80IA WHICH PROVIDES FOR DEDUCTION OF INFRAS TRUCTURE FACILITY NO WAY PROVIDES THAT ENTIRE INFRASTRUCTURE FACILITY PROJECT HAS TO BE DEVELOPED BY ONE ENTERPRISE. THUS, AS PER SECTION 80IA THE ASSESSEE SHOULD DEVELOP THE INFRASTRUCTURE FACILITY AS PER THE AGREEMENT WITH THE CENTRAL/STATE GOVERNMENT/LOCAL A UTHORITY. ENTERING INTO A LAWFUL AGREEMENT AND THEREBY BECOMING SHOULD, IN NO WAY BE A BAR TO THE ONE BEING A DEVELOPER. IN THIS REGARD, AS WE HAVE ALREADY STA TED, 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 INFRASTR UCTURE FACILITY FOR THE PURPOSE OF SECTION 80IA(4)(I) . THE ASSESSEE IS NOT REQUIRED T O 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 IT R 323. THE NEWLY INSERTED EXPLANATION 2 TO SECTION 80IA VIDE FINANCE ACT, 200 7, DOES NOT APPLY TO A WORKS CONTRACT ENTERED INTO BY THE GOVERNMENT AND THE ENT ERPRISE. IT APPLIES TO A WORK CONTRACT ENTERED INTO BETWEEN THE ENTERPRISE AND OT HER PARTY THE SUB-CONTRACTOR. THE AMENDMENT AIMS AT DENYING DEDUCTION TO THE SUB CONT RACTOR WHO EXECUTES A WORK CONTRACT WITH THE ENTERPRISE AS HELD BY THE ITAT, J AIPUR 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 D ECISION OF ITAT, CHENNAI BENCH IN THE CASE OF ACIT VS INDWELL LIANINGS PVT. LTD, 313 ITR( AT) 118, HAS BEEN ENLARGED IN ITS FINDING BY THE ITAT, MUMBAI F BENCH IN ITS DECISI ON 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 DIFFEREN CE BETWEEN WORKS CONTRACTOR AND A DEVELOPER HAS BEEN EXAMINED IN DETAIL. THE MAIN THR UST OF THE DECISION IS THAT A DEVELOPER NEED NOT BE THE OWNER OF THE LAND ON WHIC H DEVELOPMENT IS MADE. ALTHOUGH THAT DECISION WAS RENDERED IN THE CONTEXT OF A DEVE LOPER OF BUILDINGS AND THE DEDUCTION 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 AGRE EMENT THAT IN INCENTIVE PROVISIONS, THE CONSTRUCTION SHOULD BE LIBERALLY GIVEN AS HELD BY THE HON'BLE SUPREME COURT RENDERED IN THE CASE OF BAJAJ TEMPO LTD VS CIT, 196 ITR 188. THUS, WHEN THE ASSESSEE MAKES INVESTMENT AND HIMSELF EXECUTES DEVELOPMENT W ORK AND CARRIES OUT CIVIL WORKS, HE IS ELIGIBLE FOR TAX BENEFIT U/S 80IA OF THE ACT. ACCORDINGLY, WITH THE FOREGOING 18 ITA NOS. 148 & 481/HYD09 SOMDUTT BUILDERS-NCC (JV) DISCUSSION, WE HOLD THAT THE ASSESSEE IS ENTITLED T O 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 LD. CIT(A) AND DO NOT FIND ANY VALID MERIT I N THE REVENUES APPEAL. ACCORDINGLY, THE APPEAL STANDS DISMISSED. 55. FURTHER, WE MAKE IT CLEAR THAT WHERE THE ASSESS EE HAS CARRIED OUT THE DEVELOPMENT OF INFRASTRUCTURE WORK IN CONSORTIUM OR JOINTLY WIT H ANY OTHER AGENCY AND NOT AS A SUB- CONTRACTOR, THEN ALSO THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S 80IA OF THE ACT. THE SAME PRINCIPLE IS APPLICABLE IN RESPECT OF WORK ALL OTTED BY GOVERNMENT CORPORATION TO THE ASSESSEE. BEING SO, WE ARE INCLINED TO PARTLY A LLOW THE GROUND RELATING TO CLAIMING OF DEDUCTION U/S. 80IA.OF THE ACT. 9.1 EVEN THE COORDINATE BENCH OF THIS TRIBUNAL IN T HE CASE OF M/S SHUSEE HI TECH (SUPRA), UNDER SIMILAR FACTS AND CIR CUMSTANCES OF THE CASE, ALLOWED THE ASSESSEES CLAIM OF DEDUCTION U/S 80IA OF THE ACT. 9.2 AS THE ISSUE UNDER CONSIDERATION IS MATERIALLY IDENTICAL TO THAT OF THE SAID CASE, RESPECTFULLY FOLLOWING THE SAME, WE CONFIRM THAT THE ASSESSEE IS NOT MERELY A CONTRACTOR BUT AN ENTITY W HICH HAS TAKEN NOT ONLY ENTERPRISE RISK BUT ALSO BUSINESS RISK CONSIDE RING THE FACT THAT IT HAS INVESTED HUGE FUNDS IN THE PROJECT, WHICH DEMON STRATES THAT IT HAS TAKEN ENTERPRISE AS WELL AS BUSINESS RISK. IT SHOWS THAT THE ASSESSEE HAS OWNED THE PROJECT TILL IT IS HANDED OVER TO THE GOVT., IT HAS TAKEN ALL THE RISK TILL THE PROJECT IS COMPLETE. IN OUR C ONSIDERED VIEW, AND ALSO RELYING ON THE COORDINATE BENCH VIEW, WE ADJUD ICATE THAT THE ASSESSEE IS A DEVELOPER AS ENUMERATED IN SECTION 80 IA(4) AND ELIGIBLE TO CLAIM DEDUCTION U/S 80IA. ACCORDINGLY, WE SET ASIDE THE ORDER OF THE CIT(A) AND DIRECT THE AO TO ALLOW THE ASSESSEES CLAIM OF DEDUCTION U/S 80IA OF THE ACT. 11. AS THE ISSUE IS MATERIALLY IDENTICAL IN AY 2006 -07 TO THAT OF AY 2005-06, THE ISSUE IN AY 2006-07 IS ALSO DECIDED IN FAVOUR OF THE ASSESSEE. 19 ITA NOS. 148 & 481/HYD09 SOMDUTT BUILDERS-NCC (JV) 12. IN THE RESULT, BOTH THE ASSESSEES APPEALS ARE ALLOWED. PRONOUNCED IN THE OPEN COURT ON 3 RD FEBRUARY, 2017. (P. MADHAVI DEVI) (S. RIFAUR RA HMAN) JUDICIAL MEMBER A CCOUNTANT MEMBER HYDERABAD, DATED: 3 RD FEBRUARY, 2017 KV COPY TO:- 1) SOMDUTT BUILDERS-NCC (JV), C/O SAMUEL NAGADESI, CA, 408, SRI RAMAKRISHNA TOWERS, BESIDES IMAGE HOS PITALS, AMEERPET, HYDERABAD 500 073. 2) ACIT, CIRCLE 6(1), 7 TH FLOOR, IT TOWERS, MASAB TANK, HYDERABAD 500 028. 3) CIT(A) IV, HYDERABAD. 4) CIT - III 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDE RABAD. 5) GUARD FILE