Appeal Details
Counselvise Citation
[2022] 104 COUNSELVISE.COM (IT) 9783 (ITAT-RAJKOT)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
7 year(s) 5 month(s) 11 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
27-09-2022
Appeal Filed By
Department
Order Result
PartlyAllowed
Bench Allotted
DB
Assessment Year
2011-2012
Appeal Filed On
16-04-2015
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL RAJKOT BENCH, RAJKOT Before: Shri Waseem Ahmed, Accountant Member And Shri Siddhartha Nautiyal, Judicial Member Backb one Enterprise Ltd. M-4 3, Gu jarat Ho usin g Bo ard, Kalawad Road, Rajkot PAN: AA BCB9255 E (Appellant) Vs The Dep uty Co mmis sioner of I nco me- Tax, Cen tral Circle-2, Rajkot (Resp ondent) Th e Assistant Co mmis sion er of In co me- Tax, Central Circle-2, Rajkot (Appellant) Vs Back bone Enterprise Ltd . M-43, Gujarat Housing Board, Kalawad Ro ad, Rajkot PAN: AABCB92 55E (Resp ondent) Asses see by : Shri D.M . Rinda ni, A. R. Revenue by : Shri Aarsi Pra sad, CIT-D. R. Date of hearing : 06-07 -2 022 Date of pronouncement : 28-09 -2 022 आदेश/ORDER PER BENCH:- ITA No. 129/Rjt/2015 Assessment Year 2011-12 ITA No. 150/Rjt/2015 Assessment Year 2011-12 I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 2 These are the two appeals filed by the assessee and the revenue against the order of the ld. Commissioner of Income Tax (Appeals)-11, Ahmedabad in Appeal no. CIT(A)-11/465-R/CC.2/2014-15 vide order dated 19/01/2015 passed for the assessment year 2011-12. 2. The Department has taken the following grounds of appeal “1. On the fact and circumstance of the case, the Ld. CIT(A) has erred in allowing deduction u/s 80IA(4) of the Act in respect of project Nos. 2, 3, 4, 6 to 13 by treating the assessee as a "Developer" of infrastructure projects instead of "Work Contractor" as treated by the A.O. & the Ld. CIT(A) has not properly appreciated the terms and conditions laid down in the clauses of agreements in respect of the various projects/contracts which clearly point out that the contract is in the nature of "Work Contract". 2. On the facts and in the circumstances of the case and in law, the CIT(A) ought to have upheld the order of the A.O.to the above extent. It is, therefore, prayed that the order of the CIT(A) be set aside and that of the A.O. be restored to the above extent.” 3. The assessee has taken the following grounds of appeal “1. The learned Commissioner of Income Tax (Appeals) - 11, Ahmedabad erred in confirming the action of the assessing officer in disallowing the claim of deduction of Rs. 9,06,190/- u/s 80IA(4) in respect of following infrastructure projects undertaken by the appellant: Sr. No. of Project referred by CIT (Appeals) Name of Project Amt. of deduction claimed u/s 80IA (in Rs.) 1 Bhavnagar Irrigation 707,354 I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 3 5 GIDC Bamanbore Road 198,836 Total 9,06,190 2. The learned Commissioner of Income Tax (Appeals) - 11, Ahmedabad erred in holding that appellant was not a developer of infrastructure facility in respect of projects specified by him and listed in ground No. 2 above. The appellant craves leave to add, amend, alter and withdraw any ground of appeal anytime up to the hearing of this appeal.” We shall first take up the Department’s appeal. 4. The brief facts of the case are that the assessee company is a government contractor doing mainly government work on contractual basis. The assessee claimed deduction under section 80-IA(4) of the Act in respect of contracts carried out with Government and Semi-Government Bodies. During the course of assessment, the AO denied the claim of 80-IA(4) of the Act to the assessee on ground that the assessee is “contractor” and is not a “developer” within the meaning of 80-IA(1) of the Act and hence is not eligible for deduction respect of receipts from contracts carried out with Government and Semi-Government Bodies. The AO held that the assessee had carried out “works contract” in respect of each of the projects for which it had claimed deduction under section 80-IA(4) of the Act. The assessee has not been able to establish as to how it made investment in the project in addition to the fact that he has acted purely as a “works contractor”. Accordingly, the AO denied deduction under section 80-IA(4) of the Act in respect of all the projects carried out by the assessee during the year under I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 4 consideration. While denying the claim of the assessee, the AO made the following observations: “8. The claim of the assessee for deduction under section 80IA(4) of the Act has been considered in view of the facts and circumstances of the case as discussed above and the provisions of Act as applicable for the year under consideration. There is no ambiguity about the fact that the deduction under section 80IA(4) is available to a developer of the infrastructural facilities as provided within the meaning of the said section and not the contractors who simply executes work as per work contract received from either Central Govt. or State Govt. or any other agency. On this issue it would be pertinent to refer to the decision in the case of Asstt. CIT v. Indwel Linings (P.) Ltd. [2009] 122 TTJ (Chennai) 137 where in it was held that Where assessee took contract work of cement lining for water supply project of Gujarat Water Supply and Sewerage Board (Gujarat Government undertaking), it being a contractor and not developer, was not entitled to deduction under section 80IA, In this case the Hon. IT AT had discussed the distinction between a "Contractor ' and ' developer' which is extremely relevant in deciding the issue in the present case. The Hon. Tribunal observed that 'Contractor ' and ' developer' are two different terms. As per the Oxford Advanced Learner's Dictionary, 'developer' is a person or company that designs and creates new projects, whereas 'contractor' is a person or company that has a contract to do work or provides services or goods to another. The benefit of section 80-IA is available only to the developer. It is the condition precedent for the availability of the benefit of this section that the undertaking or enterprise must derive its income from carrying on the business of developing any infrastructure facility. The prescription of section 80-IA shall not apply to a person who executes work contracts entered into with an undertaking or enterprise. Thus, in a case where a person who makes investment and himself executes development works and carries out civil works, will be eligible for tax benefit under section 80-IA. In contrast to this, a person who enters into a contract with another person for executing works contract will not be eligible for the tax benefit under section 80-IA. I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 5 9. Hence, it is evident that the Explanation, below sub section (13) of section 80IA, as inserted by the Finance Act, 2009 with retrospective effect from 01.04.2000, has only clarified it that the deduction is not available to 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 an enterprise referred to in sub-section (1). The argument as to whether a contractor is a 'developer' within the meaning of the above provision of the Act has only been put to rest by providing an explicit clarification which leaves no scope for any ambiguity as regard the issue that the 'contractors' are not 'developers' within the meaning of sub-section (1) of section 80IA and hence, they are not eligible for deduction in respect of their business income from executing work orders as per contract with either Central Govt. or State Govt. or any other agency. The explanation does not in any manner provide for restricting or altering the meaning of the said provision. Rather, the position which was earlier apparent on a careful look of the provisions of sub-section (4) has now been made available even at the cursory look through the Explanation by clarifying the hitherto intention of the legislature that no person executing the works contract shall be eligible for deduction u/s. 80IA, even if it is an enterprise or undertaking as referred to in sub-section (1). The language of this Explanation makes it crystal clear that the benefit under sub-section (4) cannot be provided to a business referred to in sub-section (4) which is in the nature of works contract awarded by any person including the Central or State Government and executed by the undertaking or enterprise referred to in subsection (1). From the memorandum explaining the rationale behind the substitution of Explanation it can be easily seen that the legislature clarified its intention beyond any doubt that the deduction cannot be allowed in relation to a business which is in the nature of works contract. 10. In view of the above discussion, there is no reason to ignore the unambiguous language of the Explanation, which is simple and plain, denying the benefit of deduction to the business which is in the nature of a works contract. There is no need to arbitrarily presume any doubt in the language of section, which does not, in fact, exist, and then proceed to finding out ways and means of granting the benefit to the assessee, which the legislature did not intend. Here in would only be I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 6 pertinent to refer to the decision of Hon. Supreme Court in the case of Padmasundara Rao( Deed.) vs. State of Tamil Nadu (2002) 255 ITR 147 where in it was pointed out by the Apex Court that the plain language to the statute is best understood as the declaration of the intention of the Legislature, The court can not seek to supply omissions as such an attempt would tantamount to power to legislate, which it does not have. The plain inference can not be dismissed on the ground that it would be unreasonable or that the language is contrary to the obvious intention of the legislature. Where as in the present case even the language of the provisions harmoniously goes with the obvious intention of the legislature. 11. It is clear from the above that the assessee had executed works contract in respect of each of the projects for which it has claimed deduction u/s. 80IA(4) of the Act. The assessee has also been unable to establish as to how did it make an investment in the project, part from not being able to prove that it had not executed a works contract as is evident above. In view of the foregoing, I find no merit in the claim of the assessee for a deduction u/s.80IA of the Act. Hence, in consideration of the above discussion and provisions of section 80IA of the Income-tax Act, 1961, as applicable for the year under consideration, it is evident that the assessee is not eligible for deduction out of its business income under the provisions of the said section and hence, the deduction claimed by the assessee in the return of income under section 80IA(4) of the Act is to be disallowed and added back to the total income of the assessee for the assessment year under consideration. Hence, the deduction claimed by the assessee company u/s.80IA(4) amounting to Rs.18,08,02,807/- is hereby disallowed and withdrawn and added back to the taxable income of the assessee company.” 5. In appeal, Ld. CIT(Appeals) discussed facts of each of the individual projects carried out by the assessee on merits, and based on the analysis of each of the projects, gave part relief to the assessee. The Department and the assessee are in appeal of before us against the relief provided by Ld. CIT(Appeals) in respect of some of the projects. Ld. Counsel for the I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 7 assessee submitted that the assessee has built/developed complete infrastructure and had undertaken complete responsibility for the same as well and accordingly Ld. CIT(A) erred in facts and in law in holding that for certain projects the assessee is not eligible for deduction u/s 80-IA(4) of the Act in respect for certain projects. He placed reliance on the following various favourable Rulings and submitted that the case of the assessee is covered by the same:- Sr. No. Particulars 1. Patel Infrastructure Pvt. Ltd. (Rajkot Tribunal) dated 30-07-2020 (2020) 59 CCH 0266 2. M/s Katira Construction Ltd. (Rajkot Tribunal) dated 30-07-2020 (2020) 59 CCH 0264 3. M/s Ketan Construction (Rajkot Tribunal) in ITA Nos. 219,220,221,222/Rjt/2015, 199,200,201,202/Rjt/015 dated 03-06-2020 4. M/s KCL - BEL Tarmat (JV) (Rajkot Tribunal) in ITA No. 192, 193/Rjt/2011, 214/Rjt/2011 and 485/Rjt/2014 dated 03-12-2018 5. Welspun Projects Ltd. (Ahmedabad Tribunal) dated 08-10-2018 (2018) 54 CCH 0070 6. M/s BBEL STPL (JV) (Rajkot Tribunal) in ITA No. 507/Rjt/2012 dated 28.-10-2016 - A.Y. 2009-10 7. TARMAT - BEL (JV) (Rajkot Tribunal) in ITA No. 1111/RJT/2010 dated 23-09-2010- A.Y. 2007-08 8. TRG Industries Pvt. Ltd. (2017) 155 DTR 0109 (J & K HC) 9. M/s. Simplex Infrastructure (2017) 49 CCH 0088 (Kolkata Tribunal) I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 8 10. VRM India Ltd. (Delhi HC) ITA nos. 2069 of 2010, 318 & 320 of 2014 dated 18-03-2015 11. Sugam Construction Pvt. Ltd. Vs. I.T.O. (2012) 34 CCH 0383 (Ahmedabad Tribunal) 12. GVPR Engineers Ltd. & Others, Hyderabad (2012) 32 CCH 0296 (Hyderabad Tribunal) 13. Laxmi Civil Engg. P. Ltd. (Pune Tribunal) in ITA Nos. 766/PN/09, 254/PN/08, 431/PN/07 & 435/PN/07 14. Gayatri Projects Ltd. (Hyderabad Tribunal) in ITA Nos. 211/Hyd/2008, 711 & 712/Hyd/2010 15. Koya & Co. Construction (P.) Ltd. (Hyderabad Tribunal) (2012) 32 CCH 0043 16. Pratibha Industries Ltd. (Mumbai Tribunal) in ITA Nos. 2197 to 2199/Mum/2008 dated 19-12-2012 17. Katira Construction Ltd. (2013) 31 taxmann.com 250 (Gujarat HC) 18. KMC Constructions Ltd. (2012) 32 CCH 0297 (Hyderabad Tribunal) 19. Vijay Infrastructure Ltd. (2018) 402 ITR 0363 (Allahabad HC) 20. The Supdt. Engineer vs ITO (2013) 36 CCH 0568 (Chandigarh Tribunal) 21. Circular no. 4 of 2010 dated 18-05-2010 (widening of an existing roads) 22. Rohan & Rajdeep Infrastructure (2013) 157 TTJ 333 (Pune Tribunal) 23. Shristi Infrastructure Development Corporation Ltd. (2008) 28 CCH 0449 (Delhi Tribunal) I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 9 24. Rajkamal Builders Infrastructure P. Ltd. in ITA Nos. 118/ A/2009 and others dated 13-05-2022 (Ahmedabad Tribunal) 25. TRG Industries (P.) Ltd. (2013) 35 taxmann.com 253 (Amritsar Tribunal) The Ld. Departmental Representative submitted that Ld. CIT(A) has erred in facts and in law in allowing relief to the assessee since post amendment all works contracts have been excluded from within the scope of eligibility of deduction u/s 80-IA(4) of the Act. The assessee is a works contractor and hence not eligible to claim deduction u/s 80-IA(4) of the Act. We have heard the rival contentions and perused the material on record. Therefore, in order to decide the Department’s appeal, we shall be discussing the observations made by Ld. CIT(Appeals) in respect of each of the projects and thereafter decide, whether in the applicable set of facts, the assessee is eligible for deduction under section 80-IA(4) of the Act. 5.1 However, before we analyse the order of Ld. CIT(Appeals) in respect of each individual projects, it would be useful to go through the relevant statutory provisions and law on the subject in light of various judicial precedents to have a better understanding of the precise scope of the deduction u/s 80-IA(4) . The relevant extracts of the section are reproduced below. Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc. 80-IA. I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 10 4) This section applies to— (i) any enterprise carrying on the business of (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility which fulfils all the following conditions, namely:— (a) it is owned by a company registered in India or by a consortium of such companies or by an authority or a board or a corporation or any other body established or constituted under any Central or State Act; (b) it has entered into an agreement with the Central Government or a State Government or a local authority or any other statutory body for (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining a new infrastructure facility; (c) it has started or starts operating and maintaining the infrastructure facility on or after the 1st day of April, 1995: The above provision has been further clarified by way of explanation under sub-section (13) of section 80-IA(4) of the Act, with retrospective effect from 01-04-2000, which reads as under: 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 (including the Central or State Government) and executed by the undertaking or enterprise referred to in sub-section (1) I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 11 The Memorandum to the Finance Bill 2009 explaining the above provision reads as under Further, with a view to preventing the misuse of the tax holiday under section 80-IA of the Income-tax Act, it is proposed to amend the Explanation to the said section to clarify that nothing contained in the said section shall apply in relation to a business referred to in sub-section (4) of the said section which is in the nature of a works contract awarded by any person (including the Central or State Government) and executed by an undertaking or enterprise referred to in sub-section (1) thereof. This amendment will take effect retrospectively from 1st April, 2000 and will, accordingly, apply in relation to assessment year 2000-2001 and subsequent years. Further, the Memorandum to the Finance Bill 2007is also reproduced below to throw useful light on the intent behind introducing the above provisions (effective from 01-04-2000): Clarification regarding developer with reference to infrastructure facility, industrial park, etc. for the purposes of section 80-IA Section 80-IA, inter-alia, provides for a ten-year tax benefit to an enterprise or an undertaking engaged in development of infrastructure facilities, Industrial Parks and Special Economic Zones. The tax benefit was introduced for the reason that industrial 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 participation by way of I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 12 investment in development of the infrastructure sector and not for the persons who merely execute the civil construction work or any other works contract. Accordingly, it is proposed to clarify that the provisions of section 80-IA shall not apply to a person who executes a works contract entered into with the undertaking or enterprise referred to in the said section. Thus, in a case where a person makes the investment and himself executes the development work i.e., carries out the civil construction work, he will be eligible for tax benefit under section 80-IA. In contrast to this, a person who enters into a contract with another person [i.e., undertaking or enterprise referred to in section 80-IA] for executing works contract, will not be eligible for the tax benefit under section 80-IA. This amendment will take retrospective effect from 1st April, 2000 and will, accordingly, apply in relation to the assessment year 2000-2001 and subsequent years. 5.2 A reading of the various Statutory provisions read with the Memorandum brings out the following salient features of claim of deduction under section 80-IA(4) of the Act: 5.3 Firstly, purpose of introduction of beneficial provisions under section 80-IA(4) of the Act is for encouraging private sector participation. Secondly, only investment in development of the infrastructure sector is eligible for deduction under section 80-IA(4) of the Act and benefit is not available for the persons who merely “executes” the “civil construction work” or “any other works contract”. Thirdly, where a person makes the investment and himself executes the development work i.e., carries out the civil construction work, he will be eligible for tax benefit under section 80- IA(4) of the Act. Fourth, the Income Tax Act does not define what would I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 13 constitute as “works contract/works contractor” (as opposed to section 194C of the Act, where the word “contractor” finds a specific definition). However, from the language of the Statute read with the Memorandum the Finance Bill, benefit is sought to be denied only to persons who merely “executive” works contract, but in cases where a person makes the investment and himself executes the development work i.e., carries out the civil construction work, benefit under section 80-IA(4) of the Act would be available. Fifth, apparently there is no conflict between the term “works contractor” and “developer” and in case a person/assessee carries out activity the nature of “civil construction” work by making the investment and himself executing the development work, then such person would be eligible for benefit under section 80-IA(4) of the Act. Notably, the ITAT Calcutta in the case of DCIT v. Simplex infrastructure Ltd (2017) 49 CCH 88, held that the term "contractor" is not essentially contradictory to the term "developer". On the other hand, rather s. 80- IA(4) itself provides that assessee should develop the infrastructure facility as per agreement with the Central Government, State Government or a local authority. So, entering into a lawful agreement and thereby becoming a “contractor” should, in no way, be a bar to the one being a “developer”. 5.4 As stated above, the intent of the Statute even post Amendment vide Finance and 2009 is not, in our view, to completely deny benefit of deduction under section 80-IA(4) of the Act to all “works contracts/work- contractors ” because that would amount to defeating the very purpose for which section 80-IA(4) of the Act was introduced viz. to boost industrial modernization through expansion and improvement in infrastructure by I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 14 encouraging private sector participation by way of investment in development of the infrastructure sector. The memorandum to the Finance Bill 2007 specifically provides that the purpose of the tax benefit has been for encouraging private sector participation by way of investment in development of the infrastructure sector and not for the persons who merely “execute” the “civil construction work” or “any other works contract”. Therefore, the provisions cannot, in our view, be read in manner that all “works contracts” have been ousted from the scope of benefit under section 80-IA(4) of the Act (because that would be defeating the very purpose for which section 80-IA(4) of the Act was introduced), but the benefit is sought to be denied only to persons who merely “execute” works contract. Therefore, in cases where a person makes the investment and himself executes the development work i.e., carries out the civil construction work, benefit under section 80-IA(4) of the Act would be available. Therefore, a co-joint reading of all the provisions reproduced above, read with the memorandum, points to the fact that the benefit under section 80-IA(4) of the Act continues to be available to works “contractor/civil contractor” engaged in “development” of the project by making the investment and himself executing the development work and is only sought to be denied to those class of persons engaged merely in “execution” of works contract/ civil construction work. 5.5 Now, in the absence of any definition of “works contractor” with reference to section 80-IA(4) of the Act, the issue for consideration is what class of cases would fall under the definition of “mere execution” of works contract and hence not eligible for benefits under section 80-IA(4) of the Act I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 15 which cases would fall under the category of “development activities” done by a civil/ works contractor and hence eligible for benefits under section 80- IA(4) of the Act. The Hyderabad bench of Tribunal in case of M/s. GVPR Engineers Ltd. Vs. ACIT (2012) 51 SOT 0207 (Hyd) (URO) held that whether the assessee is a developer or works contractor is purely depends on the nature of the work undertaken by the assessee. Each of the work undertaken has to be analyzed and a conclusion has to be drawn about the nature of the work undertaken by the assessee. 5.6 Therefore, in our view, in order to decide whether the project undertaken is in capacity of a “developer” or “work contractor” has to be analysed on its own set of facts for each individual project. Various factors have to be seen whether the contract qualifies as “development contract” or mere “works contract” for example to enumerate a few factors firstly , there must come into existence some “new infrastructure facility” to be able to avail the beneficial provisions u/s 80-IA(4) of the Act. Mere repair/ maintenance/ upgradation/ restoration etc. would not be by itself sufficient to avail the benefits of provisions of 80-IA(4) of the Act, irrespective of scale of operations or other attendant conditions imposed on the works contractor. Second, how are the funds being mobilised by the contractor i.e. if the government gives any mobilisation advanced to the contractor then what are the conditions attached to granting of this mobilisation advance i.e. whether the contractor is required to give certain security deposit/bank guarantee against the same. In sum and substance, whether any financial risk is being undertaken by the contractors. Thirdly whether the agreement is for carrying out any specific work being part of the project or it is for I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 16 development of the facility as a whole, Fourthly, whether the contractor is required to bring his own manpower and material and expertise to the job or whether the materials and designs etc are provided by the Government. Whether the assessee has deployed its own plant and machinery towards execution of the project or is it a mere supplier of manpower Fifth,, whether the responsibility of the contractor ends with handing over the project or whether the responsibility in relation to the project continues even post the handing over the project i.e. whether the contractor is required to undertake the maintenance of the infrastructure for a period of 12 months or more after handing over of the project to the Government, Sixth , if during the period of construction any damage is incurred and whether the contractor shall be responsible for the same i.e. whether the assessee has to furnish a security deposit to the Employer and indemnify the employer of any losses/damage caused to any property/life in course of execution of works Seventh , whether the contractor was responsible for the correction of defects arising in the works at its own cost and responsibility. 5.6.1 To sum up, (i) first to see any new infrastructural facility has been put in place (and not mere repairs/ restoration/ upgradation/ strengthening etc. is done of the existing facility) (ii) In addition to works contract, the assessee undertakes addition responsibilities and risks attached to the project being undertaken, both financial risk as well as undertaking responsibility towards various other obligations attached towards successful completion and handling over the project including post completion performance guarantee, then he would, in our considered view, be eligible to deduction u/s 80-IA(4) of the Act. I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 17 5.7 Now having discussed the legal background, we shall come to the facts of the case in hand. Department's appeal 6. Now, with the above background in place, we shall first deal with the Department’s appeal in which it has challenged the various projects in respect of which relief has been given by the Ld. CIT(Appeals). As stated earlier, Ld. CIT(Appeals) has discussed the facts and merits of each of the projects undertaken by the assessee individually and then decided on the allowability of deduction u/s 80-IA(4) of the Act. Contract No. 2: BRTS Ring Road: 7. In this case, Ld. CIT(Appeals) while allowing the relief with the following observations: “11.1 The contract at Sr.No.2 was entered between the appellant and the Rajkot Municipal Corporation for construction of pilot BRTS corridor from Gondal bypass to Madhapar Circle on Rajkot Ring Road. The work included providing new Construction / reconstruction/strengthening of existing divided/undivided four-lane carriageway for dedicated bus-lane flanked by two-lane carriageway, service road, cycle track, sidewalk / drain from Section Gondal Road bypass junction to Madhapar Circle (Jamnagar Road Junction) on Rajkot Ring Road. The Road works constituted of site clearance, removal of tree stumps and dismantling of obstructions, encroachments etc. before commencement of the works; true and proper setting out and layout of the works, provision of road safety signage, marking and appurtenances, setting of bench marks, preparation of working drawings where required and provisions of all necessary labour, instruments, and appliances, widening and strengthening / reconstruction of the existing carriageway including raising, I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 18 remodeling/construction of junctions, intersections including bus stops, lay byes, construction of culverts / bridges and other related items of works, providing road markings, road signs and kilometer stones, construction of protective works, guardrails, landscaping and plantation, environmental measures, maintenance of existing road during the construction period and for five years beyond final completion of the work, any other item of work as may be required to be carried out for completing the road works in all respects in accordance with the provisions of the Contract The scope of work should include compliance by the contractor with all general condition of contract, whether specifically mentioned or not in the various clauses of these specifications, ail materials, apparatus, plans, equipment, tools fuel watering, strutting, timbering, transport, offices, stores, workshop, staff, labour and provision of proper and sufficient protective work, diversions, temporarily fencing and lighting. It shall also include. Safety or workers, first-aid equipments, suitable accommodation to staff and workmen with adequate sanitary arrangement, the effecting and maintenance of all insurance, the payment of all wages, salaries, fees, royalties, duties, or other charges arising out of the erection of the work and the regular clearance of rubbish, reinstatement and cleaning up of the site as may be required on completion of works, safety of the public and protection of the works and adjoining land. The contractor should ensure that all actions are taken to built in quality insurance in the planning and execution of the work. The quality insurance should cover all stages of work, such as setting out, section of materials, section of construction method, selection of equipment and plant, deployment of personnel and supervisory staff, quality control, testing etc. The. work of building in quality insurance should be deemed to be covered in this scope of the work. Apart from the construction of the BRTS Corridor, the work should also cover the monitoring of instrumentation and documentation during construction and performance warranty period for 5 years after issue of Taking over Certificate, after completion, the contractor shall furnish two sets of 'As-built Drawings' along with copies of test reports, investigation data I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 19 instrumentation details and any other data relevant to the project. After completion of maintenance period, the contractor should furnish a complete report of maintenance activities carried out including suggestion for further actions. In addition to hard copies, contractor should also furnish two numbers of soft copies of these documents. Cost of the project was of Rs. 101,61,75,720/- The project was to be completed within a period of 15 months and maintenance period was for a period of 5 years after completion of the construction. The terms and conditions of the contract were similar to those as mentioned in the contracts entered by the government or by its agencies for developing any infrastructure for public utility. After having regard to the terms and conditions of the agreement for development of the infrastructure facility, the rulings of the courts and position of law on the issue, in my opinion, the assessee acted as a developer because he developed infrastructure facility and handed over the same to the authority concerned with guarantee period for maintenance. Therefore, the assessee is eligible for claim of deduction u/s.80IA(4) (i) of the Act. Accordingly, the same is allowed.” 7.1 In addition to the observations made by Ld. CIT(Appeals), we have also perused terms of the contract/agreement and it would be useful to produce some of the terms, which would throw useful light on the additional responsibility of being undertaken by the assessee. “The Scope of Work The Rajkot Municipal Corporation hereinafter called "the Employer" invites bids for the construction of works (as defined in these documents, hereinafter referred to as "the Works ) detailed in the table given in the IFB. Works consist of: New Construction / Reconstruction / Strengthening of existing divided / undivided four-lane carriageway for dedicated bus-lane flanked by two-lane carriageway, service road, cycle track, sidewalk / drain from Section: Gondal Road bypass Junction to Madhapar Circle (Jamnagar Road Junction) on Rajkot Ring Road. I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 20 Development of walkway, streetlight, landscape, street furniture like hoardings, signages etc The works under this Contract shall be carried out in accordance with the bidding documents constituting the contract and shall consist of various salient items as generally described below: Road Works a) Site clearance, removal of tree stumps and dismantling of obstructions, encroachments etc. before commencement of the Works; b) True and proper setting out and layout of the Works, provision of road safety marking and appurtenances (both during and after construction)setting of bench marks, preparation of working drawings where required and provisions of all necessary labour, instruments, and appliances; c) Widening and strengthening / reconstruction of the existing carriageway-including raising; d) Remodeling / construction of junctions, intersections including bus stops, lay byes; e) Construction of culverts / Bridges and other related items of works; f) Providing road markings, road signs and kilometer stones; g) Construction of protective works, guardrails; h) Landscaping and plantation i) Environmental measures. 10 PERFORMANCE GUARANTEE (SECURITY DEPOSIT) 1. A sum of 5% of the accepted value of the tender shall be deposited by the tenderer for each Scheme separately (hereinafter called the contractor when tender is accepted) as security deposit with the owner for the faithful performance, completion and maintenance of the works in accordance with the contract documents and to the satisfaction of the Engineer-in-charge and assuring the payment of all obligations arising from the execution of the contract. This shall be deposited in one of the forms mentioned below : a. By a Demand Draft on the Rajkot Branch of any Scheduled 'A' Bank. I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 21 b. A fixed deposit receipt of a Schedule Bank or Government securities duly endorsed in favor of the Rajkot Municipal Corporation, Rajkot. Or c. The contractor may pay 2.5% of the value of work as initial security deposit and the balance 2.5 % shall be recovered in installments through deductions at the rate of 10 (ten) percent of the value of each running account bill till the total security deposit amount is made up. However, if the value of the work as per actual execution exceeds the accepted value of tender because of allotment of further work, further recoveries towards security deposit shall be effected at 10% of the R.A. bills to make up the Five percent security deposit of the revised value of contract. Alternatively, the contractor may at his option deposit the full amount of five ( 5 ) percent of security deposit within ten days of receipt by him of the notification accepting the tender in the form as aforesaid. 2. If the contractor, sub-contractor or their employees shall break, deface or destroy any property belonging to the owner or other agency during the execution of the contract, the same shall be made good by the contractor at his own expense and in default thereof, the Engineer-in-charge may cause the same to be made good by other agencies and recover expense from the contractor (for which the certificate of the Engineer-in-charge shall be final). These expense can be recovered from the security deposit if recovery from other sources is not possible. The amount as reduced in security deposit will be made good deduction from the next R.A. Bill of the Contractor. 12 DEFECT LIABILITY Contractor shall guarantee the work for a period of TWO YEARS from the date of issue of completion. Any damage or defect that may arise or that may remain undiscovered at time of issue of completion certificate connected in any way with the equipment or materials supplied by him or in the workmanship shall be rectified or replaced by contractor at his own expense as desired by Engineer-in-charge or in default Engineer-in-charge may cause the same to be made good by other agency and deduct expenses of which the certificate of Engineer-in-charge shall be final from any sums that may then or any time thereafter become due to contractor or form his security deposit or the proceeds of sale thereof or of a sufficient portion thereof. I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 22 From the commencement to completion of work contractor shall take full responsibility for the care of the work including all temporary works and in case any damages, occur from any cause whatsoever he shall at his own cost, repair and make good the same so that on completion, work shall be in good order and in conformity, in every respect, with the requirements of contract and as per the instructions of the Engineer-in-charge. If at any time before the work is taken over, the Engineer-in-charge shall - a) Decide that any work done or materials used by the contractor are defective or not in accordance with the contract or that work or any portion thereof is defective or do not fulfil the requirements of contract (ail such materials being herein after called defects in this clause) he shall, as soon as reasonably practicable, give notice to contractor in writing of the said defect specifying particulars of the same then contractor shall at his own expense and with all speed make good the defects so specified. b) In case contractor fails to do so, owner may take, at the cost of the contractor, such steps as may in all circumstances be reasonable to make good such defects. The expenditure so incurred by owner will be recovered from the amount due to contractor. The decision of Engineer-in-charge with regard to the amount to be recovered from contractor will be final and binding on the contractor.” 7.2 In light of the above the above terms of the contract, we are of the considered view that the assessee is not acting as a mere “works contractor” in respect of this project. The assessee has developed a new infrastructure facility. The assessee has also taken the responsibility of complete handholding of the project and also additional maintenance for 5 years post completion of project. I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 23 7.3 Accordingly, we are of the view, that Ld. CIT(Appeals) has not erred in facts and in law in holding that the assessee is eligible for claim of deduction under section 80-IA (4) of the Act in respect of project Number 6. Contract No. 3: GIDC Halol Road: 7.4 In this case, Ld. CIT(Appeals) while allowing the relief with the following observations: “11.2 The contract at Sr. No. 3 was entered between the Gujarat Industrial Development Corporation and the appellant. It was a contract for up-gradation of industrial infrastructure works of roads (concrete roads). SWD and street lights for Veraval Industrial Estate by removing the existing asphalt under CIP scheme (Part-l)- 2 nd time, construction of W.M.M. roads including CD works, SWD with asphalting and street lights at Nakhtrana Industrial Estate, construction of WMM road with asphalt work by DMP and street lights and PF and construction of earthen SWD and pipe C.D. works at Gondal-ll, Individual estate Estimated cost of the project was of Rs. 14,17,04,0007- The project was to be completed within a period of 12 months and maintenance period was for a period of 5 years after completion of the construction. The appellant undertook an obligation to design the project which was approved by the competent authority and was assigned with the duty to develop the facility, the ' appellant was fully responsible to execute and complete the work. He was given possession of the land and property during the period of development agreement and he used to exercise complete domain over the land and the project, he had to arrange finances, suitable man- power, machinery and equipments and managerial force. The risk in execution of work was also undertaken by the assessee as he was responsible for any damage or loss to the property. The assessee had to develop the infrastructure facility and in the process all the works were to be executed by him. It may be laying of drainage system, provision of way for traffic etc. without any hindrance. The assessee's duty was to develop infrastructure whether it involved construction of I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 24 a particular item as agreed to in the agreement or not. The agreement was not for a specific wok, it was for development of the facility as a whole. The assessee was not entrusted with any specific work to be done by him. The material required was to be brought in by the assessee by adhering to the quality and quantity irrespective of cost of such material. The employer did not provide any material to the assessee. Thus, the contract was provided for the works in package and not as a works contract. The assessee utilized its funds, its expertise, its employees and took the responsibility of developing the infrastructure facility. The losses suffered either by the employer, the workers of the developer or the people in the process of such development would be that of the assessee. The appellant handed over the developed infrastructure facility to the Gujarat Industrial Development Corporation on completion of the infrastructure facility. The terms and conditions of the contract were similar to those as mentioned in the contracts entered between a developer and the government or its agencies for developing any infrastructure facility for public utility. After having regard to the terms and conditions of the agreement for development of the infrastructure facility, the rulings of the courts and position of law on the issue, in my opinion, the assessee acted as a developer because he developed infrastructure facility and handed over the same to the authority concerned with guarantee period for maintenance thereof, therefore, the assessee was eligible for claim of deduction u/s.80IA (4)(i) of the Act. Accordingly, the same is allowed.” 7.5 From the reading of the contention of the Ld. CIT(Appeals) order, the work included primarily up-gradation work of industrial infrastructure of roads, SWD and street lights by removing the existing asphalt and other associated works etc. From the terms of the contract, primarily the work seems to involve restoration/upgradation/strengthening/maintenance of “existing” infrastructure. The scope of work, in our view does not involve “development” of an infrastructure facility, as envisaged within the meaning I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 25 of section 80-IA (4) of the Act. The work primarily has upgraded/strengthened the existing projects, but no development of infrastructural facility, in our view has taken place. Although, the assessee has undertaken responsibility of maintenance of the project after 60 months after completion of the project, however, looking into the totality of facts, we are of the considered view that the assessee is not eligible for deduction under section 80-IA (4) of the Act. The ITAT Bangalore in the case of GMR Tambaram Tindivanam Expressways Ltd v DCIT in I.T.A Nos.545 & 546/Bang/2018, held that a clear distinction can be made between widening an existing road by constructing additional lanes as part of the highway project vis-à-vis improving, maintaining and refurbishing an existing road. For a specific patch of road, as the taxpayer was only operating and maintaining an already existing four lane road by strengthening it, no new infrastructure facility came into existence. Laying a service road and laying a main line were two different activities and laying a service road could not be termed as a new infrastructure facility, to claim deduction under section 80-IA of the Act. 7.6 Accordingly, we are of the view that Ld. CIT(Appeals) has erred in facts and in law in holding that the assessee is eligible for claim of deduction under section 80-IA (4) of the Act in respect of contract number 3 as mentioned above. 7.7 Accordingly, we are of the view that the assessee is not eligible for claim of deduction under section 80-IA (4) of the Act in respect of contract number 3. I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 26 Contract number 4: GIDC Panoli Road: 7.8 In this case, Ld. CIT(Appeals) while allowing the relief with the following observations: “11.3 The contract at Sr.No.4 was entered between the Gujarat Industrial Development Corporation and the appellant. It was a contract for Construction of R.C.C. S.W.D. at Panoli Industrial Estate. The work was to be performed including all general works preparatory to the construction of road and all other related works. The work included work of any kind necessary for the due and satisfactory construction, completion and maintenance of the works to the intent and meanings of the drawings and these specification and further drawings and orders that may be issued by the engineer from time to time. The scope of work included compliance by the contractor with all genera! condition of contract, whether specifically mentioned or not in the various clauses of these specifications, all materials, apparatus, plant, equipment, tools, fuel, watering, strutting, timbering, transport, offices, stores, workshop, staff, labour and provision of proper and sufficient protective work, diversions, temporarily fencing and lighting. It shall also include safety of workers, first-aid equipments, suitable, accommodation staff and workman with adequate sanitary arrangement, the effecting and maintenance of all insurance, the payment of all wages, salaries, fees, royalties, duties or other charges arising out of the erection of the work and the regular clearance of rubbish, reinstatement and cleaning up of the site as may be required on completion of works, safety of the public and protection of the works and adjoining land. The contractor shall ensure that all actions are taken to build in quality insurance in the planning and execution of the work. The quality insurance shall cover all stages of work, such as setting out, selection of materials, section of construction method, section of equipment and plant, deployment of personnel and supervisory staff, quality control, testing etc. The work of building in quality insurance shall be deemed to be covered in this scope of the work. I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 27 The appellant undertook an obligation to design the project which was approved by the competent authority and was assigned with the duty to develop the facility, the appellant was fully responsible to execute and complete the work. He was given possession of the land and property during the period of development agreement and he used to exercise complete domain over the land and the project, he had to arrange finances, suitable man- power, machinery and equipments and managerial force. The risk in execution of work was also undertaken by the assessee as he was responsible for any damage or loss to the property. The assessee had to develop the infrastructure facility and in the process all the works were to be executed by him. It may be laying of drainage system, provision of way for traffic etc. without any hindrance. The assessee's duty was to develop infrastructure whether it involved construction of a particular item as agreed to in the agreement or not. The agreement was not for a specific wok, it was for development of the facility as a whole. The assessee was not entrusted with any specific work to be done by him. The material required was to be brought in by the assessee by adhering to the quality and quantity irrespective of cost of such material. The employer did not provide any material to the assessee. Thus, the contract was provided for the works in package and not as a works contract. The assessee utilized its funds, its expertise, its employees and took the responsibility of developing the infrastructure facility. The losses suffered either by the employer, the workers of the developer or the people in the process of such development would be that of the assessee. The appellant handed over the developed infrastructure facility to the Gujarat State Road Development Corporation Ltd. on completion of the infrastructure facility. The terms and conditions of the contract were similar to those as mentioned in the contracts entered by the government or by its agencies for developing any infrastructure ^*7|acility for public utility. After having regard to the terms and conditions of the agreement of the infrastructure facility, the rulings of the courts and position of law on the issue, in my opinion, the assessee acted as a developer because he developed infrastructure facility and handed over the same to the authority concerned with guarantee period for I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 28 maintenance. Therefore, the assessee is eligible for claim of deduction u/s. 80IA(4) (i) of the Act. Accordingly, the same is allowed.” 7.9 In order to better understand the terms of contract, we would also like to reproduce the relevant extracts of the Contract which are reproduced below: Mobilization Advance Not Applicable Vehicle Agreement Agency shall have to provide the mobilization of staff for site visit daily till completion of work. One non AC Vehicle in good condition shall have to be provided. This is mandatory to the bidder as a part of the tender but no separate claim shall be entertained. If the vehicles are not provided, the prevailing rates of the Gujarat Tourism Deptt. shall be made applicable for deduction from the bill. Site Cleaning, Survey & Levels The Whole S.W.D Width shall have to be cleaned first of ail as directed. All survey work before starting, of work as regards finalizing the alignment etc. and for taking actual levels before starting of work including plotting and quantification (with aid of related software or so) etc. shall have to be submitted by the bidder in triplicate to finalize the formation levels etc. by the competent authority to finalize the line out for actual start of work. Though the demarcation of road boundaries shall be done by Department however help in regard to supply of I labour / machinery etc. shall be done by the bidder. For interim payments, related sections, drawings, levels shall have to be submitted in accordance to acceptability to the Engineer in Charge. All the above is a part of the Mender and no extra charges shall be claimed. The existing service lines if damaged shall have I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 29 to be reinstated without charging any extra cost. For this cross section of the total road width shall have to be prepared and such hurdles of service line if found in road carpet of 10.00 mt. width shall have to be plotted on plan and submitted. Also, the amicable solution shall have to be taken jointly in consultation of the Engineer in Charge for existing service lines if obstructing the alignment or any other problem causing hurdle in progress of work. The electrical poles are to be shifted from the S.W.D to be constructed. Statutory payments shall be made by GIDC but the necessary follow up shall have to be done by the agency to achieve the targeted progress of the work. No extension in time limit, on this ground shall be entertained. MAINTENANCE GUARANTEE PERIOD: Agency shall give their offer for the maintenance and repairing for durig the 5 year mintenance Guarantee Period for the certified date of completion of the work. During this period contractor shall carried out the work tor making good and remedy or any defect which may develop or may be noticed for the work carried out by him. The year wise expenditure required to be explained on the executed work shall be offered yearly basis. PRICE ESCALATION, SECURED ADVANCE & MOBILIZATION ADVANCE: Secured advance, mobilization advance & price escalation except price adjustment shall not be paid by the G.I.D.C. For price adjustment clause for bitumen, steel, cement please refer to Clause No.59A & condition attached with Technical Bid. Star rate to be considered for price adjustment is applicable as per GIDC Star rate special condition attached with B2 agreement in place clause No.59.(A)” 8. In light of the above the above terms of the contract, we are of the considered view that the assessee is not acting as a mere “works contractor” I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 30 in respect of this project. The assessee has developed a new infrastructure facility. The assessee has also taken the responsibility of complete handholding of the project and also additional maintenance for 5 years post completion of project. 8.1 Accordingly, we are of the view, that Ld. CIT(Appeals) has not erred in facts and in law in holding that the assessee is eligible for claim of deduction under section 80-IA (4) of the Act in respect of Contract No. 4. Contract number 6: GIDC Veraval Road: 8.2 In this case, Ld. CIT(Appeals) while allowing the relief with the following observations: “11.5 The contract at Sr.No.6 was entered between the Gujarat Industrial Development Corporation and the appellant. It was a contract for up-gradation of industrial infrastructure works of roads (concrete roads), SWD and street lights for Veraval Industrial Estate by removing the existing asphalt under CIP scheme (Part-1)- 2 nd time, construction of W.M.M. including CD works, SWD with asphalting and street lights at Nakhtrana industrial Estate, construction of WMM road with, asphalt work by DMP and street lights and PF and construction of earthen SWD and pipe C.D. works at Gondal-, 11 Individual estate. Each work was to be maintained with free maintenance guarantee period of 5 years. The cost of the project was of Rs.14,14,03,175/- The project was to be completed within a period of 12 months with free maintenance period of 5 years after completion of the construction. The appellant undertook an obligation to design the project which was approved by the competent authority and was assigned with the duty to develop the facility, the appellant was fully responsible to execute and complete the work. He was given possession of the land and property during the period of development agreement and he used to exercise complete domain over the land and I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 31 the project, he had to arrange finances, suitable man- power, machinery and equipments and managerial force. The risk in execution of work was also undertaken by the assessee as he was responsible for any damage or loss to the property. The assessee had to develop the infrastructure facility and in the process all the works were to be executed by him. It may be laying of drainage system, provision of way for traffic etc. without any hindrance. The assessee's duty was to develop infrastructure whether it involved construction of a particular item as agreed to in the agreement ©r not. The agreement was not for a specific wok, it was for development of the facility as a whole. The assessee was not entrusted with any specific work to be done by him. The material required was to be brought in by the assessee by adhering to the quality and quantity irrespective of cost of such material. The employer did not provide any material to the assessee. Thus, the contract was provided for the works in package and not as a works contract. The assessee utilized its funds, its expertise, its employees and took the responsibility of developing the infrastructure facility. The losses suffered either by the employer, the workers of the developer or the people in the process of such development would be that of the assessee. The appellant handed over the developed infrastructure facility to the concerned authority on the completion of the infrastructure facility. The terms and conditions of the contract were similar to those as mentioned in the contracts entered between a developer and the government or its agencies for developing any infrastructure facility for public utility. After having regard to the terms and conditions of the agreement for development of the infrastructure facility, the rulings of the courts and position of law on the issue, in my opinion, the assessee acted as a developer because he developed infrastructure facility and handed over the same to the authority concerned with guarantee period for maintenance. Therefore, the assessee is eligible for claim of deduction u/s.80IA (4) (i) of the Act. Accordingly, the same is allowed.” 8.3 In order to better understand the terms of contract, we would also like to reproduce the relevant extracts of the Contract which are reproduced below: I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 32 Item Item of work Quantities estimated put may be more or less Tendered Rates Unit Total amt. according to estimated quantities No. In Figure In Words 1 2 3 4 5 6 PART A : Constructing Cement Concrete Road by Removing the Existing Asphalt Roads Estimate No.1) (I) FOR CEMENT CONCRETE ROAD Dismantling of existing structures like culverts, bridges, retaining walls and other structure comprising of masonry, cement concrete, wood work, steel work, including T & P and scaffolding wherever necessary, sorting the dismantled material, disposal of unserviceable material at suggested sites and stacking the serviceable material with all lifts and lead of 1000 meters etc. complete as per MoRTH Specifications Clause No. 202 1) : RCC. / Plain Cement Concrete 11) : Stone / Brick Structures in cement mortar Dismantling wire fencing incl. marking rolls and also incl. dismantling fencing posts including all earth work concrete in base and making good the disturbed ground stacking useful materials as directed & disposing of the unserviceable materials with all lead & lift etc. complete Removing the existing RCC Pipes with collars of anydiameter from C.D. works, S.W.D. & approaches to plots incl. removing & cleaning the existing pipes by taking all necessary precautions to avoid the damages to pipes & stacking the pipes with all lead and lift at store as. Directed including conveyance from site of 1) 20.00 400.00 M3 M3 2) 3) 30.00 Rmt 4) 1500.00 Rmt I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 33 work to store etc.complete Earth work in cutting in all sorts of soil and soft Murrum including Macadam / Asphalt roads & jungle cutting for new road, widening of Road, Re-sectioning & Profile correction of Road &„ other Road structures etc. as per detailed drawing and MoRTH Specifications Clause No. 301 with suitable means as approved including cutting and loading in tippers, trimming bottom and side slopes, in accordance with requirements of lines, grades and cross sections, and transporting to the embankment location within the estate limit including all lifts and lead from the end of cutting & spreading in required layer and dressing the excavated stuff for embankment for road portions as per drawing ind. Clearing and grubbing road land as per MoRTH specification clause No. 201 etc. complete as directed Loosening, leveling and Compacting original ground (As Per MoRTH Specifications Clause No. 305.3.4) supporting embankment to facilitate placement of first layer of embankment to construction the sub-grade/sub-base, scarified to a depth of 150 MM, mixed with water at OMC and then compacted by rolling so as to achieve required minimum dry density for embankment construction etc. 5) 33800.00 M3 6) complete as directed 47100.00 M2 I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 34 8.4 From the reading of the contention of the Ld. CIT(Appeals) order, the work included up-gradation of Industrial infrastructure works of Roads, SWD and Street Lights etc. From the terms of the contract, primarily the work seems to involve restoration /upgradation / strengthening /maintenance of “existing” infrastructure. The scope of work, in our view does not involve “development” of an infrastructure facility, as envisaged within the meaning of section 80-IA (4) of the Act. The work primarily is to dismantle / upgrad /strengthen the existing projects, but no altogether development of infrastructural facility, in our view has taken place. Although, the assessee has undertaken responsibility of maintenance of the project after 60 months after completion of the project, however, looking into the totality of facts, we are of the considered view that the assessee is not eligible for deduction under section 80-IA (4) of the Act. The ITAT Bangalore in the case of GMR Tambaram Tindivanam Expressways Ltd v DCIT in I.T.A Nos.545 & 546/Bang/2018, held that a clear distinction can be made between widening an existing road by constructing additional lanes as part of the highway project vis-à-vis improving, maintaining and refurbishing an existing road. For a specific patch of road, as the taxpayer was only operating and maintaining an already existing four lane road by strengthening it, no new infrastructure facility came into existence. Laying a service road and laying a main line were two different activities and laying a service road could not be termed as a new infrastructure facility, to claim deduction under section 80-IA of the Act. 8.5 Accordingly, we are of the view that Ld. CIT(Appeals) has erred in facts and in law in holding that the assessee is eligible for claim of deduction I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 35 under section 80-IA (4) of the Act in respect of contract number 6 as mentioned above. 8.6 In this case, it may be useful to refer to CIRCULAR NO. 4/2010 [F.NO. 178/14/2010-IT(A-I)], DATED 18-5-2010, wherein Board considered the issue as to whether widening of existing roads constitutes creation of new infrastructure facility for the purpose of section 80-IA(4)(i) of the Income-tax Act, 1961. Vide the above Circular, CBDT clarified that widening of an existing Road by constructing additional lanes as a part of a highway project by an undertaking would be regarded as a new infrastructure facility for the purpose of section 80-IA(4)(i). However, simply relaying of an existing Road would not be classifiable as a new infrastructure facility for this purpose. 8.7 Accordingly, we are of the view, that the assessee is not eligible for claim of deduction under section 80-IA (4) of the Act in respect of contract number 6 as mentioned above. CONTRACT NUMBER 7: GWSSB Kalyanpur Bhatiya Irrigation: 8.8 In this case, Ld. CIT(Appeals) while allowing the relief with the following observations: “11.6 The contract at Sr. No.7 was entered between NC-21 extension from Kalyanpur –Bhatiya water supply scheme, (providing, installation, testing and commissioning of GRP, pipeline network with road / railway crossing and all accessories, commissioning and O & M for three year). This project was planned to supply Narmada water to the 51 villages and 4 cities of Kalyanpur and Okhamandal taluka. This tender included providing, supplying, lowering, laying and jointing of various dia. pipe line of GRP, supplying and fixing of I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 36 various valves, railway crossings, road crossings, etc., operation and maintenance of this entire project for 36 months after completion of construction phase, supplying employer's representatives requirements like vehicles during the construction phase as per detailed specifications. The cost of the project was of Rs. 12,06,97,850/- The project was to be completed within a period of 9 months. The terms and conditions of the contract were similar to those as mentioned in the contracts entered between a developer and the government or its agencies for developing any infrastructure facility for public utility. After having regard to the terms and conditions of the agreement for development of the infrastructure facility, the rulings of the courts and position of law on the issue, in my opinion, the assessee acted as a developer because he developed infrastructure facility and handed over the same to the authority concerned with guarantee period for maintenance. Therefore, the assessee was eligible for claim of deduction u/s.80IA (4) (i) of the Act. Accordingly, the same is allowed.” 8.9 In light of the above the above terms of the contract, we are of the considered view that the assessee is not acting as a mere “works contractor” in respect of this project. The assessee has developed new infrastructure facility. The assessee has taken the responsibility of complete handholding of the project and also additional maintenance for 36 months post completion of project. 9. Accordingly, we are of the view, that Ld. CIT(Appeals) has not erred in facts and in law in holding that the assessee is eligible for claim of deduction under section 80-IA (4) of the Act in respect of contract number 7 mentioned above. I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 37 9.1 Accordingly, we are of the view, that the assessee is eligible for claim of deduction under section 80-IA (4) of the Act in respect of contract number 7 as mentioned above. Contract number 8: JMC Road: 9.2 In this case, Ld. CIT(Appeals) while allowing the relief with the following observations: “11.7 The contract at Sr.No.8 for Strengthening, widening and upgradation of asphalt road from Gulabnagar entry gate JMC limit to Subhash Bridge including asphalt carpet work. Estimated cost of the project was of Rs.4,73,80,500/- The project was to be completed within a period of 6 months and maintenance period was for a period of 5 years after completion of the construction. The terms and conditions of the contract were similar to those as mentioned in the entered between a developer and the government or its agencies for developing any infrastructure facility for public utility. After having regard to the terms and conditions of the agreement for development of the infrastructure facility, the rulings of the courts and position of law on the issue, in my opinion, the assessee acted as a developer because he developed infrastructure facility and handed over the same to the authority concerned with guarantee period for maintenance. Therefore, the assessee was eligible for claim of deduction u/s.80IA (4) (i) of the Act. Accordingly, the same is allowed.” 9.3 In addition to the observations made by Ld. CIT(Appeals), we have also perused terms of the contract/agreement and it would be useful to produce some of the terms, which would throw useful light on the additional responsibility of being undertaken by the assessee. I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 38 Name of Work : Strengthning and Upgradation of Asphalt road from Gulabnagar entry gate J limit to Subhash Bridge including vviding & Asphalt Carpet work Item Particulars Quantity Rate Unit Amount 1 Box cutting the road surface to proper slope and camber for making a base for road work including removing the excavated stuff and disposing surplus stuff as directed within three K.M. lead. 10400.00 Cum 2 Supplying crushed stone aggregate of following size iv) 40 to 63mm size 3350.00 Cum 3 Spreading stone aggregate for soling & W.B.M. including interstices to required camber & gradient (excluding spreading of blindage; (II) 40rnm to 63mm size aggregate (H.B.I 3350.00 Cum 4 Supplying and spreading Murrurn including necessary watering and rolling. 1850.00 Cum 5 Rolling and consolidation water bound macadam including watering not exceeding 150 mm thickness (main layer including binding materials) including fillings in depression which occur during process with power roller exceeding 8 tonne and not exceeding 12 tonne, (two times rolling) 31170.00 Sqmt I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 39 9.4 From the reading of the contention of the Ld. CIT(Appeals) order and the “Scope of Work” as given in the contract the work primarily included strengthening and upgradation of Asphalt road including widening and Asphalt Carpet work etc. From the terms of the contract, primarily the work seems to involve restoration /upgradation / strengthening /maintenance of “existing” infrastructure. The scope of work, in our view does not involve “development” of an infrastructure facility, as envisaged within the meaning of section 80-IA (4) of the Act. The work primarily is to dismantle / upgrade /strengthen the existing projects, but no new development of infrastructural facility, in our view has taken place. Although, the assessee has undertaken responsibility of maintenance of the project after 36 months after completion of the project, however, looking into the totality of facts, we are of the considered view that the assessee is not eligible for deduction under section 80-IA (4) of the Act. The ITAT Bangalore in the case of GMR Tambaram Tindivanam Expressways Ltd v DCIT in I.T.A Nos.545 & 546/Bang/2018, held that a clear distinction can be made between widening an existing road by constructing additional lanes as part of the highway project vis-à-vis improving, maintaining and refurbishing an existing road. For a specific patch of road, as the taxpayer was only operating and maintaining an already existing four lane road by strengthening it, no new infrastructure facility came into existence. Laying a service road and laying a main line were two different activities and laying a service road could not be termed as a new infrastructure facility, to claim deduction under section 80-IA of the Act. I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 40 9.5 In this case, it may be useful to refer to CIRCULAR NO. 4/2010 [F.NO. 178/14/2010-IT(A-I)], DATED 18-5-2010, wherein Board considered the issue as to whether widening of existing roads constitutes creation of new infrastructure facility for the purpose of section 80-IA(4)(i) of the Income-tax Act, 1961. Vide the above Circular, CBDT clarified that widening of an existing Road by constructing additional lanes as a part of a highway project by an undertaking would be regarded as a new infrastructure facility for the purpose of section 80-IA(4)(i). However, simply relaying of an existing Road would not be classifiable as a new infrastructure facility for this purpose. 9.6 Accordingly, we are of the view that Ld. CIT(Appeals) has erred in facts and in law in holding that the assessee is eligible for claim of deduction under section 80-IA (4) of the Act in respect of contract number 8 as mentioned above. 9.7 Accordingly, we are of the view that the assessee is not eligible for claim of deduction under section 80-IA (4) of the Act in respect of contract number 8 as mentioned above. Contract number 9: Sabli Dam Irrigation: 9.8 In this case, Ld. CIT(Appeals) while allowing the relief made the following observations: “11.8 The contract at Sr.No.9 was for Sabli Dam Works Contract Agreement No.B-2/1-2007-08 entered between the Govt. of Gujarat, Narmada Water Resources, Water Supply Kalpsar Department and the appellant for construction of earthen dam, spillway masonry, spillway bridge and head regulator. Construction was to be made of I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 41 the Earthen dam in a length of 4235 mt. having maximum height, construction of remaining Ogee shaped gated Masonry Spillway in length of 125.00 mt. in river gorge portion, construction of Head Regulator, Channel 3100 mt. on left bank, other ancillary work of relevant items like R.C.C. Spillway Bridge for all the above types of works. The work to be performed included all general works, preparatory to the construction of road and all other related works. The work also included work of any kind necessary for the due and satisfactory construction completion and maintenance of the work to the intent and meanings of the drawings and these specification and further drawings and orders that may be issued by the engineer from time to time. The scope of work also included compliance by the contractor with all general condition of contract, whether specifically mentioned or not in the various clauses of these specifications, all materials, apparatus, plans, equipment, tools, fuel, watering, strutting, timbering, transport, offices, stores, workshop, staff, labour and provision of proper and sufficient protective work, diversions, temporarily fencing and lighting. It would also include safety of workers, first-aid equipments, suitable accommodation to staff and workman with adequate sanitary arrangement, the effecting and maintenance of all insurance, the payment of all wages, salaries, fees, royalties, duties, or other charges arising out of the erection of the work and the regular clearance of rubbish, reinstatement and cleaning up of the site as may be required on completion of works, safety of the public of the works and adjoining land.. The contractor should ensure that all actions are taken to built in quality insurance in the planning and execution of the work. The quality insurance should cover all stages of work, such as setting out, section of materials, section of construction method, selection of equipment and plant, deployment of personnel and supervisory staff, quality control, testing etc. The work of building in quality insurance shall be deemed to be covered in this scope of the work. The cost of contract was of Rs.10,20,09,748/- and it was to be completed within a period of 18 months. The Contractor had to give 12 months free maintenance guarantee period from the certified date I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 42 of taking over. During this period the contractor was to repair the damaged portion of any portion of the project. The terms and conditions of the contract were similar to those as mentioned in the contracts entered between a developer and the government or its agencies for developing any infrastructure facility for public utility. After having regard to the terms and conditions of the agreement for development of the infrastructure facility, the rulings of the courts and position of law on the issue, in my opinion, the assessee acted as a developer because he developed infrastructure facility and handed over the same to the authority concerned with guarantee period for maintenance. Therefore, the assessee was eligible for claim of deduction u/s. 80lA (4) (i) of the Act. Accordingly, the same is allowed.” 9.9 In light of the above the above terms of the contract, we are of the considered view that the assessee is not acting as a mere “works contractor” in respect of this project. The assessee has developed new infrastructural facility. The assessee has taken the responsibility of complete handholding of the project and also additional maintenance for 12 months post completion of project. 10. Accordingly, we are of the view, that Ld. CIT(Appeals) has not erred in facts and in law in holding that the assessee is eligible for claim of deduction under section 80-IA (4) of the Act in respect of contract number 9 mentioned above. Contract No. 10: Tapi River Kathor Amboli PKG-6 Irrigation 10.1 In this case, Ld. CIT(Appeals) while allowing the relief to the assessee, made the following observations: I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 43 “11.9 The contract at Sr. No. 10 was an agreement entered between the Govt. of Gujarat and the appellant for providing protection and strengthening of existing flood protection earthen embankment on the bank of river Tapti River Kathor PKG-6 Irrigation. The work included restoration, raising and strengthening of existing flood protection earthen embankment on the bank of river Tapi, Rander- Kathor-Amboli falling under the jurisdiction of Surat Canal Division, Surat in Surat city limit. The tender covered protection of earthen embankment by gabions filled with rubble above layer of geofabric filter and sand-grave! bags as directed by Engineer-in-Charge. The main items executed in the tender were earth work in embankment, Geofabric filter, Compaction of earthwork and Rock fill wire gabion. The work was executed in the length of 1050 mtr. with qty. of earthwork of 77389m3, geo-fabric filter of 32871m2, gabions of (1.5x1.0x0.6 mt.) in 32871 nos., Rope Gabion (1.5x1.0x0.6 mtr) and gabion (4.0x1.0x1.0 mtr.) in 263 nos. This work was to be completed according to a time bound programe. The cost of the contract was of Rs,10,88,54,285/- The project was to be completed within a period of 15 months and maintenance period was for a period of 12 months after completion of the project. The terms and conditions of the contract were similar to those as mentioned in the contracts entered between a developer and the government or its agencies for developing any infrastructure facility for public utility. After having regard to the terms and conditions of the agreement for development of the infrastructure facility, the rulings of the courts and Position of law on the issue, in my opinion, the assessee acted as a developer because he developed infrastructure facility and handed over the same to the authority concerned with guarantee period for maintenance. Therefore, the assessee was eligible for claim of deduction u/s.80IA (4) (i) of the Act. Accordingly, the same is allowed.” 10.2 From the reading of the contention of the Ld. CIT(Appeals) order, the work included primarily restoration, raising and strengthening of existing flood protection earthern embankment on the bank of river Tapi. The tender covered protection of earthern embankment by gabions filled with the rubble I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 44 above layer of geo-fabric filter and sand gravel bags as directed by engineer- in charge. From the terms of the contract, primarily the work seems to involve restoration/upgradation/strengthening/maintenance of “existing” flood protection earthern embankment on the bank of river Tapi. The scope of work, in our view does not involve “development” of an infrastructure facility, as envisaged within the meaning of section 80-IA (4) of the Act. The work primarily has upgraded/strengthened the existing projects, but no development of infrastructural facility, in our view has taken place. Although, the assessee has undertaken responsibility of maintenance of the safer. 12 months after completion of the project, however, looking into the totality of facts, we are of the considered view that the assessee is not eligible for deduction under section 80-IA (4) of the Act. The ITAT Bangalore in the case of GMR Tambaram Tindivanam Expressways Ltd v DCIT in I.T.A Nos.545 & 546/Bang/2018, held that a clear distinction can be made between widening an existing road by constructing additional lanes as part of the highway project vis-à-vis improving, maintaining and refurbishing an existing road. For a specific patch of road, as the taxpayer was only operating and maintaining an already existing four lane road by strengthening it, no new infrastructure facility came into existence. Laying a service road and laying a main line were two different activities and laying a service road could not be termed as a new infrastructure facility, to claim deduction under section 80-IA of the Act. 10.3 Accordingly, we are of the view that Ld. CIT(Appeals) has erred in facts and in law in holding that the assessee is eligible for claim of deduction under section 80-IA (4) of the Act in respect of contract number 10 as I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 45 mentioned above. Accordingly, we are of the view that the assessee is not eligible for claim of deduction under section 80-IA (4) of the Act in respect of contract number 10. Contract No. 11: Tapi River Varivav PKG-3 Irrigation 10.4 In this case, Ld. CIT(Appeals) while allowing the relief with the following observations: “11.10 The contract at Sr.No.11 was entered between the Govt. of Gujarat and the appellant for irrigation of Tapi River Varivav PKG- 3. The work consisted of restoration, raising, providing protection and strengthening of existing flood protection earthen embankment on the bank of river Tapi, at Vill. Varivav under the jurisdiction of Surat Canal Division, Surat. The tender covered protection of earthen embankment by gabions filled with rubble above layer of geofabric filter and sand-gravel bags as directed by Engineer-in- Charge. The main items executed in the teder were earth work in embankment, Geofabric filter, Compaction of earthwork and Rock fill wire gabion. The work was executed in the length of 3710 mtr. with qty. of earthwork-246428m3, geofabric filter-105806m2, gabions (1.5x1.0x0.6 mt.)-62096 nos., Rope Gabion(1.5x1.0x0.6mtr) and gabion (4.0x1.0x1.0 mtr.)-928 nos. The restoration, raising, strengthening and providing protection to earthen embankment of the existing flood protection works, on bank of river Tapi at village Varivav was carried with earth work, geo fabric filter, rock filled gabion 1.5 mt. x 1.00 ml x 0.6 ml, 4.0 mt. x 1.0 mt. x 1.0 mt. and rope gabion 1.5 mt. x 1.0 mt. 0.6 mt. The cost of contract was of Rs. 23,56,57,1497- The project was to be completed within a period of 15 months and maintenance period was for a period of 12 months after completion of the project. The terms and conditions of the contract were similar to those as mentioned in the contracts entered between a developer and the government or its agencies for developing infrastructure facility for public utility. After having regard to the terms and conditions of the agreement for development of the infrastructure facility, the rulings I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 46 of the courts and proposition of law on the issue, in my opinion, the assesses acted as a developer because he developed infrastructure facility and handed over the same to the authority concerned with guarantee period for maintenance. Therefore, the assessee was eligible for claim of deduction U/S.80IA (4) (i) of the Act. Accordingly, the same is allowed.” 10.5 From a perusal of the contention of the order passed by Ld. CIT(Appeals), the scope and contents of contract number 11 and contract number 10 mentioned above are similar. Accordingly, observations in respect of contract number 10 would apply to contract number 11 as well. Accordingly, Accordingly, we are of the view that Ld. CIT(Appeals) has erred in facts and in law in holding that the assessee is eligible for claim of deduction under section 80-IA (4) of the Act in respect of contract number as mentioned above. 10.6 Accordingly, we are of the view that the assessee is not eligible for claim of deduction under section 80-IA (4) of the Act in respect of contract number 11. Contract No. 12: GIDC Chemical Zone Dahej Road 10.7 In this case, Ld. CIT(Appeals) while allowing the relief with the following observations: “11.11 The contract at Sr.No.12 was between the Gujarat State Road Development Corporation Ltd. and the appellant for construction of roads in G!DC Chemical Zone Dahej contract was for construction of roads including SWD, Street light, providing water supply distribution network system and providing treated effluent collection network system for chemical zone at Dahej. It was construction of four lane asphalt road in chemical sector at Dahej in a length of about 3250 mtrs, with provision of a center verge 1 I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 47 mtr. wide for dividing the traffic moving in opposite directions, pucca sides shoulders of 1.5 mtrs. width were to be constructed on either side of roads for allowing facility of pedestrian traffic/two wheelers to move on the pucca side shoulder duly segregated from the heavy traffic in the main lane, pucca portion of side shoulder could also be used for road widening in future, construction of two lane asphalt road in length of about 800 mtrs. This portion of road was also proposed to have a pucca side shoulder of 1 mtr wide segregated from the trafficable lane for slow moving and pedestrian traffic and for use of widening in future, construction of RCC storm water drains on both sides of the roads for effective surface run off from the chemical zone away from the chemical zone through a outfall RCC storm water drain, so as to prevent the water logging in the area and keeping the road structure safe for long life and utility. Necessary support was provided for crossing the storm water drain run of to flow under the carriage way through RCC box culvert at an appropriate location and care was also taken for providing service duct on one side of the road and facility of crossing the service pipeline, cables, water supply lines, existing chemical pipeline, gas pipeline and other pipeline was to be laid in future under the traffic lane for crossing without any road portion to be excavated. Such facility was to be provided by encased RCC pipe under carriageway, construction of water supply network in the chemical sector to feed water to each and every industry to the required standard of the industrial needs through a network of D1 pipeline K-7 grade in a length of about 7250 mtrs. The diameter pipeline proposed to laid varies from 150 mm. dia to 400 mm dia., effluent collection system for conveyance of industrial effluent from individual industries to the final pumping station by GIDC through the system of HOPE pipeline (6 kg. grade) of varying from 160 to 800 dia in a length of about 8 kms. The conveyance pipe line is technically planned and designed with 2 nos. of lifting station at different location, as shown tn the drawings with the documents provision is also made in developing the road by cost effective, efficient road lighting for the traffic to move safely at night. Necessary safety boards, safety road markings and glow shine road dividers were to be installed on the 4 lane and 2 lane carriageway system. I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 48 The cost of the contract was of Rs.31,51,40,326/-.The project was to be completed within a period of 11 months and free maintenance period was for a period of 60 months after completion of the project. The terms and conditions of the contract were similar to those as mentioned in the contracts entered between a developer and the government or its' agencies for developing any infrastructure facility for public utility. After having regard to the terms and conditions of the agreement for development of the infrastructure facility, the rulings of the courts and position of law on the issue, in my opinion, the assessee acted as a developer because he developed infrastructure facility and handed over the same to the authority concerned with guarantee period for maintenance. Therefore, the assessee was eligible for claim of deduction u/s. 80IA (4) (i) of the Act. Accordingly, the same is allowed.” 10.8 In light of the above the above terms of the contract, we are of the considered view that the assessee is not acting as a mere “works contractor” in respect of this project. The assessee has developed a new infrastructure facility. The assessee has taken the responsibility of complete handholding of the project and also additional maintenance for 60 months post completion of project. 10.9 Accordingly, we are of the view, that Ld. CIT(Appeals) has not erred in facts and in law in holding that the assessee is eligible for claim of deduction under section 80-IA (4) of the Act in respect of contract number 12 mentioned above. Contract No. 13: GIDC Sez Dahej Road 11. In this case, Ld. CIT(Appeals) while allowing the relief with the following observations: I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 49 “11.12 Tender at S.No13 was for the work of providing infrastructure for DSL (Daheh SEZ Limited) at Dahej (Package-ll). The scope of work included construction of two lane and three lane concrete roads with paved site shoulders. The contractor was required to provide a]PTn^te71aV~tatrotH7-consumables, tools and tackles, equipments and machineries etc. to complete the entire work in all respect, as mentioned in Tender documents, the work shall include site cleanings, jungle, cutting, making temporary approach to site of work, laisoning and coordination with local people and local authorities for smooth working. However, acquiring permission shall be the responsibilities of co-developer, the contractor shall have to work within the permissible Right of Wav (ROW) only and any damage to private properties shall be full responsibility of the contractor including compensation. The contractor would cooperate with local people to maintain cordial working environment and take full care to minimize hassles to the local people while working. The contractor should, upon the completion of works, hand over the site of works in neat and clean manner free of any debris out construction materials roads, RCC storm water drains with box culverts, street lights, water supply effluent collection system. Any other works not specifically mentioned but required for completing the work, in a! ^aspect, was to be provided by the contractor without additional cost to the co-developer. I instruction of RCC storm water drain on both sides of roads for effective surface run off from the Dahej SEZ Ltd. through a outfall RCC Storm water drain so as to prevent water bgging in the area and keeping the roads' structure safe for long life and utility. Necessary support was to be provided for crossing the storm water drain run of to flow under the carriage way through RCC box culvert at an appropriate location and care was also to be taken for providing facility of crossing the service pipeline, cables, water supply lines existing chemical pipeline, gas pipeline and other pipeline is to be laid in future under the traffic lane for crossing without any road portion to be excavated, construction of water supply network in the Dahej SEZ Ltd. to feed water to each and every industry to Jhe required standard of the industrial needs through a network with Pipeline K-7 grade pipes. Effluent collection system for conveyance of industrial effluent from chemical industries I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 50 to the local pumping stations constructed by GIDC, provision was also to be made in developing signs for the traffic to move safely at night including necessary safety boards, safety road markings and glow sign road dividers. It was duty of the contractor to procure required clearances for commencing and completing the works for infrastructure development for SEZ at Dahej, surveying and setting out of works and other pre-construction stage activities as required by RIPL/GIDC etc. The cost of the contract was of Rs.59,55,06,849/-. The project was to be completed within the stipulated period with free maintenance as per the terms of the agreement. The terms and conditions of the contract were similar to those as mentioned in the contracts entered between a developer and the government or its agencies for developing any infrastructure facility for public utility. After having regard to the terms and conditions of the agreement for development of the infrastructure facility, the rulings of the courts and position of law on the issue, in my opinion, the assessee acted as a developer because he developed infrastructure facility and handed over the same to the authority concerned with guarantee period for maintenance. Therefore, the assessee was eligible for claim of deduction u/s. 80IA (4) (i) of the Act. Accordingly, the same is allowed. Thus, the grounds of appeal on the issue of claim of deduction u/s.80IA (4) of the partly allowed.” 11.1 In light of the above the above terms of the contract, we are of the considered view that the assessee is not acting as a mere “works contractor” in respect of this project. In this case, it may be useful to refer to CIRCULAR NO. 4/2010 [F.NO. 178/14/2010-IT(A-I)], DATED 18-5-2010, wherein Board considered the issue as to whether widening of existing roads constitutes creation of new infrastructure facility for the purpose of section 80-IA(4)(i) of the Income-tax Act, 1961. Vide the above Circular, CBDT I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 51 clarified that widening of an existing Road by constructing additional lanes as a part of a highway project by an undertaking would be regarded as a new infrastructure facility for the purpose of section 80-IA(4)(i). However, simply relaying of an existing Road would not be classifiable as a new infrastructure facility for this purpose. 11.2 Accordingly, we are of the view, that Ld. CIT(Appeals) has not erred in facts and in law in holding that the assessee is eligible for claim of deduction under section 80-IA (4) of the Act in respect of contract number 13 mentioned above. 11.3 In the combined result, the Department’s appeal is partly allowed. Now we shall take of the assessee’s appeal. Assessee’s Appeal: 12. The assessee is in appeal before us in respect of projects for which Ld. CIT(Appeals) has denied the claim of deduction under section 80-IA (4) of the Act. As noted earlier, Ld. CIT(Appeals) has made specific observation in respect of each project, before denying the claim of the assessee. We shall reproduce the observations made by Ld. CIT(Appeals) in respect of each of the projects to decide whether the assessee was eligible for claim of deduction under section 80-IA (4) of the Act in respect of the above projects. Contract No. 1: Bhavnagar Irrigation: 12.1 In this case, Ld. CIT(Appeals) while disallowing the claim of deduction u/s 80-IA(4) of the Act with the following observations: I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 52 “11. The contract at Sr. No 1 was entered between Narmada Water Resource & Kalpsar Department, Bhavnanar irrigation Circle and and the appellant for Paver Lining of Shetrunji irrigation project having two main canals viz. Right Bank Canal and Left Bank canal for irrigation purpose. The work included modification of canal in both Palitana and Talaja Taluka of Bhavnagar District with Paver Lining of Left Bank Main canal between Channel 1830 to 64540 mt. and in right bank main canal between Channel 28050 to 36405 mt. and in branch B.1 between Channel 0 to 2950 mt. The terms and conditions of the contract agreement of work revealed that it was a work consisting of repairing of existing canals, channels and constructing concrete lining in the canal for a smooth and efficient flow of water. Thus, the nature of work makes it abundantly clear that the appellant did not develop any infrastructure facility, hence, in my opinion, the work of this contract was not eligible of benefit of section 80IA(4) of the Act. This view is supported by the decision of Indwell Lining (P) Ltd. reported in 122 TTJ (Chennai) 2009 also. Accordingly, the action of the A.O. is confirmed.” 12.2 From perusal of the observations made by Ld. CIT(Appeals), it is evident that the assessee has not developed any infrastructure facility but only rendered services of civil work in the form of repairing and restoration of the existing canals. 12.3 Accordingly, in our view, we find no infirmity in the order of Ld. CIT(Appeals) with respect to Contract Number 1. Accordingly, in our view, the assessee is not eligible for claiming deduction under section 80-IA of the Act in respect to Contract number 1. I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 53 Contract No. 5: GIDC Bamanbore Road: 12.4 In this case, Ld. CIT(Appeals) while disallowing the claim of deduction u/s 80-IA(4) of the Act with the following observations: “11.4 The contract at Sr.No.5 was entered for up-gradation works for existing roads, earthen surface S'WD, street lights & water supply with maintenance of guarantee period of five years at Barnanbore Industrial Estate-11. Road network included dismantling of existing structure like culverts, bridges, retaining, walls and other structure comprising of masonry, cement concrete, wood work, steel work, including T& P and scaffolding wherever necessary, sorting the dismantled material, disposal of unserviceable material at suggested sites and stacking the serviceable material with all lifts and lead at 1000 meters etc. Removing the existing RCC pipes with collars of any diameter from C.D. works, S.W.D. and approaches to plot including removing and cleaning the existing pipes by taking all necessary precautions to avoid the damages to pipes and stacking the pipes with all lead and lift at store as directed including conveyance from site of work to store etc, providing and applying primer coat with VG-10 (80/100) Bitumen complying with IS : 73-2006 at the rate of 7.50 kg. per 10 M2 of road area over prepared surface of granular base (as per MoRTH specifications clause no.502) by using Bitumen pressure distributer for spraying the primer uniformly at the rates 7.50 kg. per 10 The terms and conditions of the contract agreement of work revealed that it was a work consisting of repairing of existing raods. Thus, the nature of the work makes it abundantly clear that the appellant did not develop any infrastructure facility, hence, in my opinion, the work of this contract was not eligible of benefit of section 80IA(4) of the Act. Accordingly, the action of the A.O. is confirmed.” 12.5 From perusal of the observations made by Ld. CIT(Appeals), it is evident that the assessee has not developed any infrastructure facility but only rendered services of civil work in the form of repairing and restoration I.T.A Nos. 129 & 150/Rjt/2015 A.Y. 2011-12 Page No Backbone Enterprise Ltd. vs. DCIT & ACIT vs. Backbone Enterprise Ltd. 54 of the existing road and additional associated infrastructure. In this case, it may be useful to refer to CIRCULAR NO. 4/2010 [F.NO. 178/14/2010- IT(A-I)], DATED 18-5-2010, wherein Board clarified that widening of an existing Road by constructing additional lanes as a part of a highway project by an undertaking would be regarded as a new infrastructure facility for the purpose of section 80-IA(4)(i). However, simply relaying of an existing Road would not be classifiable as a new infrastructure facility for this purpose. 12.6 Accordingly, Accordingly, in our view, we find no infirmity in the order of Ld. CIT(Appeals) with respect to Contract Number 5. 12.7 Accordingly, in our view, the assessee is not eligible for claiming deduction under section 80-IA(4) of the Act respect to Contract number 5. 12.8 In the result, appeal of the assessee is dismissed. 13. In the combined result, the appeal of the Department is partly allowed and the appeal of the assessee is dismissed. Order pronounced in the open court on 28-09-2022 Sd/- Sd/- (WASEEM AHMED) (SIDHHARTHA NAUTIYAL) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad: Dated 28/09/2022 Tanmay, Sr. P.S. TRUE COPY आदेश क त ल प अ े षत / Copy of Order Forwarded to:- 1. Assessee 2. Revenue 3. Concerned CIT 4. CIT (A) 5. DR, ITAT, Ahmedabad 6. Guard file. By order, Assistant Registrar, Income Tax Appellate Tribunal, Rajkot
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