The Deputy Commissioner of Income Tax, Circle-4(1)(2), Ahmedabad V. Vijay M. Mistry Construction Pvt. Ltd., Ahmedabad

ITA 1481/AHD/2019

AI Insights

The case involves multiple appeals by Vijay M. Mistry Construction Pvt. Ltd. against the orders of the Income Tax Department, which denied deductions under Section 80IA(4) for various assessment years. The primary contention was whether the assessee should be classified as a 'developer' or a 'contractor' for the purposes of Section 80IA(4). The Tribunal examined the nature of the contracts, the responsibilities undertaken by the assessee, and the financial risks involved. It was found that the assessee undertook substantial activities akin to those of a developer, including financial risks and operational control, thus qualifying for the deduction. The Tribunal also addressed the issue of penalties under Section 271(1)(c), concluding that the assessee's claims were made in good faith based on a reasonable interpretation of the law.

• Counselvise Citation: [2022] 140 COUNSELVISE.COM (IT) 124708 (ITAT-AHMEDABAD)
• Duration Of Justice: 11 year(s) 1 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2022
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 09-11-2022
• Assessment Year: misc
• Appeal Filed On: 25-10-2011
• Other Referred Cases: National Thermal Power Co. Ltd. v. CIT, CIT Vs J.H. Golta, Mysore Minerals Ltd Vs CIT, Kerala State Industrial Development Corpn Ltd Vs CIT, Bajaj Tempo Ltd Vs CIT, Gujarat Industrial Development Corporation and Others Vs CIT, CIT Vs Strawboard Manufacturing Co Ltd, Radhe Developers Vs CIT, Patel Infrastructure (Rajkot ITAT), Katira Construction Ltd.(Rajkot ITAT), S.Sugam Construction P.Ltd.(And ITAT), Bhinmal Contractor Property and Land Developers P.Ltd.(Mumbai ITAT), Rohan & Rajdeep Infrastructure (Pune ITAT), ABG Heavy Industries Ltd.(BOM HC), Koya& Co. Construction P.Ltd., GVPR Engineers Ltd., B.T. Patil & Sons Belgaum Construction P.Ltd., CIT Vs. Skyline Advertising Pvt. Ltd., CIT Vs. Alloys Ltd., Empire Pumps P. Ltd. Vs. ACIT, CIT Vs. Shah Alloys Ltd.
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Retrospective amendment; Question of law; Competent authority; TDS
• Section: 271(1)(c); 143(3); 194C; 80IA; 43; 48; 13; 119; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER & Ms. MADHUMITA ROY, JUDICIAL MEMBER आयकर अपील सं./I. T. A. No. 2938/Ahd/201 1, 2939/Ahd /2011, 22 86/Ah d/2012, 268/Ahd/20 15, 269 /Ahd /2015, 5 02/Ahd/201 7, 11 45/Ah d/2019 & 14 68/Ah d/2019 ( नधा रण वष / A ss es sment Year : 2007-08, 20 08-09, 20 09-10, 20 10-11, 2011-12, 2 012-13, 2 013-14 & 2016 -17) A d dr e s s i n A. Y s . 2 00 7- 0 8 , 20 08- 09 & 2 00 9 - 1 0 V ij a y M . Mi s t ry C o n s . P. L t d. 50 1, S w ag at , C . G . R o a d, Ell is br id ge , A h me d a ba d – 38 00 0 6 ( G u j ar a t) A d dr e s s i n A. Y s . 2 01 0- 1 1 V ij a y M . Mi s t r y C o ns . P . Ltd . “ M ist r y H ou se ”, 9, Pr e ya s So c ie t y, O p p. G ul b ai Tek r a P o l ice Ch oki , A mba w a di, A h me d ab a d – 38 00 1 5 A d dr e s s i n A. Y s . 2 01 1- 1 2 V ij a y M . Mi s t ry C o n s . P. L t d. “ M ist r y H ou se ”, 9, Pr e ya s So c ie t y, O p p. G ul b ai Tek r a P o l ice Ch oki , A mba w a di, A h me d ab a d – बनाम/ Vs . & & & Asst. Commissioner of Income Tax C ir c l e– 8, B - 2 0 9, 2 n d Fl o o r, P a nj a r a P ol e , P r a t ya k s h ka r B h av a n, A m b a w ad i, A h m e da b ad Jo i nt C o mm i s s i o n er o f I n c o m e Ta x R a ng e - 8 , B - 2 09 , 2 n d Flo o r , P a nj a r a P ol e , P r a t ya k s h ka r B h av a n, A m b a w ad i, A h m e da b ad Dy. Commissioner of Income Tax (OSD) C ir c l e– 8, B - 2 0 9, 2 n d Fl o o r, P a nj a r a P ol e , P r a t ya k s h ka r B h av a n, A m b a w ad i, A h m e da b ad ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.– 2007-08 to 2013-14 & 2016-17 - 2 - 38 00 1 5 A d dr e s s i n A. Y s . 2 01 2- 1 3 , 20 13- 14 & 2 01 6 - 1 7 V ij a y M . Mi s t r y C o ns . P . Ltd . “ M ist r y H ou se ”, 9, Pr e ya s So c ie t y, O p p. G ul b ai Tek r a P o l ice Ch oki , A mba w a di, A h me d ab a d - 38 00 1 5 Dy. Commissioner of Income Tax C ir c l e– 4( 1) ( 2) , R o o m N o . B - 2 09, 2 n d Flo o r , P a nj a r a P ol e , P r a t ya k s h ka r B h av a n, A m b a w ad i, A h m e da b ad था यी ले खा सं . / जी आ इ आ र सं. /P A N / G I R N o . : A A A C V5 0 4 7 K (अपीलाथ /Appellant) . . ( यथ / Respondent) & आयकर अपील सं./I. T. A. No . 1481/Ahd/20 19 ( नधा रण वष / A ss es sment Year : 2012-13) Dy. Commissioner of Income Tax C ir cl e – 4( 1 )( 2) , R o o m N o. B - 2 09 , 2 n d Flo or , Pa nj ar a Po le, Pr at ya k s h k a r B h a va n , A m ba w a d i, A h me da ba d बनाम/ Vs . V ij ay M . Mi s t r y C on s . P. L t d. “ Mis t r y H ou s e ” , 9, Pr e ya s S o cie t y, O p p . G ul b a i Te k r a P ol ic e C h o ki , A m ba wa di, A h m ed aba d – 3 8 00 15 (अपीलाथ /Appellant) . . ( यथ / Respondent) Assessee by : Shri M. K. Patel, Advocate Revenue by : Shri Vijay Kumar Jaiswal, CIT.DR & Ms. Anam Benish, Sr. D.R. स ु नवाई क तार ख / D a t e o f H e a r i ng 10/11/2022, 28/11/2022 घोषणा क तार ख /D a t e o f P ro n o u nc e me n t 23/12/2022 ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.– 2007-08 to 2013-14 & 2016-17 - 3 - O R D E R PER Ms. MADHUMITA ROY - JM: Out of the instant eights appeals filed, seven filed by the assessee and one penalty appeal by the Revenue are directed against the orders dated 21.10.2011, 21.10.2011, 13.08.2012, 24.12.2014, 24.12.2014, 17.01.2017, 08.05.2019, 29.07.2019 & 30.07.2019 passed by the Ld. Commissioner of Income Tax (Appeals) – XIV / Ld. Commissioner of Income Tax (Appeals)- 8), Ahmedabad (in short ‘CIT(A)’ arising out of the orders dated 23.12.2019, 20.11.2010, 31.10.2011, 28.02.2013, 25.03.2014, 09.02.2015, 22.12.2015 & 12.12.2018 passed by the ACIT, Circle-8, Ahmedabad / Jt.CIT, Range-8, Ahmedabad / DCIT(OSD), Circle-8, Ahmedabad / DCIT, Circle-4(1)(2), Ahmedabad under section 143(3) of the Income Tax Act, 1961 (hereinafter referred as to ‘the Act’) for Assessment Year 2008-09, 2009-10, 2010-11, 2011-12, 2012-13, 2013-14 & penalty order dated 19.03.2018 by the Ld. ACIT Circle-4(1)(2), Ahmedabad, under Section 271(1)(c) of the Act for A.Y. 2012-13. 2. Since all these appeals are relating to identical issues that too in respect of the same assessee, the entire bunch of appeals are heard analogously and are being disposed of by this common order for the sake of convenience. 3. A perusal of the grounds of appeals, it would indicate that there are certain common grounds, which are as follows– ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.– 2007-08 to 2013-14 & 2016-17 - 4 - (i) Denial of claim of deduction under Section 80IA of the Act by treating the assessee as a ‘work contractor’ and not ‘developer’ by the Revenue. (ii) Additional ground has also been taken in respect of A.Ys. 2007- 08, 2008-09 & 2009-10 in the appeal preferred by the assessee in regard to rejection of deduction under Section 80IA(iv) of the Act. (iii) Ground has also taken by the assessee in regard to the claim of deduction in respect of repairs expenses for A.Y. 2009-10. (iv) Rejection of claim under Section 36(1)(va) i.e. Employees’ PF & Welfare Fund has been challenged by the assessee for A.Y. 2006- 07. (v) Quashing of penalty by the Ld. CIT(A) under Section 271(1)(c) of the Act has been challenged by the Department for A.Y. 2012- 13. 4. The appellant has further raised following additional ground for A.Ys. 2007-08, 2008-09 & 2009-10: “(1) That on facts, and in law, the learned Assessing Officer has grievously erred in holding that other income of Rs.42,62,716/- is not eligible for deduction u/s.80IA of the Act.” These other income as shown the assessee was denied by the Ld. AO without prejudice for computation of deduction under Section 80IA(iv) of the Act. Since, the issue is germane to the claim made out of the assessee’s business and facts are already on record, in view of the ratio laid down in the matter of National Thermal Power Co. Ltd. v. CIT, reported in (1998) 229 ITR 383 (SC), we admit this ground of appeal preferred by the appellant. ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.– 2007-08 to 2013-14 & 2016-17 - 5 - 5. Ground Nos. 1 & 2 relate to the issue as to whether the assessee is a developer or a contractor as the assessee merely executed the contract for the various sites awarded by the various entities as of the ultimate view of the Revenue and the claim made by the assessee under Section 80IA(4) of the Act has, therefore, been rejected. 6. Since the issues raised in all these appeals revolve around similar set of facts, for the convenience of adjudication, we would like to take up ITA No.2938/Ahd/2011 for the Asstt.Year 2007-08 and cull out facts, figures therefrom and the relevant orders under challenge. 7. The brief facts leading to this case is this that the assessee, a Private Limited Company, is engaged in the business of carrying out the activities of construction of Bridges on river, flyover, Railway Bridge etc. i.e. infrastructure projects entrusted by the State Government and the Ministry of Railways and others. The deduction under Section 80IA of the Act was claimed on eligible projects. The assessee filed the Income Tax Return regularly claiming relief under Section 80IA of the Act since 2002-2003 and such claim was accepted by the Department as all the conditions laid down by the Act was duly fulfilled by the assessee earlier finalizing assessment under Section 143(3) of the Act accepting such claim made under Section 80IA of the Act. 8. In the year under consideration, the assessee claimed deduction under Section 80IA(4) of the Act of Rs.1,59,58,473/-. Upon a perusal of the details ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.– 2007-08 to 2013-14 & 2016-17 - 6 - submitted by the assessee, the Ld. AO was of the view that the assessee’s construction business was performed on contract/sub-contract basis and therefore on 23.11.2009 show cause was issued as to why the claim should not be disallowed in view of the Explanation to Section 80IA of the Act as substituted by the Finance Act (No.2), 2009 w.e.f. 01.04.2000 on the premise that the assessee carries on a business which is in the nature of work contract. The assessee duly replied by substantiating the details in regard to the claim made under Section 80IA(4) of the Act. It was contented that the activities carried out by the assessee involve development of project, engagement of various agencies, raises own finances and invests its own funds in the construction of the project and therefore, entitled to the claim made by the assessee under Section 80IA/80IA(4) of the Act. In support of the contention, the assessee further relied upon the following judgments: 1. CIT Vs J.H. Golta 156ITR 323(SC) 2. Mysore Minerals Ltd Vs CIT 239 ITR 775(SC) 3. Kerala State Industrial Development Corpn Ltd Vs CIT 259 ITR 51(SC) 4. Bajaj Tempo Ltd Vs CIT 196 ITR 188(SC) 5. Gujarat Industrial Development Corporation and Others Vs CIT 227 ITR 414(SC) 6. CIT Vs Strawboard Manufacturing Co Ltd 177 ITR 431(SC) However, such plea taken by the assessee was not found to be acceptable and, thus, the assessment under Section 143(3) of the Act was completed on 23.12.2009 disallowing the claim made under Section 80IA of the Act, which was further confirmed by the First Appellate Authority. Hence, the instant appeal before us. ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.– 2007-08 to 2013-14 & 2016-17 - 7 - 9. The Ld. Counsel for the assessee reiterated submissions as were made before the Revenue authorities. He further submitted that the assessee has executed construction and development of infrastructure facilities by entering into agreement with State or Central Government, local authority, statutory body etc. These activities include Bridges on river, flyover, Railway Bridge etc. He also contended that the assessee has fulfilled all the conditions as mentioned in section 80IA(4)of the Act and in denying the claim of the assessee, the AO wrongly construed that assessee is a ‘contractor’ and not carried out any development activity. He further submitted that for the Asst.Year 2002-03 and 2006-07, the Ld.CIT(A) allowed the similar claim of the assessee. It was further contended that though the expression ‘works contract” has not been defined in the Act but various judicial pronouncements examined the issue and held that the term has wider meaning so as to state that if the activities carried out by the assessee involve development of project, engagement of various agencies, undertaking risk element, raises own finances and invests its own funds in the construction of the project, then the case of the assessee falls within the meaning of expression “developer”. A perusal of the tender documents clearly shows that the assessee has to arrange own finances, purchase own plant & machinery and purchase all materials at own cost, deploy qualified personnel for construction and development of infra projects. The authorities gave only general specifications for the project. However, for the specific drawings & designs recommended by the assessee, the same has to be approved by the competent authority and becomes part of the tender. Further that once the tender is awarded, the assessee has to pay earnest money, security deposits, performance guarantee by placing fixed ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.– 2007-08 to 2013-14 & 2016-17 - 8 - deposits with banks. The assessee is also liable for liquidated damages/penalty, free maintenance and repair during defect liability period. During the construction of project, the assessee has to make all the arrangements and is liable for procurement of water, electricity, all materials, skilled, semi-skilled staff, labourers, plant & machinery, equipments & tools, and also wellbeing of the staff/labourers. A perusal of the books of accounts reveals that the assessee has arranged own finance and fixed assets shown on plant & machinery, profit & loss account also demonstrates purchase and consumption of material. He submitted that the assessee is always burdened with financial risk to carry out the project work on own cost with the fixed rate specified in the tender. The payment would be made by the competent authority only after successful completion of the project, project certification etc. and that too after deduction of the retention money. The construction and development of infrastructure projects is highly technical and required special skill, adherence to quality etc. which lasts for two to five years depending on the type and size of the project. Moreso, the assessee is not compensated for increase in prices of materials, cost of labourers, overhead expenses etc. in various projects. These facts clearly demonstrate that the financial and other risk, responsibility, obligations is undertaken by the assessee in construction and development of the various infrastructure projects. Hence, as per the ratio of the jurisdictional High Court in the case of Radhe Developers, the assessee is not merely a works contractor, but is engaged in development of project as a whole, and therefore, entitled for claim of deduction under section 80IA(4) of the Act. The Ld. Counsel for the assessee further relied on the following decisions to support his case: ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.– 2007-08 to 2013-14 & 2016-17 - 9 - “1. Patel Infrastructure (Rajkot ITAT) ITA No.627/Ahd/2014, Dated 30/07/2020 2. Katira Construction Ltd.(Rajkot ITAT) [2020] 119 taxmann.com 489(Rjt) 3. S.Sugam Construction P.Ltd.(And ITAT) (2013) 30 taxmann.com 331 (Ahd) 4. Bhinmal Contractor Property and Land Developers P.Ltd.(Mumbai ITAT) [2018] 93 taxmann.com 296 (Mum) 5. Rohan & Rajdeep Infrastructure (Pune ITAT) [2013] 40 tax.com 136 (Pune) 6. ABG Heavy Industries Ltd.(BOM HC) [2010] 189 taxman.com 54 (Bom) 7. Koya& Co. Construction P.Ltd. [2012] 21 taxmann.com 35 (Hyd.ITAT) 8 . GVPR Engineers Ltd. [2012] 21 taxmann.com 25 (Hyd ITAT) 9. B.T. Patil & Sons Belgaum Construction P.Ltd. [2013] 34 taxmann.com 97 (Pune ITAT)” 10. Radhe Developers Vs.CIT, 341 ITR 403 (Guj) 10. On the other hand, the Ld. DR supported the orders of the Revenue authorities. He has also filed a detailed written submissions dated 10.11.2022, which we will analyse at the appropriate stage. 11. We have heard the rival submissions made by the respective parties; we have also perused the relevant materials including the orders passed by the authorities below. It appears from the record that the Ld. AO has denied deduction claimed under section 80IA(4) of the Act by holding that the ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.– 2007-08 to 2013-14 & 2016-17 - 10 - assessee acted as works contract in the project awarded by the statutory bodies. The Ld.CIT(A) while upholding finding of the AO on this issue, also taken into consideration the submissions of the assessee as made before us. 12. Before the First Appellate Authority, the assessee submitted as follows: "The learned Assistants Commissioner of Income Tax has erred in disallowing our claim u/s 80 IA of Rs. 1,59,58,4731- on the ground that the assessee is only contractor and not the developer, so the relief u/s 80IA is not available to contractor and the legislature is also amended retrospectively and thus the claim is not eligible. During the course of hearing held on 06/11/2009, learned ACIT, has specifically raised a query why relief claim u/s 80IA (4) should not be disallowed on the basis of explanation inserted by Finance Act (No. 2) 2009. The inserted explanation is as follows, " Explanation- For the removal of doubts, it is hereby declared that nothing contained in this section shall apply in relation to a business referred to in sub section (4) which is in nature of a works contract awarded by any person (including the Central or State Government) and executed by the undertaking or enterprise referred to in sub section (1) We are regularly filling Income Tax Returns with claiming relief u/s 80IA (4) since many years and claim is accepted by the department as all the condition laid down by the IT Act have been fulfilled. Till date, majority assessments were finalized u/s 143 (3) of the IT Act and assessee 's claim u/s 80IA (4) were accepted. Sub-section (1) speaks about the business of an enterprise referred to in subsection ' (4). In so far as the business of the eligible infrastructure facility is concerned, clause (i) of subsection (4) is applicable here. In order to be eligible for deduction the enterprise must fulfill all the conditions as laid down in sub-clauses (a), (b) and (c). As per the language of this clause, primarily it should be an enterprise carrying on the business of (i) developing, or (ii) maintaining and operating or (Hi) developing, maintaining and operating any infrastructure facility. So the enterprise should carry on the business of(i) or (ii) or (Hi) and fulfill all the conditions enshrined in sub-clauses (a) to (c) of this clause. The benefit of this section is available to an enterprise carrying on the business of(i) developing or (ii) maintaining and operating or (in) developing, maintaining and operating ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.– 2007-08 to 2013-14 & 2016-17 - 11 - any infrastructure facility. According to us there is a word "or" between (i) and (ii) which clearly suggests that the benefit of deduction is available even to a developer who does not maintain and operate the infrastructure facility. We submitted that our case is covered in (i) preceded by the word 'or' which is sufficient compliance since the developer simplicter of the infrastructure facility is also eligible for deduction. We further explained that the work done by us is of developing the infrastructure facility as without the construction, the functioning of the infrastructure facility is impossible. We further state that the infrastructure facility was one larger job, which could be accomplished by several small jobs. As the civil construction is an important segment of the big whole, in our opinion, any person executing even a part of the jobs concerning the infrastructure facility, shall be eligible for deduction. Whether the assessee can be called as "developer' within the meaning of section 80-IA(4). We submit that the work done by the assessee made it a developer entitled to deduction. Further, the "works contract" has not been defined in the context of section 80-IA and hence in the absence of assignment of any definition by the statute, its meaning should be understood in the common parlance. Accordingly a developer is a person who develops the facility and such person may or may not be a contractor. For an example, if a contract to construct a highway from Mumbai to Delhi is given to a person he is contractor as well as developer. As against that a person who has been given a contract for painting or beautification is merely a contractor but not a developer. According to us while developing a project, a developer has to make technological inputs, entrepreneurial inputs etc. Besides, there is financial involvement in terms of deployment of man and machine as well as bank guarantees. Further, we explain that the developer undertakes the risk and reward of the project and is accountable to the authorities for the development work carried out by him. In our opinion, we in the present case cannot be characterized anything other than a developer. The meaning of the words "contractor" as well as "developer", which have neither been defined in the Act nor in the General Clauses Act, we fall upon Oxford Advanced Learner's Dictionary to find out their meaning. According to this dictionary "developer" is a person or company that designs and creates new products, whereas "contractor" is a person or a company that has a contract to do work or provides services or goods to another. The New Shorter Oxford Dictionary defines the word "contractor" as "A person who enters into a contract or agreement. Now chiefly specifically a person or firm that undertakes work by contract, especially for building to specified plans". In the light of the meaning ascribed to these words by the dictionaries it is observed that the developer is a person who designs and creates new products. He is the one who conceives the project. He may execute the entire project himself or assign some parts of it to others. On the contrary the contractor is the one who is assigned a particular job to ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.– 2007-08 to 2013-14 & 2016-17 - 12 - be accomplished on the behalf of the developer. His duty is to translate such design into reality. There may, in certain circumstances, be overlapping in the work of developer and contractor, but the line of demarcation between the two is thick and unbreachable. When the per son acting as developer, who designs the project, also executes the construction work, he works in the capacity of contractor too. But when he assigns the job of construction to someone else, he remains the developer simpliciter, whereas the person to whom the job of construction is assigned, becomes the contractor. The role of developer is much larger than that of the contractor. It is no doubt true that in certain circumstances a developer may also do the work of a contractor but a mere contractor per se can never be called as a developer, who undertakes to do work according to the pre- decided plan. Further our contention and arguments are on reasoning that Circular No. 733 dt. 30.01.1996 clarified that after construction, the project was to be transferred to the Central Government and hence due to this reason the assessee cannot be denied deduction only on the ground that the projects in question were owned by the Central Government. He further held that it was not a condition precedent for allowing the deduction, that the project must be owned by an enterprise. The term 'contractor' did not contradict with the term 'developer' and thus we must held to be developer of an infrastructure facility and hence the income from such business of construction activity should be eligible for deduction u/s. 80- IA Without prejudice to the above, we state that, first of all the explanation has come from 01-04-2009 and as such when the return of income for the current year was filed, this explanation was not there and hence, not applicable to current year as the same is inserted by Finance Act (No. 2) 2009. Moreover, the Act is not amended. Thus it is not substantive amendment and the same is inserted with retrospective effect which is unduly oppressive and confiscatory and bad in law. The explanation is direct conflict with and contrary to the main provision of the section. Explanation cannot override or be derogatory to the main provisions of the Act as held by the Hon'ble Supreme Court in the case of S. Sundaram Pillai & Others reported at AIR 1985 (SC) 582. The assessee company has always considered such relief while quoting and finalization the tender, which is the main activity of the company. In fact, the competitive bidding was priced by taking into consideration the incentive available at that time based on prevailing legal position. Now, with retrospective amendment, the whole commercial arrangement of the assessee has become infructuous and resulted into loss of incentives, which would have been otherwise available to the assessee. " Under the circumstance, our legitimate claim u/s 80IA should be allowed fully. Further, we rely on ITAT Rajkot Bench decision in the case ofM/s Tarmat Bel (JV) KCL Rajkot vs. The Income Tax Office, Ward- 4, Rajkot, the ITAT has decided same issue in favour of assessee on same facts and ground. ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.– 2007-08 to 2013-14 & 2016-17 - 13 - 13. After considering the above submissions and the materials available before the First Appellate Authority, the following finding was made by the Ld. CIT(A) while rejecting the claim of the assessee: “In view of the above discussion, we can say that a developer has Allowing characteristic; (i) He conceives the project. That means the basic study about feasibility of the project, economic benefits arising out of the project, the evaluation of the funds required to construct the project etc. is done by him. (ii) The financial investment in the project is made by him. (iii) The financial risk is borne by him. That means in case due to some reason the project does not click or the expected financial returns are not received the loss or the profit in case the project works belongs to him. (iv) He may or may not execute the project himself. ' (v) He has the dominant control over the work that is being carried on and for changing any specification of the project he need not take anybody's permission. He has all the authority and control about the execution of the project. The 'contractor' is a person who undertakes to produce a given result for any establishment by employing building workers. He executes the job assigned to him as per the specified parameters and specifications. After the completion of the project, the principal checks whether the job has been carried out as per the desired specifications and then the payment is made to the contractor in accordance with the terms and conditions. Therefore, it can be seen from the above that there is a vast difference between the contractor and a developer. The most important difference is that a developer conceives the project whereas the contractor executes it. The other difference is that of financial risk. The developer bears the financial risk and makes the investment whereas the contractor does not make the investment and take any financial risk, he gets the payment for the work done by him and is not concerned about anything else. The developer can modify the project as per his1 desire whereas the contractor has to stick to the specifications given to him. After ascertaining the meaning of the words 'developer' as well as the 'contractor', it would now be appropriate to apply the conditions prescribed in section 80IA(4) to each project on which the deduction u/s. 80IA has been claimed, executed by him during the year and also test whether the appellant has acted as a ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.– 2007-08 to 2013-14 & 2016-17 - 14 - developer or contractor. The conditions prescribed in Section 80IA(4)(ia) is satisfied by the appellant company as the company is registered in India. The appellant has executed several projects during the year, but has claimed 80IA deduction only on six projects. Each project on which the deduction is claimed is discussed separately hereunder: (i) Construction of elevated road including approach roads connecting the existing road on Dadabari side and the road going Garh Palace by passing Kishorepura Gate on Chambal river reservoir near the barrage at Kota. The project was executed by the appellant for Urban Improvement Trust (UIT) Kota a body of government of Rajasthan. The appellant has claimed that it has developed the project as it was responsible for structural design of the bridge. The project was executed with their own manpower and machinery. The project was supervised by qualified engineers and was also financed from their own resources. The claim of the appellant is not acceptable. The project was designed as per the specification given by the UIT The design and drawing of the bridge was checked and approved by the consultant of the UIT. The claim that it was financed by the appellant is also not correct as the appellant did receive the payments from UIT from time to time according to the completion of the work. The payment conditions were clearly defined in the contract agreement. It was provided that the appellant would be paid money at various stages and in accordance with the progress of construction. Therefore, there was no financial risk involved as the appellant was getting the payment for the construction done by him from time to time. There was no risk of loosing the investment. The appellant was not the developer. He did not conceive the project. The project was conceived by UIT Kota who gave the specification of the project to the appellant. The appellant in turn executed the project as per the specifications. The appellant did not make investment in the project. Further claim of the appellant that it maintained the project for 3 years after completion also does not make him a developer of the project as the maintenance of the project was a part of the guarantee for quality of construction and was valid till the end of defect liability period. Therefore, from above analysis it is clear that this project does not make the appellant entitle for deduction u/s. 80IA as the appellant ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.– 2007-08 to 2013-14 & 2016-17 - 15 - has worked merely as a contractor and not as a developer. The developer in this case is UIT, Kota. (ii) Construction of bridge with approaches across river Damanganga connecting Nani - Daman and Moti - Daman in UT of Daman. The project involved a construction of bridge across the river. The project was earlier being done by some other contractor who abandoned the work without construction. It involved construction of ten number of well foundations, out of which one was constructed by the earlier contractor and remaining nine were done by the appellant. The appellant has claimed that the design of the bridge was complicated as it fell in tidal zone. The design of floating caisson launching pad and trusses etc. were done by the appellant. The appellant has, therefore, claimed that it has acted as a 'developer'. The claim of the appellant is not acceptable. The bridge has been constructed as per the drawing issued by the department. The appellant did not make any investment in construction of the project. The appellant did not take any financial risk for the project as the payments were received from Executive Engineer, N. H. Division, Bharuch from time to time in accordance with the progress of the work. The payment conditions were clearly defined in the contract agreement. It was provided that the appellant would be paid money at various stages and in accordance with the progress of construction. It is notable that the appellant was given the work after part of it was executed by some other contractor. The appellant was, therefore, clearly a 'contractor' who executed the work as per the specification. The claim that the appellant had given performance bank guarantee for the project is not relevant for deciding whether the appellant was a 'developer' or 'contractor’ as every contractor who is executing a project gives such guarantee about the quality of the construction of the project. Therefore, from above analysis it is clear that this project does not make the appellant entitle for deduction u/s. 80IA as the appellant has worked merely as a contractor and not as a developer. The appellant did not conceive, did not develop the project and did not make investment in it. The developer and the financial investor in this case is MORT&H i.e. the agency which gave the contract to the appellant. ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.– 2007-08 to 2013-14 & 2016-17 - 16 - (iii) Construction of Railway Bridge of Span 18 x 30.5 metre with pile foundation and PSC Girder across river Narmada between Gwarighat and Burgi Stations in connection with gauge conversion between Gondia - Jabalpur. The project was executed for railways and involved construction of railway bridge. The design and drawings for the construction were issued by the railways. The appellant has claimed that it has used highly technical equipment such as hydraulic rig and other technical works were also undertaken by him which included design of supporting process etc. The project was supervised by qualified engineer of the appellant and was also financed by it. The appellant has, therefore, claimed that it was not mere contractor but a developer. The claim of the appellant is not acceptable as it is clear from the details given by him that the railway provided all the specification and drawing. The project was not conceived by him. It was not a project which was developed by the appellant. In fact it was a project for gauge conversion of existing railway line and a bridge was to be constructed on river Narmada for the purpose. The claim of the appellant it used highly technical skills and technical persons for executing the project is not material as for executing a contract which is highly technical such as construction of a bridge or railway line over the river, the contractor will definitely need the technical skills and experience. The appellant did not make any investment in the project. The appellant did not take any financial risk as it was being paid from time to time in accordance the progress of the work. The payment conditions were clearly defined in the contract agreement. It was provided that the appellant would be paid money at various stages and in accordance with the progress of construction. The performance security in the form of fixed deposit of bank given by the appellant is also normal guarantee of the quality of project given by any contractor. Therefore, from above analysis it is clear that this project does not make the appellant entitle for deduction u/s. 80IA as the appellant has worked merely as a contractor and not as a developer. The appellant did not conceive, did not develop the project and did not make investment in it. The developer and the investor in this case is Indian Railways. (iv) Construction of 4 lane bridge across river Sabarmati for connecting 120 feet wide road from Vasna to Pirana. ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.– 2007-08 to 2013-14 & 2016-17 - 17 - The project was executed for Ahmedabad Municipal Corporation (AMC) and involved construction of bridge across river Sabarmati. The bridge was constructed with the design and drawing issued by AMC. The appellant has claimed that the project demanded great skill for constructing the foundations, structure and super structure under water flowing condition of the river Sabarmati. It was supervised by the qualified engineer of the company. The appellant has designed the supporting trusses. The appellant also appointed the consultants for testing of the file foundations. The appellant has also claimed that it has financed the project with their own resources. The appellant also maintained the project for 1 !/2 years for making good the defects which developed during the period. The appellant, therefore, claimed that it acted as a 'developer'. The claim of the appellant is not acceptable. The project was not conceived or developed by the appellant. The design and drawing were also issued to him by the AMC. The appellant did not make any investment in the project. There was no financial risk involved in constructing the project except the risk that is there for any contractor in executing any contract. The appellant received the payment from time to time as per the progress of construction of bridge. It was provided in the contract that the appellant would be paid money at various stages and in accordance with the progress of construction. There is no doubt that the construction involved highly technical skills and manpower but the fact remains that it was a contract for construction of bridge as per specifications given by the contractee. Since the contract for construction of bridge, the contractor should have the requisite technical skills. The claim of the appellant that it maintained the bridge for 1½ year after the completion is also not material as any contractor who executes some contract has to give this kind of guarantee for the quality of the contract executed by him. Therefore, from above analysis it is clear that this project does not make the appellant entitle for deduction u/s. 80IA as the appellant has worked merely as a contractor and not as a developer. The appellant did not conceive, did not develop the project and did not make investment in it. The developer and the investor in this case is Ahmedabad Municipal Corporation. (v) Providing Bridge No. 33 (6 x 9.15 PSC Slab), 34 (3 x 12.20 PSC Girder) and 35 (1 x 6.10 RCC box) including Earthwork Toe Wall, Retaining Wall, etc. between Stations Belapurto Thuwavi in ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.– 2007-08 to 2013-14 & 2016-17 - 18 - connection with Gauge conversion work of Pratapnagar -Chota Udaipur. The project was undertaken for western railway. It involved construction of bridge and related structures which were incidental to gauge conversion work of railway track between two stations. The drawing and design were issued by the railways. The appellant has claimed that it used its own machinery for piling work and other technical equipments were also used by it. The project was supervised by a qualified engineer. It financed the project with their own resources. The project was maintained by appellant for one year for making good the defects, if any, developed during the period. The appellant also deposited performance security in the form of bank guarantee from the start of the project till the end of defect liability period. The appellant has, therefore, claimed that it was a 'developer'. The claim of the appellant is not acceptable as it is clear from the details given by him that the railway provided all the specification and drawing. The project was not conceived and developed by him. In fact it was a project for gauge conversion of existing railway line and a bridge was to be constructed on the river. The project was designed and conceived by the railways. The claim of the appellant that it used highly technical skills and technical persons for executing the project is not material as for executing a contract which is highly technical such as construction of a bridge or 'railway line over the river, the contractor will definitely need the technical skills and experience. The appellant did not make any investment in the project. The appellant did not take any financial risk as it was being paid from time to time in accordance the progress of the work. It was provided in the contract agreement that the appellant would be paid money at various stages and in accordance with the progress of construction. The performance security in the form of fixed deposit of bank given by the appellant is also normal guarantee of the quality of project given by any contractor. Therefore, from above analysis it is clear that this project does not make the appellant entitle for deduction u/s. 80IA as the appellant has worked merely as a contractor and not as a developer, The project was not conceived, financed and developed by the appellant. The developer and investor in this case is Indian Railways. (vi) Construction of Road over Bridge at Railway Culvert No. 436 near Dindoli, Udhna at Surat. ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.– 2007-08 to 2013-14 & 2016-17 - 19 - The project was executed for Surat Municipal Corporation (SMC). It involved construction of two lane bridge across railway track. The drawings and design were issued by SMC. The officials of SMC and railway officials (for railway portion) supervised the work. The appellant has submitted that certain part of the project were designed by the appellant by taking the services of an expert. The project was supervised by qualified engineer of the appellant. The project was financed with their own resources. It was maintained by the appellant for one year after the construction for the purpose of making good the defects, if any, developed during the period at its own cost. The appellant also gave performance bank guarantee from the start of the project till the end of the defect liability period. The appellant has, therefore, claimed that it acted as a developer and not as mere contractor. The claim of the appellant is not acceptable. The project was not conceived and developed by the appellant. The design and drawing were also issued to him by the SMC and the railways. There was no financial risk involved in constructing the project except the risk that is there for any contractor in executing any contract. The appellant received the payment from time to time as per the progress of construction of bridge as per the terms of contract agreement. There is no doubt that the construction involved highly technical skills and manpower but the fact remains that it was a contract for construction of fly over / road over bridge as per specifications given by the contractee. Since the contract for construction of bridge, the contractor should have the requisite technical skills. The claim of the appellant that it maintained the bridge for 1 year after the completion is also not material as any contractor who executes some contract has to give this kind of guarantee for the quality of the contract executed by him. Therefore, from above analysis it is clear that this project does not make the appellant entitle for deduction u/s. 80IA as the appellant has worked merely as a contractor and not as a developer. The appellant did not conceive, finance and develop the project. The developer and the investor in this case is Surat Municipal Corporation. Therefore, it is clear from the individual analysis of all the projects for which the appellant has claimed deduction that the business done by him is in the nature of work contract awarded to him by other agencies. The appellant has merely acted as a work contractor. The claim of the appellant that the assessments from A.Y. 2002-03 to 2006-07 have been completed u/s. 143(3) and the deduction ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.– 2007-08 to 2013-14 & 2016-17 - 20 - u/s. 80IA have been allowed, the claim of the appellant is not acceptable as the principle of Res-judicata is not applicable to the Income Tax proceedings as the facts of each year are different. Moreover, an explanation has also been inserted u/s. 80IA which clarifies that it is not available in relation to a business which is in the nature of works contract. The explanatory notes for introducing the explanation to section 80IA also clearly mentions that 80IA benefits will be available to a person who makes the investment and himself executes the development works i.e. carries out the civil construction work. The explanatory notes clearly show the intention of the legislature in bringing the explanation in the Act. Therefore, the legal and factual position for the present year is different from earlier years. The appellant has also relied on the recent decision of ITAT, Rajkot Bench in the case of Tarmat Bel (JV), Rajkot vs. ITO in ITA No. 1111/RJT/2010. I have carefully perused the judgment and after analysing each contract undertaken by the appellant during the year it is noted that the facts of the case are different to the present cose and the judgment is respectfully distinguished. Reliance is further placed on the decision of larger bench of ITAT, Mumbai in the case of B.T. Patil & Sons, Belgaum Construction Pvt. Ltd. vs. ACIT. In that case, the Hon'bie Bench has discussed the similar issue related to the government contract which were in the nature of infrastructure projects. The Hon'bie Bench after discussing the difference between the developer and a contractor and the applicability of section 80IA(4) has laid down certain principles which are applicable to the present case also. Considering all the above facts and circumstances, the claim of deduction made by the appellant u/s. 801 A (4) of the Act cannot be allowed and the ground of appeal is, therefore, dismissed.” 14. At this juncture, therefore, deliberation is required on the main issue as to whether the assessee is entitled to the deduction claimed under section 80IA(4) of the Act even after the Explanation inserted after sub-section 13 of section 80IA of the Act by the Finance (No.2) Act 2009 w.e.f. 1-4-2000. The Explanation reads as follows: Explanation.—For the removal of doubts, it is hereby declared that nothing contained in this section shall apply in relation to a business referred to in sub- section (4) which is in the nature of a works contract awarded by any person ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.– 2007-08 to 2013-14 & 2016-17 - 21 - (including the Central or State Government) and executed by the undertaking or enterprise referred to in sub-section (1). 15. The above explanation has denied the benefit of deduction under section 80IA(4) of the Act to a person who executes a project which is in the nature of works contract. In that view of the matter, the first and foremost condition imposed upon an assessee is to establish that he worked not as ‘works contractor’, but as a ‘developer’. 16. On the other hand, a 'contractor' is a person who undertakes work on a contract basis. He does not assume risks and responsibilities like that of a developer. He merely carries out the work as has been instructed to him by the principal. Moreover, in case of such work, the contractor gets fixed amount of revenue for executing such work and is not entitled to any share of profit from revenue generated by the developer/land owner. In other words, the developer acts as a principal whereas the contractor acts as an agent in performing the functions as required by the developer. The developers, in true sense, are the persons who are carrying out the business of developing or operating and maintaining or developing, operating and maintaining the infrastructure facility whereas the contractors are those persons who merely execute part of these functions on behalf of developer and do not own any risks and responsibilities of the work. In such cases, the contractors may not be eligible for the deduction under section 80-IA of the Act as they are not developing any infrastructure facility but only providing assistance to the actual developers. ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.– 2007-08 to 2013-14 & 2016-17 - 22 - 17. We have also considered the submissions made by the Ld. DR. The Ld. DR has relied upon the history and legislative intent of insertion and different amendment of the provision of Section 80IA(iv) of the Act. “1.4 As regards the question of eligible business, from a plain reading of the subsection, it emerges that for the purposes of admissibility of claim of deduction of profits u/s 80IA, the eligible business has to be one of the following: - business of developing or - business of operating and maintaining or - business of developing, operating and maintaining 1.5 Before going into the issue on and, we need to analyse the provision of section 80 IA(4) of the Act.The section was first introduced by the Finance Act 1991 for providing deduction to industrial undertaking. The purpose of providing such deduction was modernisation and expansion of industrial undertaking. 1.6 However the provisions of this section was amended by Finance Act, 1995 for the reason that the legislature realised that the modernisation of industrial undertaking requires development of infrastructure facility. This fact can be verified from the memorandum (Circular No. 717, dated 14-8-1995) explaining the amendment in the section as reproduced below: “...34.1 34.2 Industrial modernisation requires a massive expansion of, and qualitative improvement is infrastructure. Our country is very deficient in infrastructure such as expressways, highways, airports, ports and rapid urban rail transport systems. Additional resources are needed to fulfil the requirements of the country within a reasonable time frame. In many countries the BOT (build-operate- transfer) or the BOOT (build-own-operate-transfer) concepts have been utilised for developing new infrastructure. Finance Act, 1995 34.3 Applying commercial principles in the operation of infrastructure facilities can provide both managerial and financial efficiency. In view of this, a ten-year concession including a five-year tax holiday has been allowed for any enterprise which develops, maintains and operates any new infrastructure facility such as roads, highways, expressways, bridges, airports, ports and rail systems or any other public facility of similar nature as may be notified by the Board on BOT or BOOT or similar other basis (where there is an ultimate transfer of the facility to a Government or public authority). The enterprise has to enter into an agreement with the Central or State Government or a local authority or any other statutory authority for this purpose. The period within which the infrastructure ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.– 2007-08 to 2013-14 & 2016-17 - 23 - facility has to be transferred needs to be stipulated in the agreement between the undertaking and the Government concerned. The enterprise has to be owned by a company registered in India or a consortium of such companies. The tax holiday will be in respect of income derived from the use of the infrastructure facilities developed by them. Finance Act, 1995 34.4 It will apply in respect of infrastructure facilities becom- ing operational on or after 1-4-1995...” 1.7 Thus, a clear declaration about the kind of profits eligible for deduction under Section 80IA(4)(i) comes from the aforementioned memorandum. The legislature leaves no scope of misconstruction as to the nature of income eligible for deduction. It is only such income as is derived from the use of the infrastructure facility so developed by the assessee that is eligible for the claim of deduction. 1.8 Another way of looking at the scheme of things is to acknowledge the undisputed fact that when contracts are awarded by way of tendering process to the lowest bidder, as is the case with the assessee, the element of profit is already embedded in the bid so quoted. This being the case, there is no question of allowing deduction on such contractual profits. What is eligible under the scheme is the profits derived by the actual developer of the facility (within the meaning of Section 80IA) and not a person or entity that merely executes the works contract even if it undertakes the construction of the facility, which in common parlance may be understood as development. 1.9 Thus, the essential requirement to be eligible for deduction under the Section 80IA(4) is that the assessee should have undertaken the work of development as an investment augmenting partner and should have derived profits from the use of the infrastructure facility so developed and not from the activity of construction per se. As would be elaborated subsequently in this submission, the assessee has merely participated as a contractor simplicitor rather than by way of investment. 2.1 It is clear that the Government envisaged nation-wide infrastructure development through the participation of the private sector. The investment required for these projects were huge and the gestation period of these projects were also quite high. The Government with a view to encourage the private participation in these developmental projects offered various business, models like BOOT, BOLT & BOT. BOOT means Build Own Operate & Transfer Under this scheme the private participant will get an opportunity to own and operate the facility for some time and during this period the developer can commercially exploit the facility so developed. After the specified period the facility would be transferred to the Government. BOLT means Build Own Lease & Transfer The Private participant will lease the facility to the Government and the Government will pay the lease charges for a specific ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.– 2007-08 to 2013-14 & 2016-17 - 24 - period and on the completion of the lease period the facility is transferred to the Government. BOT means Build Operate & Transfer Under this scheme the private participant will not be owning the facility. The private participant would be entitled to operate the facility for a specific period during which the revenues from the operation would be shared between the private participant and the Government or the Government will be paid lease charges by the private participant. On completion of the specified time the facility will be transferred to the Government. 2.2. It is, thus, assesses who undertake development of infrastructure on BOOT, BOLT or BOT model or a similar arrangement are eligible of the benefit of deduction u/s 80IA(4)(i). They make initial investment and the income derived from the use or commercial exploitation of the project so developed alone is eligible profit. 2.3 For instance, if we consider the case of development of highway, developer assessees derive income from the usage of the road in the form of revenues collected by way of toll charges and thus, not only collect the cost of investment but also profits thereon. It is such kinds of profit that are contemplated u/s 80IA(4)(i) for deduction. 2.4 It would be pertinent to mention that the Hon’ble High Court of Karnataka had the occasion to deal with the issue at hand in the case of CIT Vs. Skyline Advertising Pvt. Ltd. reported in [2014] 45 taxmann.com 532 (Kar). The court, after considering the issue at length concluded as under: “...20. ....the circular issued by the CBDT makes it clear that the income eligible for deduction has to be arisen from the use of facility, for example, collection of toll from road users. The said income has to be treated as income derived from the infrastructure facility ..” 2.5 As would be seen later, in the present case, the assessee did not make any initial investment since the project is funded by the contractee. Moreover, even the profits claimed for deduction are not the profits derived from use or commercial exploitation of the project/facility. 2.6 It is once again submitted that the claim of the assessee has to stand the test of eligibility on two counts – first, the business has to be eligible business and second, the profits have to be eligible profits. These two conditions have to be fulfilled together for the admissibility of the claim u/s 80IA(4)(i). ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.– 2007-08 to 2013-14 & 2016-17 - 25 - 2.7 An inquiry into the nature and scope of eligible business invariably necessitates an instructive reference to the Explanatory Notes to the Finance Act, 2001, the relevant part of which is reproduced hereinunder: “... 47. Tax holiday for infrastructure rationalised 47.1 ... 47.2 Investments in infrastructure have to compete with investment in other sectors to be attractive. There is, in particular, a need to encourage investment in the area of Surface transport, water supply, water treatment system, irrigation project, sanitation and sewerage system or solid waste management systems. With this in view, section 80 IAhas been amended to relax the existing two tier benefit to provide a ten year tax holiday..” 2.8 Thus, the only objective behind this scheme of deduction is to encourage private investment in development and augmentation of infrastructure facilities. However, the legislature came to realise how the benefit of deduction was being misused for purposes other than those envisaged by the enactment inasmuch as even activities in the nature of works contract also claimed and were allowed the benefit of deduction. To prohibit such misuse and unintended consequence, the legislature brought in a clarificatory amendment in the year 2007. An Explanation below Section 80 IA(13) was inserted with retrospective effect from 01.04.2000, 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..” 2.9 The legislature clarified the real legislative intent behind this scheme of deduction by way of Circular No.3/2008 dated 12/03/2008 being the Explanatory Notes to the Finance Act, 2007. The relevant portion of the Circular is reproduced hereunder for ready reference: “... 34.2 The tax benefit was introduced for the reason that industrial modernization requires a massive 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 participationby 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...” ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.– 2007-08 to 2013-14 & 2016-17 - 26 - 3.1 The legislature had, thus, always directed the benefit of the deduction only to those assessee who are in the business of development of infrastructure facility by way of investment and only to such profits as derived from the use of such infrastructure facility. 3.2 The explanatory memorandum is categorical in carving out a clear exclusion for businesses of works contract, even if by way of ordinary parlance, such enterprises may also perceive their business as that of development. The legislature has, thus, made a conscious distinction between a business of development as envisaged by the Section 80IA and a business of construction/works contract that might have some semblance of development in the ordinary parlance. 3.3 It, therefore, cannot be over-emphasised that for an enterprise to be eligible for admissibility of deduction u/s 80IA, a non-negotiable precondition is participation in the project as a developer assuming investment risk and entrepreneurial risk. In other words, investment risk is the litmus test for discerning the eligibility of a developer as envisaged in the scheme of Section 80IA vis-à-vis a developer understood in common parlance. The clarificatory amendment of 2009 3.4 The amendment of 2007 intended to plug the possibility of misuse by assesses who entered into a mere works contract with the undertaking or enterprise. However, the misuse of the deduction still continued by the undertaking or enterprise which were awarded the works contract directly by the contractee governments. 3.5 In order to prohibit this misuse of tax holiday, the legislature, by Finance Act 2009, substituted the erstwhile Explanation (2007) by an new Explanation with retrospective effect from 01.04.2000 to make it clear that even those undertakings/enterprises which are direct recipients of contract from the government, shall not entitled for the benefit of deduction for profits derived from such contract business. The clarificatory Explanation is as under: “..For the removal of doubts, it is hereby declared that nothing contained in this section shall apply in relation to a business referred to in sub-section (4) which is in the nature of a works contract awarded by any person (including the Central or State Government) and executed by the undertaking or enterprise referred to in sub-section (1)..” 3.6 Restricting the benefit of deduction only to the class of developers bearing investment and entrepreneurial risk is, therefore, a conscious legislative action and is not open to slightest of inferential latitude. 3.7 The clarificatory amendments represent a fine example of legislative discretion and parliamentary discernment and leave no scope for any attempt at interpretation, liberal or otherwise. It is a settled doctrine of jurisprudence that scope of interpretation does not exist where the language of the law is clear and words are unambiguous. 3.8 The A.R. of the assessee has argued that BOLT, BOOT or BOT or similar manner which were the basis of investment augmentation is no more a good law as the only ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.– 2007-08 to 2013-14 & 2016-17 - 27 - developer are also entitled to claim deduction u/s. 80IA(4) and it is not necessary to operate or maintain the infrastructure facility for claiming deduction in view of amendment made in Finance Act, 2001 w.e.f. 01.04.2002. In this regard, it is submitted that though the condition was relaxed vide amendment made in 2001 but the condition that it has to be built from the fund of the assessee as per BOT or BOOT or similar arrangement has not been relaxed. Only the Enterprise which has built the infrastructure project on BOT or BOOT or similar arrangement has been provided on exit route by way of this amendment and it is not necessary for them to operate and maintain theinfrastructure facility developed by them. Therefore, simultaneously amendment have been made in sub clause (b) of clause (i) of section 80IA(4) and the transferee Enterprise were allowed to claim the deduction for unexpired period during which the transferor Enterprise would have been entitled to claim the deduction. Therefore, the infrastructure facility has to be developed on BOT, BOOT or BOLT or similar arrangement where the investee Enterprise bears the financial and investment risks. The nature of contracts entered by the assessee company does not reflect that it has brought investment and bear the financial and investment risk. It only bears the contractual risks which is true for any construction contracts. The above legislative intent has been clarified many times by Parliament as per clarificatory amendments made in 2007 and 2009. Against this backdrop of the legislative scheme of Section 80IA(4), the facts of the case are now proposed to be examined in the ensuring passages. 4.1 The assessee is a private limited company engaged in the work of construction of infrastructure projects in the nature of roads, bridges, water treatment plants, canals, siphon work (irrigation projects), sewage treatment plant etc. by entering into contract. with different Government entities. 4.2 In assessment proceedings for the different AYs, Ld. Assessing Officer observed that the assessee was ineligible for deduction since the assessee had worked as amerecontractor and not developer within the meaning of Section 80IA(4) in light of the following findings: i. The nature of work is contract execution and not development ii. TDS has been made u/s 194C which shows that the contracted as well as the contractor have themselves treated the relationship as a contractual arrangement. iii. Various government contractees have issued tenders for works contract to the lowest bidder. iv. Ownership risks never vested in the assessee. ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.– 2007-08 to 2013-14 & 2016-17 - 28 - v. Assessee was required to complete the contract as per the specifications prescribed by the contractee entities. vi. For admissibility of the claim, income should have been derived from developing, operating & maintaining or developing, maintaining & operating the projects. Copies of works contracts how that the assessee was not involved in such stages as a developer. vii. The assessee company has no stake in the financial viability of any of the projects and payments are made to it by the contractee on attainment of specific stages of progress on periodic manner. viii. The activity of contractual civil construction does not fall in the purview of the phrase ‘eligible business’. 4.3 The Ld. AO, therefore, held that neither the assessee company was into eligible business within the meaning of Section 80IA(4)nor the income earned by the assessee fell within the ambit of eligible income. 18. In view of the above, in order to ascertain whether a civil construction work is assigned on development basis or contract basis only on the appellant, the terms and conditions of the agreement needs to be considered. Only on the basis of the terms and conditions and the scope, ambit and nature of the contract assigned to the appellant it could be ascertained whether it is a "works contract" or a "development contract”. The right and obligations of the assessee in the projects implemented by the assessee on behalf of the Government entities is also required to be examined. Our this approach has also been strengthened by the observation made by the Rajkot Bench in the matter of Patel Infrastructure Pvt. Ltd. Vs. DCIT, ITA No.627/Ahd/2014, Asst.Year 2010-11. We, therefore proceed to analyse the facts of the present case to find out whether the appellant acted as a “Developer or “Works Contractor”. ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.– 2007-08 to 2013-14 & 2016-17 - 29 - 19. We have carefully considered the different clauses prescribed in the tender notice in respect of the project of construction of Bridge with Approaches Across Damanganga River connecting Nani-Daman & Moti- Daman, U.T. of Daman from National Highway Division, Bharuch-A.Y. 2007-08. 19.1 It appears from Page Nos. 156 to 337 of Paper Book-II that the Contractor must have necessary experience, facilities, ability, financial resources, specified turnover, specific experience in construction of Bridges, Qualified Key personnel, plant & machinery & equipments etc. to perform the work. 19.2 The general specifications are given by the respective Authorities. However, the specific drawings & designs are recommended by the Contractor which shall be approved by the Competent Authority and shall form part of the accepted Tender. The same is evident from Page No. 229 of Paper Book-II. clause 18 to 18.5 of tender. 19.3 The assessee has appointed Shah Associates, an experienced designer in the field for designing this project. The relevant submission and supporting papers are also evident from Page Nos. 75 to 104 of Paper Book-I. 19.4 The assessee has to arrange the necessary requirement of Water, Electricity Connection, Cement and other required qualitative materials, labour, supervision, erection, maintenance, insurance, at its own cost. It is ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.– 2007-08 to 2013-14 & 2016-17 - 30 - evident from Clause 3 of Tender ( Bill of Quantities) at Page No. 176 of Paper Book-II. 19.5 The Audited Accounts, P & L account, appearing from Page 11 of Paper Book-I has been perused. Total materials consumed during the year are of Rs. 25,37,59,925/- as per schedule of P & L account at Page No. 16 of Paper Book-I, and creditors for goods are of Rs.7,64,24,928/- as per Balance Sheet at Page 14 of Paper Book-I filed before us. 19.6 It appears from Clause 2.1 of the Tender at Page No. 310 of Paper Book-II, that the various materials and mix, load testing of Foundation, from (Page No. 312 of Paper Book-II & from clause 2.3 of Tender) Fusion Bonded Epoxy Coating to Reinforcing Bars are also got to be tested by the assessee at its own cost from time to time at Government Approved Laboratories. 19.7 We have further gathered from Page No.10 of Paper Book-I that the assessee has to arrange own finance by raising adequate capital, reserves & surplus, secured & unsecured loans. From the financial statement, we find that the appellant has raised total amount of Rs. 13,23,63,317/-. 19.8 It appears from Schedule of fixed assets on Page No.13 of Paper Book-I that the assessee has to use and invest heavily in purchasing own P & M, Equipments etc in order to be eligible to bid for tender and carry out the development of various projects. The gross block of assets as on 31-03-2007 are to the tune of Rs.10,17,55,560/-. ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.– 2007-08 to 2013-14 & 2016-17 - 31 - 19.9 It further appears from Clause - 9 of the Tender document available at Page No. 218 & 229 of Paper Book-II that the assessee has to employ own team of experienced and qualified Project Manager, Site Engineer, Plant Engineer, Quality Surveyor, Soil & Material Engineer, Survey Engineer. 19.10 It also appears from Clause No. 34 of the tender document available at Page No. 215 of Paper Book-II that the appellant has to pay Performance Security Deposit at 1 to 2% of contract value. 19.11 We find from Clause No. 52 of the said document at Page No. 234 of Paper Book-II that Security Deposits are to be valid for 28 days from the date of expiry of the Defect Liability Period. 19.12 The tender clause further stipulates that the Retention money shall be deducted @ 10% from current bills and shall be released 50% on completion of the Works and remaining 50% after the end of the Defect liability period. The same is found at Clause 48 of the Tender at Page No. 233 of Paper Book- II filed before us. Clause 48 reads as follows: “48. Retention 48.1. The Employer shall retain from each payment dec to the Contractor the proportion stated in the Contract Data until Completion of the whole of the Works. 48.2. On Completion of the whole of the Works half (he total amount retained is repaid to (he Contractor and half when the Defects Liability Period has passed and the Engineer has certified that all Defects notified by the Engineer to the Contractor before the end of this period have been corrected. 48.3. On completion of the whole works, the contractor may substitute retention money with an "on demand" Bank guarantee. ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.– 2007-08 to 2013-14 & 2016-17 - 32 - 49. Liquidated Damages 49.1 The Contractor shall pay liquidated damages to the Employer at the rate per day staled in the Contract Data for each day that the Completion Date is later than the Intended Completion Dale (for the whole of the works or the milestone as staled in the contract data). The total amount of liquidated damages shall not exceed the amount defined in the Contract Data. The Employer may deduct liquidated damages from payments due to the Contractor. Payment of liquidated damages does not affect the Contractor's liabilities.” 19.13 If the contractor fails to complete contract by the stipulated date, he shall pay penalty of 1/2000 th of the contract value per day from the date of delaying said work up to the date of completion and handing over to contract upto maximum of 10% of contract price. The above condition is mentioned at clause 28 of the Tender document available at Page No. 288 of Paper Book-II. 19.14 It is evident from Clause 4 of the Tender document at Page No. 239 of Paper Book-II that 1 year free maintenance and guarantee period from the certified date of completion of work has been fixed. 19.15 Advance payment/ mobilisation advance will be given only against the provision by the Contractor of an unconditional Bank Guarantee. Same is evident from Clause 51 of the Tender at Page No. 234 and Clause 32 of Tender document at page 244 of Paper Book-II. 19.16 The Contractor shall submit monthly statements of estimated value of work completed, and it will be subject to final Certification, determination and approval by the Engineer and that too after deductions like advance payments, retention, other recoveries, taxes etc. The same is evident from Clause 42 & 43 of the Tender at Page Nos. 232 of Paper Book-II. ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.– 2007-08 to 2013-14 & 2016-17 - 33 - 19.17 It also appears from Clause F-1 of the Tender document at page 236 of Paper Book-II that the assessee has to arrange for labour and is also responsible for their payments, housing, feeding and transport and for safety of all concerned. It also appears from Clause F-2 of the said document at Page No. 236 of Paper Book-II that the assessee has to take Workmen compensation insurance & is liable to pay Compensation and abide by all Labour Laws. 19.18 Contractor will be responsible for all activities on the Site. Same is evident from Clause 19 of the Tender document available at Page No. 230 of Paper Book-II. 19.19 Clause 59 to 61 at Page 235 of Paper Book-II speaks that if the assessee defaults in work or violates any terms of contract, it shall be liable to penalty in terms of lien of Government over the plant, machinery, equipments, etc., forfeiture of security deposit etc. 20. Name the different projects entrusted on the appellant : Sr. No. Particulars of Infrastructure facility developed 2007-08 i. Construction of elevated road including approach roads connecting the existing road on Dadabari side and the road going Garh Palace bypassing Kishorepura Gate on Chambal river reservoir near the barrage at Kota. 1739200 ii Construction of bridge with approaches across river Damanganga connecting Nani - Daman and Moti - Daman in UT of Daman. 75608421 ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.– 2007-08 to 2013-14 & 2016-17 - 34 - iii. Construction of Railway Bridge of Span 18 x 30.5 metre with pile foundation and PSC Girder across river Narmada between Gwarighat and Bur gi Stations in connection with gauge conversion between Gondia - Jabalpur. 176540701 iv Construction of 4 lane bridge across river Sabarmati for connecting 120 feet wide road from Vasna to Pirana. 88928443 V Providing Bridge No. 33 (6 x 9.15 PSC Slab), 34 (3 x 12.20 PSC Girder) and 35 (1 x 6.10RCC box) including Earthwork Toe Wall, Retaining Wall, etc. between Stations Belapur to Thuwavi in connection with Gauge conversion work of Pratapnagar - Chota Udaipur. 43260383 vi Construction of Road over Bridge at Railway Culvert No. 436 near Dindoli, Udhna at Surat. 5485870 Total 391563018 From the records available before us we gather that the terms and conditions of the tender documents in respect of the above projects are mostly identical. 21. As to whether the assessee can be termed as “developer” or a “contractor” as contended by the Revenue in its written submissions, we find, in fact, it only attempts to give a general meaning of the term “contractor” and “developer”. In the cases in hand, we find that in terms of tender documents, audited accounts and facts on record suggest that the assessee has fully undertaken the work of development of various infrastructure projects as a whole by undertaking the risk & responsibility, arranged own finances, ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.– 2007-08 to 2013-14 & 2016-17 - 35 - materials, personnel, labour, machinery, other equipments etc. and thereby fulfilled the test of being a “developer” as per the principles laid down by Hon’ble Gujarat High Court in the case of Radhe Developers, 341 ITR 403 (Guj). It is imperative upon us to take note of the relevant portion of the above judgments for better understanding of the issue on hand. “34. We have reproduced relevant terms of development agreements in both the sets of cases. It can be seen from the terms and conditions that the assessee had taken full responsibilities for execution of the development projects. Under the agreements, the assessee had full authority to develop the land as per his discretion. The assessee could engage professional help for designing and architectural work. Assessee would enroll members and collect charges. Profit or loss which may result from execution of the project belonged entirely to the assessee. It can thus be seen that the assessee had developed the housing project. The fact that the assessee may not have owned the land would be of no consequence. 35. With respect to the question whether the assessee had acquired the ownership of the land for the purposes of the Income Tax Act and, in particular, Section 80IB(10) of the Act and to examine the effect of Explanation to Section 80IB(10) introduced with retrospective effect from 1.4.2001, since several aspects overlap, it would be convenient to discuss the same together. 36. We have noted at some length, the relevant terms and conditions of the development agreements between the assessees and the land owners in case of Radhe Developers. We also noted the terms of the agreement of sale entered into between the parties. Such conditions would immediately reveal that the owner of the land had received part of sale consideration. In lieu thereof he had granted development permission to the assessee. He had also parted with the possession of the land. The development of the land was to be done entirely by the assessee by constructing residential units thereon as per the plans approved by the local authority. It was specified that the assessee would bring in technical knowledge and skill required for execution of such project. The assessee had to pay the fees to the Architects and Engineers. Additionally, assessee was also authorized to appoint any other Architect or Engineer, legal adviser and other professionals. He would appoint Sub- contractor or labour contractor for execution of the work. The assessee was authorized to admit the persons willing to join the scheme. The assessee was authorised to receive the contributions and other deposits and also raise demands from the members for dues and execute such demands through legal procedure. In case, for some reason, the member already admitted is deleted, the assessee would have the full right to include new member in place of outgoing member. He had to make necessary financial arrangements for which purpose he could raise funds from the financial institutions, banks etc. The land owners agreed to give necessary signatures, agreements, and even power of attorney to facilitate the work of the developer. In short, the assessee had undertaken the entire task of development, construction and sale of the housing units to be located on the land belonging ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.– 2007-08 to 2013-14 & 2016-17 - 36 - to the original land owners. It was also agreed between the parties that the assessee would be entitled to use the full FSI as per the existing rules and regulations. However, in future, rules be amended and additional FSI be available, the assessee would have the full right to use the same also. The sale proceeds of the units allotted by the assessee in favour of the members enrolled would be appropriated towards the land price. Eventually after paying off the land owner and the erstwhile proposed purchasers, the surplus amount would remain with the assessee. Such terms and conditions under which the assessee undertook the development project and took over the possession of the land from the original owner, leaves little doubt in our mind that the assessee had total and complete control over the land in question. The assessee could put the land to use as agreed between the parties. The assessee had full authority and also responsibility to develop the housing project by not only putting up the construction but by carrying out various other activities including enrolling members, accepting members, carrying out modifications engaging professional agencies and so on. Most significantly, the risk element was entirely that of the assessee. The land owner agreed to accept only a fixed price for the land in question. The assessee agreed to pay off the land owner first before appropriating any part of the sale consideration of the housing units for his benefit. In short, assessee took the full risk of executing the housing project and thereby making profit or loss as the case may be. The assessee invested its own funds in the cost of construction and engagement of several agencies. 22. The provisions of section 80IA(4) of the Act provides that deduction would be available to any enterprise which carries on the business of – (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility which fulfills the conditions prescribed therein. 23. As per the Explanation, even a road and bridge is an infrastructure facility for the purposes of section 80-IA(4). The primary condition is that the enterprise must carry on the work of "developing" an infrastructure facility. As mentioned above, Explanation under sub-section (13) of section 80- IA clarifies that this section will not apply to any business which is in the nature of a "works contract". In other words, the essence of this section is ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.– 2007-08 to 2013-14 & 2016-17 - 37 - that, the benefit of section 80-IA(4) would be available to a developer and not to a contractor simplicitor. In the present case the lower authorities have denied the benefit of section 80-IA(4) to the appellant-company on the assumption that the appellant-company is engaged in executing merely a work contract and it is not carrying on the business of developing an infrastructure facility. But we find that the assessee has undertaken entirely and exclusively the projects awarded by the Government authorities, as it is evident from the records as explained and already narrated hereinabove and therefore, there is hardly any basis for assuming that it is merely a contractor executing a works contract. The difference between a "developer" and a "contractor" has to be properly analyzed and understood. This issue has come up before the Hon'ble ITAT, Amritsar Bench in the case of M/s. TRG Industries P. Ltd. in ITA Nos. 433 etc./Asr/2009. The Tribunal after relying various case laws has laid down the following parameters when to treat an assessee as a developer or contractor. (i) The assessee does not have to develop the entire infrastructure facility to qualify for deduction u/s.80-IA(4) and if only a part of the infrastructure facility is developed, the assessee would be eligible for deduction. (ii) The three requirements of section 80-IA(4) viz. development, operation and maintenance are not cumulative. Thus, an enterprise which only develops facility would also be entitled to the benefit of section 80-IA(4). (iii) Merely because the assessee is referred to as a contractor in the agreement, it would not debar it from claiming deduction. ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.– 2007-08 to 2013-14 & 2016-17 - 38 - (iv) Direct agreement between the transferee-assessee and the specified authority is not a mandatory requirement u/s.80-IA(4) of the I.T. Act. Needless to mention that the assessee qualified all the criterion fixed by the Amritsar Bench. 24. We have already dealt with relevant clauses of the tender documents stipulating various conditions viz. financial involvements, risks, obligations and responsibilities of the assessee in developing, operating and maintaining of infrastructure facilities, which clearly make the case of the assessee within the scope and ambit of section 80IA(4) of the Act so as to claim the impugned deduction. 25. The terms and conditions of tender documents / agreements / work order and comprehensive view of the activities undertaken by the assessee as discussed above clearly demonstrates that the assessee-company has undertaken substantial activities in respect of various projects awarded by various statutory bodies, which makes the assessee to qualify as a developer of Infra facility and to make claim necessary benefits under section 80IA(4) of the Act. 26. So far as case law relied on by the Revenue on the decision of ITAT, Hyderabad Bench in the case of M/s. NEC NCC Maytas-JV in ITA No.496/Hyd/2018 is concerned, the same is distinguishable on facts. In that case the assessee has not executed entire project but only a part of the project was undertaken, whereas in the instant case, the assessee has executed the ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.– 2007-08 to 2013-14 & 2016-17 - 39 - entire project. In that case, the assessee has not established entrepreneurial risk or financial involvement of assessee before the lower authorities and the assessee was only a JV with no assets and no wherewithal to execute the projects. Payments were released on multiple occasions from time to time i.e. fixed sum on monthly basis and also received advance payment against supply of goods at site. While in the case of present assessee, entire project has been executed by the assessee; there are risks, responsibilities and obligations till the project completion; payment would be released only after completion of the project, that too, after due certification from the competent authority of the local authority. Ten percent of mobilization advance could be received only after furnishing bank guarantees in the form of fixed deposits. In the present case, the assessee itself had to procure materials for the projects and make payments. It has also to deploy men and machineries. Therefore, both the cases, i.e. case of the assessee before us and the assessee before the ITAT, Hyderabad (referred above) are clearly distinguishable on all respects. 27. However, this particular aspect has already been considered in the matter of CIT vs. ABG Heavy Industries Ltd. [2010] 189 Taxman 54 (Bombay). The paragraph 22 of the said judgment suggests that in the particular facts and circumstances of the case in hand, the assessee is entitled to relief claimed under Section 80IA(4) of the Act. The first and foremost condition imposed by the statutory provision is that the enterprise must start operating and maintaining the infrastructure facility on or after 01.04.1995. Thereafter, time-to-time the provision though has been amended under this particular condition enunciated therein, that the assessee has to be granted ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.– 2007-08 to 2013-14 & 2016-17 - 40 - conditions stipulated, fulfilling of which the assessee said to be a developer and entitled to the claim under Section 80IA of the Act. The view has been narrated in the said judgment in the following manner: “22. Another submission which was urged on behalf of the revenue is that under clause (iii) of sub-section (4A) of section 80-IA, one of the conditions imposed was that the enterprise must start operating and maintaining the infrastructure facility on or after 1-4- 1995. The same requirement is embodied in sub-clause (c) of clause (i) of sub-section (4) of the amended provisions of section 80-IA. On this basis, it was urged that since the assessee was not operating and maintaining the facility, he did not fulfil the condition. This submission is fallacious both in fact and in law. As a matter of fact, the Tribunal has entered a finding that the assessee was operating the facility and this finding has been confirmed earlier in this judgment. That the assessee was maintaining the facility is not in dispute. The facility was commenced after 1-4-1995. 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 1-4-1995. After section 80-IA was amended by the Finance Act of 2001, the section applies to an enterprise carrying on the business of (i) developing; 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 enterprise by a Company registered in India or by a consortium; (ii) An agreement with the Central or State Government, local authority or statutory body; (iii) The start of operation and maintenance of the infrastructure facility on or after 1-4-1995. The requirement that the operation and maintenance of the infrastructure facility should commence after 1-4-1995 has to be harmoniously construed with the main provision under which a deduction is available to an assessee who develops; or operates and maintains; or develops, operates and maintains an infrastructure facility. Unless both the provisions are harmoniously construed, the object and intent underlying the amendment of the provision by the Finance Act of 2001 would be defeated. A harmonious reading of the provision in its entirely would lead to the conclusion that the deduction is available to an enterprise which (i) develops; or (ii) operates and maintains; or (iii) develops, maintains and operates that infrastructure facility. However, the commencement of the operation and maintenance of the infrastructure facility should be after 1-4-1995. In the present case, the assessee clearly fulfilled this condition. 23. In the view which we have taken, all the assessment years in question to which this batch of appeals relates would be governed by the same principle. The subsequent amendment of section 80-IA(4A) of the Act to clarify that the provision would apply to an enterprise engaged in (i) developing; or (a) operating and maintaining; or (iii) developing, operating and maintaining an infrastructure facility was reflective of a position which was always construed to hold the field. Before the amendment that was brought about by Parliament by the Finance Act of 2001, we have already noted that the consistent line of circulars of the Board postulated the same position. The amendment made by Parliament to section 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.” ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.– 2007-08 to 2013-14 & 2016-17 - 41 - 28. It is contended by Revenue that the profit element is already embedded in the tender price quoted by the assessee. Moreso, there is no financial risk involved as the assessee was getting the payment for the construction done by him from time to time as one of the major remarks and/or observations made by the CIT(A) in negating the claim made by assessee. We have carefully considered this particular aspect of the matter. If the contention of the Revenue is encouraged then possibly none of the developers will be entitled to the claim made under Section 80IA(4) of the Act. Our this view has been strengthened by the observation and the ratio laid down by the Hon’ble Delhi High Court in the case of CIT vs. VRM India Ltd., reported in [2015] 57 taxmann.com 325 (Delhi). While dealing with this particular aspect of the matter the Hon’ble Court has been pleased to observe as follows: “15. Since the assessee developed an infrastructure facility/project and was not required to maintain or operate, it was entitled to cost, plus the margin of income or profit; not to expect this treatment would render one who develops an infrastructure facility project, unable to realise its cost. If the infrastructure facility is, after its development, transferred to the Government, naturally the cost would be paid by the Government. Therefore, the mere circumstance that the Indian Railways or DDA paid for development of a housing project carried out by the assessee, did not mean that the assessee did not develop the residential complex. If the revenue's interpretation is accepted, no enterprise, carrying on the business of only developing the infrastructure facility, would be entitled to deduction under section 80-IB (10). The conclusions of the ITAT in this context were rendered after a detailed analysis of the facts and the contracts entered into by the assessee with IRWO and DDA. The narrow ground on which the AO concluded that the projects were "owned" by IRWO or DDA and that the assessee was only a works contracts, was unwarranted.” We, therefore, do not have any doubt in regard to the admissibility of the claim made by the assessee and to entertain the same by giving relief to that effect. ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.– 2007-08 to 2013-14 & 2016-17 - 42 - 29. Before parting with the matter we would like to mention that we have considered the judgements relied upon by the Ld. AR passed by different judicial forums including the judgement passed in the matter of Patel infrastructure and Katira construction (supra) passed by the Rajkot Bench and Katira construction passed by the Hon’ble jurisdictional High Court wherein the constitutional validity of insertion of explanation below sub Section 13 of Section 80 IA of the Act was challenged. The Ld. Representative appearing for the Revenue vehemently argued on this point that the jurisdictional High Court in the said matter already decided the issue against the assessee. Fact remains that the jurisdictional High Court in that particular matter dealt with the constitutional validity of the insertion of explanation as mentioned hereinabove and decided the same in favour of the revenue to this effect that such explanation brought with retrospective effect from 01.04.2000 by the Finance Act No. 2 of 2009 was very well within the competence of Parliament. As such there was no issue whether the assessee is acting as a developer or contractor was raised before the Hon’ble Jurisdictional High Court neither the said has been decided in the said judgement. 30. We have further considered the judgment passed by the Co-ordinate Bench in the matter of Rajkamal Builders Infrastructure Pvt. Ltd. in ITA No.441/Ahd/2011 & 20 Ors., order dated 13.05.2022, where the assessee had undertaken infrastructure facilities, such as, development infrastructure facilities such as development of roads, bridges, water treatment plants, canals, siphon work (irrigation projects), sewage treatment plant etc. by entering into contract with various Government authorities. In fact, we find ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.– 2007-08 to 2013-14 & 2016-17 - 43 - that the clauses stipulated in the Tender document is almost akin to the clauses mentioned in the Tender document in respect of the assessee before us. Relevant to mention that though the assessee has taken different projects, the clauses mentioned mostly in all tendered documents are in respect of different projects entrusted upon assessee by the statute authorities in different years are identical. We find that on the identical facts and circumstances of the case, the assessee was found to be eligible for claiming deduction under Section 80IB(4) of the Act taking into consideration the overall aspect of works undertaken by the assessee therein. We are inspired by the ratio laid down by the Co-ordinate Bench in the said judgment Rajkamal Builders Infrastructure Pvt. Ltd. (supra) in holding the assesse eligible under the identical facts and circumstances of the case. 31. In the light of the above discussion and perusal of various clauses of Tender documents and case laws relied upon by both the parties, it reveals that the tender work under consideration are not for a specific work, rather they are for development facility as a whole. The responsibility is fully assigned to the developer for execution and completion of the work. Various stipulations contained in the Tender documents demonstrate various risks undertaken by the assessee for execution of the project work awarded by the competent authority in terms of financial resources, manpower deployment, both technical and administrative expertise, drawing and designing of the project specifications and getting approval from the competent authority, safety and security of project and human resources, compliances of various statutory rules and laws. Therefore, merely because in the agreement for development ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.– 2007-08 to 2013-14 & 2016-17 - 44 - of infrastructure facility, assessee is referred to as contractor or because if some basic specifications are laid down, it does not detract the assessee from the position of being a developer, nor will deprive the assessee from claiming deduction u/s.80IA(4) of the Act. As such, looking to the overall aspects of work undertaken by the assessee we can safely come to the conclusion that the assessee is engaged in development of the infrastructure facility and therefore, a developer, which entails the assessee to claim benefits under section 80IA(4) of the Act. Thus, the issue of claim of deduction under section 80IA(4) of the Act is allowed in favour of the assessee and against the Revenue. This common ground raised in all the appeals are accordingly disposed of. 32. So far as the additional ground is concerned, we find that the Ld. AO denied the claim of the assessee under Section 80IA of the Act including the claim in respect of other income to the tune of Rs.42,62,716/-; the assessee is not entitled to any such deduction under Section 80IA of the Act as of the finding of the Ld. AO, which was further confirmed by the Ld. CIT(A). 33. We have heard the rival submissions made by the respective parties; we have also perused the relevant materials including the orders passed by the authorities below. 34. Upon going through the financial statement filed by the appellant, we find that the following are the component and/or break up of the said other income: “1. Bank Interest on Bank Guarantee ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.– 2007-08 to 2013-14 & 2016-17 - 45 - 2. Sale of Scrap of Business Items 3. Profit on Sale of Assets 4. VAT Refund - Jabalpur Bridge Site 5. Release of Retained Income - Sabarmati Bridge 6. Refund from Sales Tax 7. Arbitration Claim - Anantpur ROB Kota Site 8. Recovery against stolen Steel at site 9. Compensation of Job Work Charges 10. Sundry Balance Written off 11. Crane Service Income 12. Interest on IT Return & other Interest 13. Dividend Income” 35. So far as Item Nos. 9 to 13 is concerned, the Ld. Counsel appearing for the assessee has not pressed the same. 36. So far as the bank interest on bank guarantee is concerned, the same is found to be covered in favour of the assessee by the judgment passed in case of Rajkamal Builders Infrastructure P. Ltd. vs. DCIT in ITA Nos. 118/Ahd/2019 & Ors. While granting relief to the assessee, the Co-ordinate bench has been pleased to observe as follows: “46. Before us, the counsel for the assessee reiterated submissions as were made before the lower authorities. The counsel further submitted that the interest income is earned only on fixed deposits for obtaining bank guarantee and security deposit to be placed mandatorily as per the tender when work was awarded. Hence, such interest income is business income and eligible for deduction under section 80IA(4) of the Act. In support of his contentions, the counsel relied upon the following decisions: i) AVM Cine Products Vs. DCIT, (2021) 123 taxamnn.com 41 (Mad); ii) CIT Vs. Alloys Ltd. (2017) 84 taxmann.com 256 (Guj) iii) Empire Pumps P. Ltd. Vs. ACIT, (2015) 54 taxmann.com 317 (Guj) 47. For countering the above submissions of the assessee, the DR supported orders of the Revenue authorities, which was based on the decision of Hon’ble Supreme Court in the case of Pandian Chemicals Ltd. ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.– 2007-08 to 2013-14 & 2016-17 - 46 - 48. We have considered submissions of both the parties; perused relevant orders and case laws cited by the parties. We have already hold the assessee a developer and eligible for deduction under section 80IA(4) of the Act. We further note that the amount of Rs 8,61,827 has been received by the assessee as other income which appears from the records is nothing but the claim approved and received by the assessee for the assessment year 2004-05 in respect of the infrastructure project undertaken by the assessee. We find that before the lower authorities the assessee has explained regarding interest income earned by it from the fixed deposits, security deposits, margin-money and from the bond, with the banks and other institutions, as per the terms and conditions of the contract agreement with the Government authorities. Furnishing of fixed deposits for bank guarantees, security deposits etc. are the pre-condition for awarding the project work by the competent authority, and therefore, these are necessity of regular course of business and has direct nexus with the activities. Jurisdictional High Court in the case of Empire Pumps P. Ltd (supra) held that interest income having direct nexus with its business, was to be considered as income ‘derived from’ business. Thus, deduction under section 80I of the Act was allowed on such income. Yet in another decision by jurisdictional High Court in the case of CIT Vs. Shah Alloys Ltd. (supra) has held that interest received on margin money placed for business purpose cannot be treated as income from other sources and is, therefore, eligible for deduction under section 80IA of the Act. Further, various higher judicial authorities have held that profits of the business of the undertaking include other incidental incomes derived from the business of the undertaking. This being the position of law, we have no hesitation in accepting the claim of the assessee that the income earned from the deposits is business income is eligible for deduction under section 80IA of the Act. Accordingly, this common ground raised in the appeals under consideration is allowed in favour of the assessee and against the Revenue.” We do not find any reason to deviate from the stand taken by the Co- ordinate Bench in identical facts and circumstances of the case. We, therefore, respectfully relying on the same, allow this bank interest on bank guarantee to the tune of Rs.11,46,733/- for the deduction made under Section 80IA of the Act. This ground of appeal will apply mutatis mutandis in the appeal preferred by the assessee for A.Ys. 2008-09 & 2009-10. ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.– 2007-08 to 2013-14 & 2016-17 - 47 - 37. So far as sale of scrap of business items to the tune of Rs.26,24,658/- is concerned, the same is also found to be covered by Hon’ble Jurisdictional High Court in the case of DCIT vs. Harjivandas Juthabhai Saveri & Anr., reported in (2002) 258 ITR 785 (Guj). While granting relief to the assessee, Hon’ble Court has been pleased to observe as follows: “(5) Whether the Appellate Tribunal is right in law and on facts in allowing the deduction under Section 80-I of the Act on the following items of income treating it as income of industrial undertakings : Rs. (i) Job work receipt of : 1,67,000 (ii) Sale of empty soda ash bardana of : 41,93,709 (iii) Sale of empty barrels of : 4,38,542 (iv) Sale of plastic waste of : 12,83,785." So far as question No. 1 is concerned, the same is covered by the decision of this court in the case of CIT v. Deepak Family Trust (No. 1): [1995]211ITR575. Hence, no substantial question of law arises, and question No. 1 need not be referred. So far as question No. 2 is concerned, the same is covered by the decision in the case of CIT v. Tanvi Sajni Family Trust: [1994]209ITR497(Guj) . Therefore, qua this question also, no substantial question of law arises, and the question need not be referred. So far as questions Nos. 3 and 4 are concerned, the Tribunal, considering the material placed before it, arrived at a conclusion that the amount of interest was receivable by the beneficiaries, and considering the decision, the Tribunal has opined in favour of the assessee. No substantial question of law arises. The Tribunal relied on its earlier decision which has been accepted by the Revenue, and we would not like to refer these questions. So far as question No. 5 is concerned, learned counsel, Mr. Soparkar, drew our attention to Section 80-I of the Act and submitted that this section is meant for deduction in respect of profits and gains from industrial undertakings. With regard to the question raised by the Revenue that the amount received on sale of jute bags, barrels, etc., ought to have been deducted from the cost of the material, Mr. Soparkar, the learned advocate for the assessee, submitted that it would not make any difference if the amount received by the sale of empty barrel or "bardan" (jute bags) is deducted from the cost of the raw material. He submitted that if the cost is reduced by deducting the sum so received, the profit will increase and, ultimately, the total would be the same. He submitted that the Commissioner of Income Tax (Appeals) and the Tribunal have rightly come to the conclusion that the items ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.– 2007-08 to 2013-14 & 2016-17 - 48 - covered by question No. 5 are covered by Section 80-I of the Act inasmuch as the amount received can be said to have been received from the activities undertaken by the assessee. He submitted that no question of law is raised, more particularly, when a Division Bench of this court in Income Tax Application No. 70 of 1997 (CIT v. Norma Detergent P. Ltd.) had considered a similar question and held that "it was, however, found that the items of kasar and sale of empty soda ash bardans, are directly connected with the manufacturing activities of the assessee and should be allowed". It is required to be noted that if the assessee was not engaged in industrial activities, there was no question of empty barrels or bardans. Instead of manufacturing if the assessee was doing trading activities, i.e., dealing in raw material, and if the assessee had sold the material on retail basis and earned amount by sale of bardans, then obviously this section will not apply.” In view of the aforesaid observation, we allow this component to be taking into consideration for deduction under Section 80IA of the Act treating it as income. 38. The other component being profit on sale of Assets, VAT Refund - Jabalpur Bridge Site, release of Retained Income - Sabarmati Bridge, refund from Sales Tax, Arbitration Claim - Anantpur ROB Kota Site and recovery against stolen Steel at site are found to have direct nexus with the appellant’s business and hence, these are eligible income under Section 80IA(4) of the Act as claimed by the appellant. These are also applied mutatis mutandis in the respective appeals filed by the appellant. 39. Item Nos. 9 to 13 are not pressed. Thus, the same are dismissed as not pressed. 40. The Ld. Counsel appearing for the assessee has not pressed the ground of deduction for repair expenses. The same is, thus, dismissed as not pressed. ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.– 2007-08 to 2013-14 & 2016-17 - 49 - ITA No. 1481/Ind/2019 (Revenue’s Appeal) for A.Y. 2012-13 41. The Revenue has challenged the order dated 30.07.2019 passed by the CIT(A)-8, Ahmedabad, arising out of the order dated 19.03.2018 passed by the ACIT, Circle-4(1)(2), Ahmedabad, under Section 271(1)(c) of the Act. The assessment order was finalized upon making disallowance of claim of deduction under Section 80IA of the Act to the tune of Rs.7,84,59,273/-. Penalty proceeding under Section 271(1)(c) of the Act was issued and notice to that effect on 09.02.2015 was served upon the appellant for furnishing inaccurate particulars of income. As the assessee has not disclosed the true amount of income voluntarily as of the finding of the Ld. AO, minimum penalty of Rs.2,66,68,307/- under Section 271(1)(c) of the Act was, therefore, levied, which was, in turn, deleted by the Ld. CIT(A). Hence, the instant appeal, filed by the Revenue. Merely because, the assessee had claimed the expenditure, which was not acceptable to Revenue, would not attract penalty under Section 271(1)(c) of the Act, as the ratio laid down by Hon’ble Supreme Court in the case of Reliance Petro Products Pvt. Ltd., reported in [2010] 322 ITR 158 (SC) was duly taken care of by the Ld. CIT(A) and having found the claim made by the appellant is a bonafide one, the penalty was deleted. 42. We have heard the rival submissions made by the respective parties; we have also perused the relevant materials including the orders passed by the authorities below. 43. At the very outset, the Ld. Counsel for the assessee submitted before us that the issue is squarely covered by the judgment passed by the Co-ordinate ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.– 2007-08 to 2013-14 & 2016-17 - 50 - Bench in the case of Rajkamal Builders Infrastructure P. Ltd. vs. DCIT in ITA No. 118/Ahd/2009 & Ors., the copy whereof is placed on record before us. The Ld. DR, however, has not been able to controvert such submissions made by the Ld. AR. 44. After careful consideration of the judgment, we find that while upholding the order passed by the Ld. CIT(A) in deleting the levy of penalty made by the Ld. AO, the Co-ordinate Bench has been pleased to observe as follows: “77. However, we would like to note that the Ld. CITA has deleted the penalty on the ground that the assesses’s claim is a bona fide one, all the particulars were fully disclosed in the return itself, supported by audit reports under Section 80 IA(7) in Form No. 10 CCB and none of the particulars or figures are found to be untrue or wrong. The disallowance is made only due to a bona fide difference of opinion between the assessee and the Department as to whether the assessee is a ‘developer’ or ‘contractor’. It further appears that relying on the decision passed in the matter of Reliance Petro Products Pvt. Ltd., reported in 322 ITR 158 (SC) the penalty was deleted by the Ld. CIT(A) which according to us is without any ambiguity so as to warrant interference. We, thus, find all the appeals preferred by the revenue as above as devoid of any merit and therefore, dismissed.” Having heard the Learned Counsel appearing for the parties and having regard to the facts and circumstances of the case, we do not find any reason to deviate from the stand taken by the Co-ordinate Bench as reproduced hereinabove. Thus, respectfully relying upon the same, we upheld the order passed by the Ld. CIT(A) in holding that the penalty is not sustainable as the claim made by the assessee was a bonafide one. Moreso, the appeal preferred by the assessee in the year under consideration has been allowed by us. Therefore, the penalty proceeding automatically becomes infructuous. Thus, ITA Nos. 2938/Ahd/2011 & 8 Ors. (Vijay M. Mistry Construction Pvt. Ltd.) A.Ys.– 2007-08 to 2013-14 & 2016-17 - 51 - the appeal preferred by the Revenue is found to be devoid of any merit and, thus, dismissed. ITA No. 1468/Ind/2019 for A.Y. 2016-17 45. The Ld. Counsel appearing for the assessee has not pressed this ground of addition made under Section 36(1)(va) to the tune of Rs.3,95,505/- as Employees’ PF & Welfare Fund. This ground of appeal is, thus, dismissed as not pressed. 46. In the result, assessee’s appeals are allowed and Revenue’s appeal is dismissed. This Order pronounced on 23/12/2022 Sd/- Sd/- (WASEEM AHMED) (MADHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 23/12/2022 S. K. SINHA True Copy आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं$धत आयकर आय ु &त / Concerned CIT 4. आयकर आय ु &त(अपील) / The CIT(A)- 5. )वभागीय ,त,न$ध, आयकर अपील य अ$धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड2 फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील$य अ%धकरण, अहमदाबाद / ITAT, Ahmedabad