Rithwik Projects Private Limited, Hyderabad V. Dy.CIT., Circle-3(1), Hyderabad

ITA 1552/HYD/2014

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6399 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 8 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 04-07-2016
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: B
• Next Hearing Date: 05-04-2016
• Assessment Year: 2010-2011
• Appeal Filed On: 08-10-2014
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: P SOMASEKHAR REDDY
• Assessee Lawyers: P MURALI MOHAN RAO
• Keywords: Unexplained expenditure; Additional evidence; Revised return
• Section: 40A(3); 143(3); 80G; 131

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCHES A : HYDERABAD BEFORE SMT. P. MADHAVI DEVI, JUDICIAL MEMBER AND SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER ITA.NO.1781/HYD/2013 ASSESSMENT YEAR 2009-2010 M/S. RITHWIK PROJECTS P. LTD., HYDERABAD. PAN AABCR5748L VS. JCIT, CIRCLE - 3(1) HYDERABAD. (APPELLANT) (RESPONDENT) ITA.NO.1552/HYD/2014 ASSESSMENT YEAR 2010-2011 M/S. RITHWIK PROJECTS P. LTD., HYDERABAD. PAN AABCR5748L VS. JCIT, CIRCLE - 3(1) HYDERABAD. (APPELLANT) (RESPONDENT) [[ FOR ASSESSEE : MR. P. MURALIMOHAN RAO FOR REVENUE : MR. P. SOMASEKHAR REDDY DATE OF HEARING : 05.04.2016 DATE OF PRONOUNCEMENT : 04 .07.2016 ORDER SMT. P. MADHAVI DEVI, J.M. BOTH THE ABOVE ARE ASSESSEES APPEALS FOR THE A.Y S. 2009-10 AND 2010-2011 RESPECTIVELY. IN THESE APPEAL S, THE ASSESSEE IS MAINLY AGGRIEVED BY THE DISALLOWANCE OF ASSESSEES CLAIM OF DEDUCTION UNDER SECTION 80IA(4) OF THE I.T . ACT AND THE CONSEQUENT ADDITION. IN THE APPEAL FOR THE AY 2009- 2010 GROUNDS 2 TO 4 ARE AGAINST THE ABOVE DISALLOWANCE W HILE THE OTHER GROUNDS 5 TO 7 ARE AGAINST THE (I) ADDITION O F RS.17,70,000 2 ITA.NOS. 1781/H/2013 & 1552/H/2014 M/S. RITHWIK PROJECTS P. LTD., HYDERABAD. MADE BY THE A.O. TOWARDS UNEXPLAINED EXPENDITURE; ( II) ADDITION OF RS.9 LAKHS MADE BY THE A.O. TOWARDS UNEXPLAINED EXPENDITURE; AND (III) ADDITION OF RS.21,35,295 BY WAY OF DISALLOWANCE UNDER SECTION 40A(3) OF THE I.T. ACT R ESPECTIVELY. 2. AT THE TIME OF HEARING, THE LD. COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS NOT INTERES TED TO PRESS GROUND OF APPEAL NO.5 AGAINST THE ADDITION OF RS.17 ,70,000. THE SAID GROUND OF APPEAL IS ACCORDINGLY REJECTED AS NO T PRESSED. 3. AS REGARDS THE GROUNDS OF APPEAL NOS. 2 TO 4 AG AINST THE DISALLOWANCE OF THE CLAIM OF DEDUCTION U/S 80IA (4) OF THE ACT, THE BRIEF FACTS OF THE CASE ARE AS FOLLOWS:THE ASSESSEE COMPANY IS ENGAGED IN THE BUSINESS OF EXECUTING CON TRACTS LIKE DAMS, ROADS, BRIDGES, TUNNELS, RESERVOIRS AND CANAL S ETC., IT FILED ITS ORIGINAL RETURN OF INCOME FOR THE A.Y. 2009-201 0 ON 30.09.2009 DECLARING INCOME OF RS.50,83,53,564 WITH OUT MAKING ANY CLAIM UNDER CHAPTER-VIA OF THE I.T. ACT. SUBSEQ UENTLY, THE ASSESSEE FILED ITS REVISED RETURN OF INCOME ON 09.0 3.2010 DECLARING INCOME OF RS.23,34,33,257 AFTER CLAIMING DEDUCTION OF RS.34,24,73,802 UNDER SECTION 80IA OF THE I.T. ACT. 4. DURING THE ASSESSMENT PROCEEDINGS UNDER SECTION 143(3) OF THE I.T. ACT, THE A.O. CALLED FOR VARIOUS DETAILS W HICH WERE FILED BY THE ASSESSEE. ON PERUSAL OF THE SAME, THE A.O. OBSE RVED THAT THE ASSESSEE COMPANY HAD CARRIED OUT EXECUTION OF CERTA IN CONTRACT WORKS AND HAD CLAIMED DEDUCTION UNDER SECTION 80IA( 4) OF THE ACT TO THE TUNE OF RS.34,24,73,802 BEING 100% OF TH E PROFITS FROM THE CONSTRUCTION OF KOTESHWAR DAM AT UTTARAKHA ND, IN THE REVISED RETURN OF INCOME FILED BY THE ASSESSEE ON 0 9.03.2010. 3 ITA.NOS. 1781/H/2013 & 1552/H/2014 M/S. RITHWIK PROJECTS P. LTD., HYDERABAD. THE A.O. OBSERVED THAT AS PER THE PROVISIONS OF SEC TION 80IA(4) AND THE EXPLANATION THERETO, THE BENEFIT OF THE DED UCTION UNDER SECTION 80IA IS NOT ALLOWABLE TO WORKS CONTRACTS, I NCLUDING THOSE WHO ARE AWARDED SUCH CONTRACTS BY THE GOVERNMENT IT SELF. HE ALSO CONSIDERED THE CBDT CIRCULAR NO.14 OF 2001 WHI CH STATES THAT THE APPLICABLE SCHEMES ARE EITHER BOT (BUILT, OWN AND TRANSFER) OR BOOT (BUILT, OWN, OPERATE AND TRANSF ER). HE OBSERVED THAT IN BOTH THE CLAIMS, THE ASSESSEE SHAL L NOT ONLY BUILD BUT ALSO OWN THE INFRASTRUCTURE FACILITY BEFO RE IT IS TRANSFERRED. AFTER CONSIDERING THE BUDGET SPEECH F OR 1995-1996 WHICH WAS DELIVERED BY THE THEN MINISTER OF FINANCE ON 15 TH MARCH, 1995, SETTING OUT THE INTENTION BEHIND INTRO DUCING THE DEDUCTION, THE A.O. HELD THAT THE LEGISLATURE INTEN DED THAT THE BENEFIT OF DEDUCTION WAS MEANT TO BE EXTENDED ONLY TO THOSE PRIVATE ENTERPRISES WHICH DEVELOP INFRASTRUCTURE FA CILITY IN THE COLLECTIVE ROLE OF A FUNDS INVESTOR BUILDER OPE RATOR, BUT NOT MERELY AS A WORKS CONTRACTOR. 4.1. THEREAFTER, THE AO PROCEEDED TO EXAMINE THE N ATURE OF WORKS UNDERTAKEN BY THE ASSESSEE AND THE VARIOUS CLAUSES OF SUB-CONTRACT AGREEMENT AND OBSERVED THAT THE SUB-CO NTRACT WAS ONLY FOR EXECUTION OF THE WORK CONTRACT RECEIVED BY THE PCL INTERTECH LENHYDRO CONSORTIUM JV AND THAT WHATEVER CONTRACT WORK WAS RECEIVED BY THE PRINCIPAL, HAS BEEN GIVEN TO THE ASSESSEE. THUS, HE CAME TO THE CONCLUSION THAT THE CONTRACT TO THE ASSESSEE WAS A WORKS CONTRAT AND FURTHER THAT THE CONTRACT TO THE ASSESSEE HAS NOT BEEN AWARDED BY ANY STATE G OVERNMENT OR CENTRAL GOVERNMENT OR LOCAL AUTHORITY AND THEREF ORE, THE FIRST CONDITION LAID DOWN IN CLAUSE (B) OF SECTION 80IA(4 )(I) HAS NOT 4 ITA.NOS. 1781/H/2013 & 1552/H/2014 M/S. RITHWIK PROJECTS P. LTD., HYDERABAD. BEEN FULFILLED BY THE ASSESSEE FOR CLAIMING DEDUCTI ON. FURTHER, THE A.O. ALSO EXAMINED THE ROLE OF THE ASSESSEE IN EXECUTION OF THE CONTRACT AND OBSERVED THAT THE ASSESSEE IS ONLY A SUB- CONTRACTOR. HE THEREFORE, ISSUED A SHOW CAUSE NOTIC E TO THE ASSESSEE ASKING ITS EXPLANATION AS TO WHY THE DEDUC TION CLAIMED UNDER SECTION 80IA(4) SHOULD NOT BE DISALLOWED. 4.2 IN REPLY THERETO, THE ASSESSEE, VIDE LETTER DAT ED 19.12.2011, SUBMITTED THAT THE CONSTRUCTION OF CIVIL WORKS OF D AM, SPILL-WAY AND POWER HOUSE AT KOTESHWAR DAM, UTTARAKHAND STATE WAS AWARDED TO THE PRINCIPAL COMPANY PCL INTERTECH LENH YDRO CONSORTIUM J.V.BY THDC INDIA LIMITED, A JOINT VENTU RE FORMED BY GOVERNMENT OF INDIA AND GOVERNMENT OF U.P. UNDER AN AGREEMENT, WHICH IN TURN, HAS SUB-CONTRACTED THE W ORK TO THE ASSESSEE ON BACK TO BACK BASIS. IT WAS ALSO SUBMITT ED THAT THE ASSESSEE-COMPANY IS HAVING THE REQUIRED EXPERTISE A ND INFRASTRUCTURE FACILITY TO EXECUTE THE SAID WORK AN D THAT THE ONLY CONTRACT EXECUTED BY THE ASSESSEE IS THE CONTRACT I N QUESTION FOR THE A.Y. 2009-2010 AND THEREFORE, THE ASSESSEE IS E LIGIBLE TO CLAIM DEDUCTION UNDER SECTION 80IA AS EVEN THE PRIN CIPAL CONTRACTOR HAS NOT CLAIMED ANY DEDUCTION WITH REGAR D TO THE SAID CONTRACT. 4.4 THE A.O. HOWEVER, DID NOT ACCEPT THE ASSESSEES CONTENTIONS AND HELD THAT THE ASSESSEE HAS NOT MADE ANY INVESTM ENT IN THE FORM OF INFRASTRUCTURE. HE THEREFORE, HELD THAT THE ASSESSEE IS ONLY A WORKS CONTRACTOR. FURTHER HE ALSO HELD THAT THE ASSESSEE HAS FAILED TO PROVE THAT IT HAS RECEIVED A WORKS OR DER DIRECTLY FROM THDC LTD., AND THAT THE WORKS EXECUTED BY THE ASSESSEE ARE PURELY AS PER THE CONTRACT AGREEMENT ENTERED IN TO WITH PCL- 5 ITA.NOS. 1781/H/2013 & 1552/H/2014 M/S. RITHWIK PROJECTS P. LTD., HYDERABAD. ILHC J.V. WHICH ACCORDING TO HIM IS A WORKS CONTRAC T. HE, THEREFORE, DISALLOWED THE CLAIM OF DEDUCTION UNDER SECTION 80IA(4) AND BROUGHT IT TO TAX. 5. AGGRIEVED, ASSESSEE PREFERRED AN APPEAL BEFORE THE CIT(A) BY REITERATING THE CONTENTIONS MADE BEFORE T HE A.O. THE LD. CIT(A), AFTER CONSIDERING THE ASSESSEES CONTEN TIONS, HAS, AT PARA 4.1.3OF HIS ORDER, HELD THAT THE ONLY CONTRACT ENTERED INTO BY THE LOCAL AUTHORITY I.E., THDCL WAS WITH PCL-INT ERTECH LENHYDRO CONSORTIUM J.V. AND NOT WITH THE ASSESSEE HEREIN IN ITS OWN RIGHT OR AS A PRINCIPAL OF A J.V. SHE OBSER VED THAT THE CONTRACTS ENTERED INTO BY THE ASSESSEE, WHETHER AS A MEMBER OF J.V. ON 16.11.2002 OR IN ITS OWN RIGHT BY AGREEMENT DATED 01.04.2008 WITH PCL-INTERTECH LENHYDRO CONSORTIUM J .V. CAN NOT BE CONSIDERED AS AN AGREEMENT WITH THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT OR A LOCAL AUTHORITY OR ANY O THER STATUTORY BODY AS REQUIRED UNDER SECTION 80IA (4)(I )(B) OF THE ACT. THUS, SHE HELD THAT THE ASSESSEE IS NOT ELIGIBLE TO CLAIM DEDUCTION UNDER SECTION 80IA OF THE ACT. SHE THEREA FTER, CONSIDERED IT IRRELEVANT TO GO INTO THE FACT AS TO WHETHER THE ASSESSEE CAN BE TERMED AS A DEVELOPER OR A CONTRACT OR AND DID NOT ADJUDICATE THE ISSUE. THE CIT(A) THUS, UPHELD T HE DISALLOWANCE MADE BY THE A.O. AND THE ASSESSEE IS I N SECOND APPEAL BEFORE US. 6. THE LEARNED COUNSEL FOR THE ASSESSEE REITERATED THE SUBMISSIONS MADE BY THE AUTHORITIES BELOW AND HAVE ALSO FILED DETAILED WRITTEN SUBMISSIONS BEFORE US WHICH ARE AT PAGES 1 TO 6 OF THE PAPER BOOK FILED BY THE ASSESSEE ON 4.9.2015 . HE HAS ALSO 6 ITA.NOS. 1781/H/2013 & 1552/H/2014 M/S. RITHWIK PROJECTS P. LTD., HYDERABAD. PLACED RELIANCE UPON THE FOLLOWING DECISIONS IN SUP PORT OF HIS ABOVE CONTENTIONS: I) ITAT INDORE IN THE CASE OF AYUSH AJAY CONSTRUCTIONS LTD, REPORTED IN 79 ITD 213 II) ITAT PUNE IN THE CASE OF T. PATIL & SONS BELGAUM CONSTRUCTIONS P LTD REPORTED IN (34 TAXMANN.COM 97) III) ITAT PUNE IN THE CASE OF LAXMI CIVIL ENGINEERING P LTD (ITA NO.766/PN/09) IV) ITAT HYDERABAD IN THE CASE OF GVPR ENGINEERS LTD (ITA NO.1482/H/2011) V) ITAT HYDERABAD IN THE CASE OF MADHUCON PROJECTS LTD IN ITA NO.1970/H/2011. VI) ITAT AMRITSAR IN THE CASE OF TRG INDUSTRIES P LTD REPORTED IN (35 TAXMANN.COM 253) VII) HON'BLE HIGH COURT OF MADRAS IN THE CASE OF AL LOGISTICS P LTD REPORTED IN (55 TAXMANN.COM 283) VIII) ITAT HYDERABAD IN THE CASE OF SIVA SWATHI CONSTRUCTIONS P LTD IN ITA NO.189/H/2015. 7. THE LEARNED DR, ON THE OTHER HAND, SUPPORTED THE ORDERS OF THE AUTHORITIES BELOW AND SUBMITTED THAT THE ASSESSEES CONTRACT WAS NOT WITH THE CENTRAL OR A STATE GOVERN MENT OR ANY LOCAL AUTHORITY OR STATUTORY BODY AND FURTHER THAT THE ENTIRE WORK WAS NOT EXECUTED BY THE ASSESSEE AS THE INITIAL AGR EEMENT FOR EXECUTION OF THE CONTRACT WAS ENTERED INTO BY PCL-I LHC WITH THE JOINT VENTURE OF RITHWIK SWATHI JOINT VENTURE AND T HE ASSESSEE WAS A CONSTITUENT OF THE SAID JV. FURTHER, ACCORDIN G TO HIM, THE PROJECT EXECUTED BY THE ASSESSEE IS NOT AN INFRASTR UCTURE FACILITY AS DEFINED U/S 80IA(4) OF THE I.T. ACT. 8. IN REBUTTAL, THE LEARNED COUNSEL FOR THE ASSESSEE HAS DRAWN OUR ATTENTION TO PAGE 264 OF THE PAPER BOOK F ILED BY THE ASSESSEE WHEREIN THE THDC INDIA LTD HAD CERTIFIED T HAT THE WORK FOR CONSTRUCTION OF SPILLWAY WORK AT KOTESHWAR HYDR O ELECTRO 7 ITA.NOS. 1781/H/2013 & 1552/H/2014 M/S. RITHWIK PROJECTS P. LTD., HYDERABAD. PROJECTS WAS AWARDED TO M/S. PCL-ILHC J.V. AND AGA INST CONTRACT NO. THDC/RSH/CV/187/80 DATED 14.11.2002 M/ S. RITHWIK PROJECTS (P) LTD WAS THE BACK TO BACK SUB C ONTRACTOR FOR THE SAID WORK AND FURTHER THAT KOTESHWAR HYDRO ELEC TRIC PROJECTS IS A MULTI PURPOSE PROJECT WHERE HYDRO POWER GENERA TION, WATER SUPPLY AND IRRIGATION FOR D/S AREAS ARE INVOLVED AN D THAT THIS PROJECT IS REGULATING WATER, RELEASE FROM TEHRI RES ERVOIR FOR IRIGATION PURPOSE. THE CERTIFICATE IS DATED 13.10.2 015 I.E AFTER THE DISPOSAL OF THE APPEAL OF THE ASSESSEE BY THE LEARN ED CIT (A). THE ASSESSEE HAS FILED AN APPLICATION FOR ADMISSION OF THE ADDITIONAL EVIDENCE STATING THAT THE LETTER HAS BEEN RECEIVED BY THE CIT (DR) ONLY DURING THE APPEAL PROCEEDINGS BEFORE THE ITAT AND SINCE THE ADDITIONAL EVIDENCE FILED IS CONNECTED TO THE MATTE R INVOLVED IN THE APPEAL, THE ADDITIONAL EVIDENCE MAY BE ADMITTED AND CONSIDERED. FINDING FAVOUR WITH THE ASSESSEES CONT ENTION ON THE ADDITIONAL EVIDENCE, WE DEEM IT AND FIT AND PROPER TO ADMIT THE SAME AND CONSIDER IT FOR ADJUDICATION OF THE ISSUE. 8. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE FIND THAT THE UNDISPUTED FAC TS ARE THAT THE GOVT. OF INDIA AND GOV. OF U.P FORMED A JOINT V ENTURE BY THE NAME OF TEHRI HYDRO DEVELOPMENT CORPORATION (THDC I N SHORT) WITH EQUITY IN THE RATIO OF 75:25 BETWEEN THE GOVT. OF INDIA AND THE GOVT. OF UP FOR THE POWER COMPONENT. THE SAID C OMPANY WAS INCORPORATED IN JULY 1988 TO DEVELOP, OPERATE AND M AINTAIN THE 2400 MW TEHRI HYDRO POWER COMPLEX AND OTHER HYDRO P ROJECTS. KOTESHWAR HYDRO ELECTRIC PROJECT (400 MW) LOCATED 2 2 KMS DOWNSTREAM OF TEHRI, IS AN INTEGRAL PART OF TEHRI P OWER COMPLEX COMPRISING OF TEHRI DAM & HPP (1000 MW), TEHRI PSP (1000 8 ITA.NOS. 1781/H/2013 & 1552/H/2014 M/S. RITHWIK PROJECTS P. LTD., HYDERABAD. MW) AND KOTESHWAR HEP (400 MW) TO DEVELOP HYDRO-ELE CTRIC POTENTIAL OF RIVER BHAGIRATHI, TO FACILITATE THE FU NCTIONING OF TEHRI POWER COMPLEX AS A MAJOR PEAKING STATION IN NORTHER N GRID AS RESERVOIR CREATED BY KOTESHWAR DAM HAVING A LIVE ST ORAGE CAPACITY OF 35.0 MCM WILL FUNCTION AS LOWER (BALANC ING) RESERVOIR FOR TEHRI PSP. THIS PROJECT IS ALSO REGULATING WATE R RELEASES FROM TEHRI RESERVOIR FOR IRRIGATION PURPOSE. 8.1. A JOINT VENTURE WAS FORMED ON 30.01.2002 BETW EEN M/S PROGRESSIVE CONSTRUCTIONS LTD (1 ST PARTY) AND M/S INTER TECH SERVICE RUSSIA AND INSTITUTE LEN HYDRO PROJECT (2 ND PARTY) FOR THE PURPOSE OF PRE-QUALIFICATION BID SUBMITTED TO THE T EHRI HYDRO DEVELOPMENT CORPORATION LTD. THE JOINT VENTURE WAS CALLED AS PCL-INTERTECH LENHYDRO CONSORTIUM JOINT VENTURE (PC L-ITHL IN SHORT). THDC HAD AWARDED THE CONTRACT TO M/S PCL IN TERTECH LENHYDRO CONSORTIUM AND AN AGREEMENT WAS ENTERED IN TO ON 14.11.2002 FOR CONSTRUCTION OF CIVIL WORKS OF DAM, SPILLWAY & POWER HOUSE OF KOTESHWAR HYDRO ELECTROC PROJECT, KO TESHWAR (UTTARANCHAL). MEANWHILE A JOINT VENTURE IS FORME D BETWEEN RITHWIK PROJECTS PVT. LTD AND M/S. SWATHI CONSTRUCT IONS VIDE A MEMORANDUM OF UNDERSTANDING (MOU) DATED 6.9.2012 AN D THE JV WAS KNOWN AS RITHWIK SWATHI JV. AS PER THE MOU, RITHWIK PROJECTS PRIVATE LTDS SHARE IN JOINT VENTURE WAS 6 0% AND SHARE OF SWATHI CONSTRUCTIONS WAS AT 40%. 8.2. CONSEQUENT TO THE AGREEMENT BETWEEN THDC AND M/S PCL INTERTECH LENHYDRO CONSORTIUM JV DATED 14.1 1.2002, AN AGREEMENT BETWEEN M/S PCL INTERTECH LENHYDRO CON SORTIUM JV AND M/S RITHWIK SWATHI JV WAS EXECUTED ON 16.11. 2002 BY VIRTUE OF WHICH, RITHWIK SWATHI JV WAS TO EXECUTE A ND COMPLETE 9 ITA.NOS. 1781/H/2013 & 1552/H/2014 M/S. RITHWIK PROJECTS P. LTD., HYDERABAD. THE WORK AS MENTIONED IN THE ORIGINAL AGREEMENT ON BACK TO BACK BASIS. THIS SUB CONTRACT AGREEMENT WAS PERMISSIBLE AS PER CLAUSE 56 OF THE ORIGINAL AGREEMENT. THE WORK WAS E XECUTED BY THE JOINT VENTURE PARTLY, WHILE ON 31.03.2008, THER E WAS A DISSOLUTION OF THE JOINT VENTURE BY VIRTUE OF WHICH THE JOINT VENTURE RITHWIK SWATHI JV WAS DISSOLVED BY MUTUAL CONSENT W.E.F. 1.4.2008. AS PER THE SAID DISSOLUTION DEED, RITHWIK PROJECTS PRIVATE LIMITED WAS ENTITLED TO CARRY ON A ND CONTINUE THE BUSINESS OF KOTESHWAR DAM WORK AND SHALL TAKE O VER ALL THE ASSETS AND LIABILITIES OF RSJV WITH RESPECT TO ASSE TS OF KOTESHWAR DAM WORK. FURTHER, AS PER THE AGREEMENT, M/S SWATH I CONSTRUCTIONS WAS NOT ENTITLED TO ANY CLAIM OR CRED IT FOR THE WORK EXPERIENCE WITH RESPECT TO KOTESHWAR DAM WORK. 8.3. SUBSEQUENT TO THE DISSOLUTION DEED, A FRESH S UB- CONTRACT AGREEMENT BETWEEN PCL-INTERTECH LENHYDRO CONSORTIUM JV (PRINCIPAL) AND RITHWIK PROJECTS PVT LTD (RPL) WAS ENTERED ON 1.4.2008 IN RESPECT OF KOTESHWAR DAM WOR K. ACCORDING TO THE AGREEMENT, THE ASSESSEE SHALL UNDE RTAKE, EXECUTE AND COMPLETE ON A BACK TO BACK BASIS ALL TH E WORK TO BE CARRIED OUT BY THE PRINCIPAL AND AS MORE PARTICULAR LY DETAILED AND DESCRIBED IN THE ORIGINAL CONTRACT. ASSESSEE AL SO UNDERTOOK TO TAKE OVER ALL RESPONSIBILITIES, ALL THE RIGHTS I NCLUDING ALL CLAIMS AND ALL SUMS THEREOF, ALL OBLIGATIONS, ALL LIABILIT IES, ALL GUARANTEES, ALL PROMISES OF THE PRINCIPAL TO THE EMPLOYER OR TO ANY OTHER RELATED TO THE EXECUTION OF THE ORIGINAL CONTRACT. IT WAS ALSO AGREED THAT THE PRINCIPAL SHALL NOT HAVE ANY OBJECT ION TO ISSUE THE TDS CERTIFICATE IN FAVOUR OF THE ASSESSEE FOR T HE AMOUNT DEDUCTED BY THDC ON ACCOUNT OF THE PRINCIPAL. THER EAFTER, THE 10 ITA.NOS. 1781/H/2013 & 1552/H/2014 M/S. RITHWIK PROJECTS P. LTD., HYDERABAD. ASSESSEE EXECUTED THE ENTIRE WORK OF KOTESHWAR DAM ON ITS OWN BY EMPLOYING ITS INVESTMENTS AND, DEPLOYING ITS LAB OUR AND TECHNOLOGY, ASSUMING ALL THE RISKS AND CARRYING OUT THE ENTIRE DEVELOPMENT ACTIVITY. THUS THE ASSESSEE HAS CLAIMED THE DEDUCTION U/S 80IA OF THE ACT AS NO OTHER PARTY INC LUDING PCL- ITLH OR ANY OF ITS CONSTITUENTS HAS EITHER BOOKED T HE REVENUE OR CLAIMED DEDUCTION U/S 80IA FOR THE KOTESHWAR DAM PR OJECT FOR THE YEARS UNDER CONSIDERATION. 8.4 ONE OF THE OBJECTION OF THE AO WHICH HAS BEEN CONFIRMED BY THE CIT (A) IS THAT THE ASSESSEE HAS NOT ENTERED INTO THE CONTRACT DIRECTLY WITH THDC. THE THDC BEING THE JOI NT VENTURE BETWEEN THE GOVT. OF INDIA AND THE GOVT. OF UP IS N O DOUBT A LOCAL AUTHORITY AS DEFINED U/S 80IA(4) OF THE ACT. FROM THE ABOVE FACTS, IT IS SEEN THAT THE THDC HAS AWARDED THE CON TRACT TO PCL- ILHC JV WHICH IN TURN HAD SUB CONTRACTED THE WORK T O RITHWIK SWATHI JV AND THE ASSESSEE WAS A CONSTITUENT OF RIT HWIK SWATHI JV. WE ALSO FIND THAT PART OF THE CONTRACT WAS EXEC UTED BY M/S RITHWIK SWATHI JV AS WELL. THEREFORE, THE ASSESSEE S CLAIM HAS TO BE CONSIDERED IN THE LIGHT OF ALL THE ABOVE FACTS. THE ASSESSEE HAS RELIED UPON THE DECISION OF THE ITAT AT INDORE IN T HE CASE OF AYUSH AJAY CONSTRUCTIONS LTD (SUPRA) FOR THE PROPOS ITION THAT THOUGH THE ASSESSEE HAS NOT ENTERED INTO AN AGREEME NT WITH THE STATE GOVT., BUT HAVING OBTAINED A CONTRACT THROUGH A VALID AGREEMENT, IT SHALL BE DEEMED TO HAVE BEEN ENTERED INTO AN AGREEMENT WITH THE GOVT. AND THUS ELIGIBLE FOR DEDU CTION U/S 80IA(4) OF THE ACT. FURTHER, HE HAS ALSO RELIED UP ON THE DECISION OF THE HON'BLE MADRAS HIGH COURT IN THE CASE OF A.L . LOGISTICS P LTD (SUPRA) FOR THE PROPOSITION THAT AN ASSESSEE IS ELIGIBLE TO 11 ITA.NOS. 1781/H/2013 & 1552/H/2014 M/S. RITHWIK PROJECTS P. LTD., HYDERABAD. CLAIM DEDUCTION U/S 80IA OF THE ACT, EVEN IN THE AB SENCE OF SPECIFIC AGREEMENT WITH CENTRAL/STATE GOVT. PROVIDE D THE SEQUENCES OF EVENTS CLEARLY SHOW THAT THE ASSESSEE IS PROVIDING THE FACILITY IN ACCORDANCE WITH THE CONDITIONS LAID DOWN BY THE GOVERNMENT. . LET US THEREFORE, FIRST EXAMINE THE APPLICABILITY OF THESE DECISIONS TO THE CASE BEFORE US. 9. THE FIRST CASE IS OF AYUSH AJAY CONSTRUCTIONS L TD., VS., ITO REPORTED IN (2001) 79 ITD 213 (IND.). IN T HIS CASE, THE COORDINATE BENCH OF THIS TRIBUNAL AT INDORE HAS CON SIDERED SIMILAR SET OF FACTS AND HAS AT PARAS 18 AND 19 OF ITS ORDER HELD AS UNDER : 18 . IF WE EXAMINE THE RELEVANT PROVISIONS OF S. 80-I A(4A) OF THE ACT AND THE OBJECT OF ITS INSERTION TO THE T AX STATUTE IN THE LIGHT OF THE BUDGET SPEECH OF THE HONBLE FINANCE M INISTER AND THE ABOVE SAID JUDICIAL PRONOUNCEMENTS, WE WOULD FIND T HAT THE LEGISLATURE HAS GIVEN A FILLIP OF DEDUCTIONS TO THO SE ENTERPRISES WHO ENGAGE THEMSELVES IN DEVELOPING, MAINTAINING AN D OPERATING ANY INFRASTRUCTURE FACILITIES FOR ECONOMIC GROWTH O F THE NATION AS IT WAS FELT BY THE LEGISLATURE THAT INADEQUATE INFRAST RUCTURE WAS A KEY CONSTRAINT OF OUR ECONOMIC PROGRESS. AS HELD BY THE APEX COURT IN THE CASE OF BAJAJ TEMPO LTD. VS. CIT (SUPR A), THE PROVISIONS OF PROMOTING ECONOMIC GROWTH SHOULD BE I NTERPRETED LIBERALLY AND THE RESTRICTION ON IT TOO HAS TO BE C ONSTRUED SO AS TO ADVANCE THE OBJECTIVE OF THE PROVISIONS AND NOT TO FRUSTRATE IT. IF WE PUT THE FACTS OF THE CASE WITH THE PARAMETER LAI D DOWN BY THE APEX COURT AND THE VARIOUS HIGH COURTS, WE WOULD FI ND THAT THE ASSESSEE THOUGH NOT ENTERED INTO AN AGREEMENT WITH THE STATE GOVERNMENT AT THE INITIAL STAGE BUT HAS OBTAINED TH E TENDER/CONTRACT BY VIRTUE OF A VALID ASSIGNMENT, WH ICH WAS DULY RECOGNISED BY THE STATE GOVERNMENT, SHOULD BE DEEME D TO HAVE ENTERED INTO AN AGREEMENT WITH THE STATE GOVERNMENT FOR CONSTRUCTION OF THE IMPUGNED BRIDGE ON BOT BASIS. I T IS NOT THE CASE OF THE REVENUE THAT THE ENTIRE EXPENDITURE INC URRED IN THE CONSTRUCTION OF THE AFORESAID BRIDGE WAS NOT BORNE BY THE ASSESSEE BUT BY M/S AJAY CONSTRUCTIONS, THE MAIN TE NDERER. THE REVENUE HAS REJECTED THE CLAIM OF THE ASSESSEE FOR THE SIMPLE REASON THAT THE ASSESSEE HAD NEVER ENTERED INTO ANY CONTRACT WITH THE STATE GOVERNMENT AND THE ASSESSEE-COMPANY IS NOTHING 12 ITA.NOS. 1781/H/2013 & 1552/H/2014 M/S. RITHWIK PROJECTS P. LTD., HYDERABAD. BUT A COLOURABLE DEVICE TO EVADE TAX. IT IS A SETTL ED POSITION OF LAW THAT THE COMPANY IS A JURISTIC ENTITY AND IT SHOULD BE CONSIDERED INDEPENDENT FROM THE SHAREHOLDERS OR THE DIRECTORS. ADMITTEDLY, M/S AJAY CONSTRUCTION, THE ORIGINAL TENDERER, HAVE ASSIGNED THE REMAINING WORK OF THE CONTRACT/TENDER ALONG WITH TH E EXPENDITURE INCURRED BY IT TO SMT USHA AGRAWAL, THE PROMOTER OF THE ASSESSEE- COMPANY THOUGH AN AGREEMENT DT. 1ST APRIL, 1995 AND THEREAFTER THE CONSTRUCTION WORK WAS UNDERTAKEN BY THE PROMOTE R OF THE ASSESSEE-COMPANY TILL ITS INCORPORATION. WHEN THE P ERMISSION OF THE ASSIGNMENT WAS GRANTED BY THE STATE GOVERNMENT, FRESH AGREEMENT WAS EXECUTED BETWEEN THE ASSESSEE-COMPANY AND THE MAIN TENDERER, M/S AJAY CONSTRUCTIONS, IN WHICH THE ASSESSEE- COMPANY HAS RATIFIED ALL THE DEEDS AND ACTS OF ITS PROMOTER, SMT. USHA AGRAWAL, AND OWNED/TAKEN OVER ALL THE ASSETS A ND LIABILITIES OF ITS PROMOTER. THE ACTION OF ASSIGNIN G AND THE WORK OF CONSTRUCTION UNDERTAKEN BY THE ASSESSEE WAS RECOGNI SED BY THE STATE GOVERNMENT AND A TRIPARTITE AGREEMENT WAS EXE CUTED BETWEEN THE ASSESSEE, M/S AJAY CONSTRUCTIONS AND TH E STATE GOVERNMENT THROUGH WHICH THE STATE GOVERNMENT HAVE RECOGNISED THAT THE ASSESSEE HAS STEPPED INTO THE S HOES OF M/S AJAY CONSTRUCTIONS AND NOTIFIED AUTHORISING THE ASS ESSEE TO COLLECT THE TOLL TAX FOR A PARTICULAR PERIOD. A COP Y OF THE LETTER DT. 22ND MAY, 2000, TO THIS EFFECT IS ALSO PLACED BEFOR E US. THE ASSESSEE HAS ALSO PLACED VARIOUS CORRESPONDENCE ENT ERED INTO BETWEEN THE ASSESSEE AND THE STATE GOVERNMENT AND T HE LETTER DT. 26TH AUG., 1995, THROUGH WHICH THE ASSESSEE WAS INFORMED ABOUT THE NOTIFICATION IN HIS FAVOUR TO COLLECT THE TOLL TAX. A COPY OF THE LETTER PLACED AT P. 140 OF THE COMPILATION OF T HE ASSESSEE. COPIES OF THE NOTIFICATION AND VARIOUS RECEIPTS OF TOLL TAX ARE ALSO PLACED ON RECORD FOR OUR PERUSAL. IT IS ALSO REVEAL ED FROM VARIOUS CORRESPONDENCE OF THE ASSESSEE WITH THE STATE GOVER NMENT THAT THE ASSIGNMENT OF CONTRACT WAS DULY RECOGNISED BY T HE STATE GOVERNMENT AND IT WAS ADMITTED BY THEM THAT THE ACT UAL CONSTRUCTION WORK WAS UNDERTAKEN BY THE ASSESSEE ON LY. 19. FROM A CAREFUL PERUSAL OF THE TEXT AND TENOR OF T HE TENDER WE ARE OF THE VIEW THAT THE TENDER CAN BE DU LY ASSIGNED WITH THE APPROVAL OF THE CHIEF ENGINEER OF PWD IN F AVOUR OF ANY PERSON AND THE ASSIGNEE WOULD STEP INTO THE SHOES O F THE TENDERER ON THE SAME TERMS AND CONDITIONS. SINCE THE ASSESSE E-COMPANY HAS RATIFIED ALL ACTS AND DEEDS OF ITS PROMOTER, SM T. USHA AGRAWAL, AND OWNED ALL THE ASSETS AND LIABILITIES O F ITS PROMOTER THROUGH AN AGREEMENT OF ASSIGNMENT DT. 21ST JULY, 1 995, EXECUTED BETWEEN THE ASSESSEE AND M/S AJAY CONSTRUC TIONS AFTER OBTAINING APPROVAL FROM THE STATE GOVERNMENT, THE A SSESSEE SHALL BE DEEMED TO HAVE UNDERTAKEN THE CONSTRUCTION WORK SINCE 1ST 13 ITA.NOS. 1781/H/2013 & 1552/H/2014 M/S. RITHWIK PROJECTS P. LTD., HYDERABAD. APRIL, 1995. WE HAVE ALSO CAREFULLY PERUSED THE STA TEMENTS OF ACCOUNTS IN THE LIGHT OF VARIOUS JUDGMENTS REFERRED TO BY THE PARTIES AND FIND THAT THOUGH THE FINANCIAL ASSISTAN CE AND THE MACHINERIES WERE PROVIDED BY M/S AJAY CONSTRUCTIONS TO THE ASSESSEE-COMPANY IN WHICH THE PROPRIETOR OF M/S AJA Y CONSTRUCTIONS AND HIS WIFE ARE THE SOLE DIRECTORS B UT THIS FACT CANNOT BE IGNORED THAT ULTIMATELY THE CONTRACT WAS EXECUTED BY THE ASSESSEE-COMPANY AND THE ACT OF ASSIGNMENT WAS DULY RECOGNISED BY THE STATE GOVERNMENT. NO DOUBT, IT IS TRUE THAT IN VIEW OF THE JUDGMENT OF THE APEX COURT IN THE CASE OF JUGGILAL KAMLAPAT VS. CIT AND MCDOWELL & CO. VS. CTO (SUPRA) , THE JUDICIAL AUTHORITIES ARE COMPETENT ENOUGH TO PIERCE THE CORPORATE VEIL AND TO ASCERTAIN THE REAL STATE OF AFFAIRS. IF WE LOOK, INTO THE REAL STATE OF AFFAIRS, WE WOULD FIND THAT AJAY AGRA WAL HAS OBTAINED THE TENDER THROUGH ITS PROPRIETORSHIP CONC ERN, M/S AJAY CONSTRUCTIONS FROM THE STATE GOVERNMENT AND LATER O N IT ASSIGNED THE CONTRACT TO THE ASSESSEE-COMPANY I.E. AYUSH AJA Y CONSTRUCTIONS IN WHICH MR. AJAY AGRAWAL AND HIS WIF E SMT. USHA AGRAWAL, WERE THE SOLE DIRECTORS, TO AVAIL THE TAX DEDUCTIONS UNDER S. 80-IA(4A) OF THE ACT INASMUCH AS THE DEDUC TIONS ARE ONLY GIVEN TO THOSE ENTERPRISES WHICH ARE OWNED BY THE C OMPANIES REGISTERED IN INDIA OR BY A CONSORTIUM OF SUCH COMP ANIES. SINCE THE GOVERNMENT HAS PROVIDED THIS DEDUCTION IN ORDER TO ENCOURAGE ECONOMIC GROWTH OF THE COUNTRY, THE PLENT ITUDE OF EXEMPTION SHOULD NOT BE WHITTLED DOWN BY LAYING STR ESS ON AMBIGUITY HERE AND THERE. IF IT IS PROVED THAT THE ASSESSEE- COMPANY HAS OBTAINED THE STATUS OF A TENDERER BY VI RTUE OF A VALID ASSIGNMENT, IT SHOULD NOT BE DENIED FROM THE BENEFIT OF DEDUCTION PROVIDED BY THE CENTRAL GOVERNMENT THROUG H INTRODUCTION OF SUB-S. (4A) OF S. 80-IA OF THE ACT. THE ACTION OF AJAY AGRAWAL, PROPRIETOR OF AJAY CONSTRUCTIONS AND THE A SSESSEE CAN ONLY BE TERMED AS A VALID TAX PLANNING WHICH IS PER MISSIBLE UNDER THE LAW AS HELD BY THE APEX COURT IN THE CASE OF MCDOWELL & CO. LTD. (SUPRA), THAT TAX PLANNING MAY BE LEGITI MATE PROVIDED IT IS WITHIN THE FRAMEWORK OF LAW. WE, THEREFORE, HAVE NO HESITATION IN HOLDING THAT THE ASSESSEE-COMPANY HAS FULFILLED THE REQUIREMENTS PROVIDED IN CL. (II) OF SUB-S. (4A) OF S. 80-IA OF THE ACT FOR CLAIMING DEDUCTION UNDER THIS SECTION BECAUSE H AD IT NOT BEEN RECOGNISED AS A VALID ASSIGNMENT OF THE TENDERER BY THE STATE GOVERNMENT OR HAD IT NOT STEPPED INTO THE SHOES OF THE MAIN TENDERER, THE STATE GOVERNMENT WOULD NOT HAVE NOTIF IED AUTHORISING THE ASSESSEE TO COLLECT THE TOLL TAX FO R A PARTICULAR PERIOD AS STIPULATED IN THE TENDER/AGREEMENT DT. 14 TH FEB., 1995. WE, THEREFORE, SET ASIDE THE ORDER OF THE CIT(A) ON THIS COUNT AND DIRECT THE AO TO ALLOW THE DEDUCTIONS CLAIMED BY TH E ASSESSEE UNDER S. 80-IA(4A) OF THE ACT. 14 ITA.NOS. 1781/H/2013 & 1552/H/2014 M/S. RITHWIK PROJECTS P. LTD., HYDERABAD. 9.1. FOLLOWING THE ABOVE DECISION, THE COORDINATE BENCH OF THE TRIBUNAL AT AMRITSAR IN THE CASE OF TRG INDU STRIES (P.) LTD., VS. DCIT, CIRCLE-1, JAMMU (2013) 35 TAXMANN.C OM 253 (AMRITSAR TRIB.) HAS AT PARA 15.11 HAS ALSO GIVEN SIMILAR FINDING. 9.2. FURTHER, THE HONBLE MADRAS HIGH COU RT IN THE CASE OF CIT, CHENNAI VS. AL LOGISTICS P. LTD., (2015) 55 TAXMANN.COM 283 (MAD.) AT PARAS 7 TO 13 HAS HELD AS UNDER : 7. NOW, WE PROCEED TO THE NEXT ISSUE, WHETHER IN THE ABSENCE OF SPECIFIC AGREEMENT WITH THE CENTRAL/ STATE GOVERNMENT, LOCAL AUTHORITY OR STATUTORY BODY, THE ASSESSEE IS ENTITLED TO CLAIM THE BENEFIT OF SECTION 80IA( 4 ) (I). THE ASSESSEE HAD MADE AN APPLICATION FOR SETTING UP OF CFS AT HALDIA. IN RESPONSE TO THE APPLICATION OF THE ASSES SEE, THE DEPARTMENT OF COMMERCE, INFRASTRUCTURE DIVISION, MI NISTRY OF COMMERCE AND INDUSTRY APPROVED THE PROPOSAL OF THE ASSESSEE FOR SETTING UP OF CFS AT HALDIA FOR HANDLI NG IMPORT/EXPORT OF CARGO SUBJECT TO EXECUTION OF CERT AIN DOCUMENTS AND COMPLIANCE OF OTHER TERMS AND CONDITI ONS AS STATED IN THE LETTER; THE LD. COUNSEL FOR THE ASSES SEE HAS PLACED ON RECORD LETTER DT. 27-05-2003 FROM THE MIN ISTRY OF COMMERCE AND INDUSTRY PERMITTING THE ASSESSEE TO SE T UP CFS AT HALDIA. THE CONTENTS OF THE LETTER ARE REPRO DUCED HEREIN BELOW : 'NO.16/6/2003-LNFRA-I GOVERNMENT OF INDIA MINISTRY OF COMMERCE & INDUSTRY DEPTT. OF COMMERCE INFRASTRUCTURE DIVISION UDYOG BHAWAN, NEW DELHI, DATED THE 27TH MAY, 2003 TO THE DIRECTOR, M/S.AL LOGISTICS PVT. LTD., CHENNAI. SUBJECT: SETTING UP OF AN CFS AT HALDIA. 15 ITA.NOS. 1781/H/2013 & 1552/H/2014 M/S. RITHWIK PROJECTS P. LTD., HYDERABAD. SIR, I AM DIRECTED TO REFER TO YOUR APPLICATION DAT ED 8.2.2003 ON THE ABOVE SUBJECT AND TO SAY THAT THE GOVERNMENT HAS APPROVED YOUR PROPOSAL FOR SETTING U P OF AN CONTAINER FREIGHT STATION AT HALDIA FOR HANDLING IM PORT AND EXPORT CARGO. THE APPROVAL IS SUBJECT TO THE FOLLOW ING TERMS AND CONDITIONS:- (A) THE LETTER OF INTENT HOLDER SHALL TAKE ADEQUATE STE PS TO CREATE PROPER INFRASTRUCTURE KEEPING IN VIEW THE IN DICATIVE NORMS GIVEN IN PARTS A & B OF THE GUIDELINES FOR SE TTING UP INLAND CONTAINER DEPOTS/ CONTAINER FREIGHT STATI ONS (ICDS/CFS) WITHIN A PERIOD OF ONE YEAR FROM THE DAT E OF ISSUE OF THIS LETTER. (B) NECESSARY BOND AND GUARANTEES, AS REQUIRED, WOULD B E EXECUTED WITH THE CONCERNED COMMISSIONER OF CUSTOMS AND CENTRAL EXCISE. (C) THE APPROVAL WOULD BE SUBJECT TO CANCELLATION IN TH E EVENT OF VIOLATION OF THE CUSTOMS AND OTHER LAWS OF THE L AND AND RULES. (D) A QUARTERLY PROGRESS REPORT OF THE IMPLEMENTATION S HALL BE SENT TO THE MINISTRY OF COMMERCE. (E) THE WORKING OF THE CFS WILL BE TO REVIEW BY THE INT ER MINISTERIAL COMMITTEE. (F) FORMALITIES IN RESPECT OF ACQUISITION/POSSESSION OF THE LAND SHALL BE COMPLETED WITHIN 60 DAYS AND INTIMATE D TO THE M/O COMMERCE, FAILING WHICH THE APPROVAL GRANTE D WOULD BE AUTOMATICALLY CANCELLED. 2. THE FACILITY TO BE SET UP SHALL BE FULL COMPUTE RIZED, WITH EDI COMPATIBILITY AND A MINIMUM COMPLEMENT OF EQUIPMENT AND ACCESSORIES AS NECESSARY SHALL BE MADE AVAILABLE AT THE FACILITY. THE INDICATIVE LIST OF EQUIPMENT/ACCESSORIES CONSIDERED NECESSARY IS ANNEXED. THE STATUS REGARDING CONFIRMATION OF THE INSTALLATION/AVAILABILITY OF THE ITEMS SHALL BE FUR NISHED 16 ITA.NOS. 1781/H/2013 & 1552/H/2014 M/S. RITHWIK PROJECTS P. LTD., HYDERABAD. TO THE APPROPRIATE AUTHORITIES TO FACILITATE ISSUE OF REQUISITE NOTIFICATION. 3. PLEASE ACKNOWLEDGE RECEIPT OF THIS LETTER. YOURS FAITHFULLY, SD/ (N.G.BISWAS) DIRECTOR A PERUSAL OF CLAUSE 'B' OF THE ABOVE LETTER SHOWS T HAT THE ASSESSEE WAS REQUIRED TO EXECUTE NECESSARY BOND AND GUARANTEES WITH THE CONCERNED COMMISSIONER OF CUSTO MS AND CENTRAL EXCISE. IT WAS ONLY ON THE COMPLIANCE O F ALL THE TERMS AND CONDITIONS MENTIONED IN THE AFORESAID LET TER THAT THE ASSESSEE WAS ALLOWED TO CARRYON THE SERVICES OF CFS. THE ASSESSEE ON THE COMPLIANCE OF THE TERMS AND CON DITIONS AS MENTIONED IN THE LETTER, WAS NOTIFIED AS CFS COM PLEX FOR THE PURPOSE OF RECEIVING, STORING, IMPORT CONTAINER S, RECEIVING/CONSOLIDATING EXPORT CARGO ETC. VIDE PUBL IC NOTICE DT.L0-11-2013. THE PUBLIC NOTICES WERE ISSUED BY TH E OFFICE OF THE COMMISSIONER OF CUSTOMS (PORT) KOLKATTA. 8. THUS, IT IS EVIDENT THAT THE PROPOSAL OF THE ASS ESSEE WAS ACCEPTED BY THE GOVERNMENT ON CERTAIN CONDITION S WHICH WERE DULY COMPLIED WITH BY THE ASSESSEE. THER E MAY NOT BE ANY SPECIFIC AGREEMENT, BUT THE SEQUENCES OF EVENTS CLEARLY SHOW THAT THE ASSESSEE IS PROVIDING CFS FAC ILITY IN ACCORDANCE WITH THE CONDITIONS LAID DOWN BY THE GOVERNMENT. IN SUCH CIRCUMSTANCES THERE IS NO NEED TO INSIST FOR THE SPECIFIC EXECUTION OF AGREEMENTS. THE CO-ORDINATE BENCH OF THE TRIBUNAL IN THE CASE O F UNITED LINER AGENCIES OF INDIA (PRIVATE) LTD; V. JO INT CIT (OSD) IN ITA NOS.273&275/MUM/2013 (SUPRA), HAS TAKE N A SIMILAR VIEW. WHERE NO SPECIFIC AGREEMENT WITH THE STATE GOVERNMENT WAS ENTERED INTO BUT FROM THE APPROVALS GRANTED TO THE ASSESSEE IT WAS INFERRED THAT ASSESS EE SHOULD BE DEEMED TO HAVE ENTERED INTO AN AGREEMENT WITH TH E STATE GOVERNMENT. THUS, WE ARE OF THE CONSIDERED VIEW THA T THE ASSESSEE HAS COMPLIED WITH ALL THE PROVISIONS OF SE CTION 801A(4) (I) AND IS ELIGIBLE TO CLAIM DEDUCTION UNDE R THE SAID SECTION. THE IMPUGNED ORDER IS SET ASIDE. THE APPEA L OF THE ASSESSEE IS ALLOWED.' 17 ITA.NOS. 1781/H/2013 & 1552/H/2014 M/S. RITHWIK PROJECTS P. LTD., HYDERABAD. 13. IN PARAGRAPH 7 OF THE ORDER OF THE TRIBUNAL, T HE LETTER ISSUED BY THE GOVERNMENT OF INDIA, MINISTRY OF COMM ERCE, WHICH HAS BEEN EXTRACTED AS SUCH, CLEARLY STATE THA T WITH REFERENCE TO THE LETTER DATED 8.2.2003, THE GOVERNM ENT HAS APPROVED THE PROPOSAL FOR SETTING UP OF A CONTAINER FREIGHT STATION AT HALDIA FOR HANDLING IMPORT AND EXPORT CA RGO. THEREFORE, THERE CANNOT BE ANY DOUBT IN THE LIGHT O F THE APPROVAL GIVEN BY THE GOVERNMENT. THE REASON OF THE TRIBUNAL IS UNIMPEACHABLE. 9.3. ON GOING THROUGH THE ABOVE DECISIONS, WE FIND THE TRIBUNAL IN THE CASE OF AYUSH AJAY CONSTRUCTIONS (C ITED SUPRA) HAS HELD THAT WHERE AN ASSESSEE HAS OBTAINED A CONT RACT THROUGH A VALID AGREEMENT, THOUGH NOT DIRECTLY WITH THE STATE GOVERNMENT, IT SHALL BE DEEMED TO HAVE ENTERED INTO AN AGREEMENT WITH THE GOVERNMENT. THE HONBLE MADRAS H IGH COURT HAS HELD THAT WHERE THE GOVERNMENT HAS GIVEN AN APP ROVAL FOR SETTING-UP OF AN INFRASTRUCTURE FACILITY, EVEN THOU GH THERE IS NO SPECIFIC AGREEMENT WITH THE GOVERNMENT, THE ASSESSE E IS ELIGIBLE TO CLAIM DEDUCTION UNDER SECTION 80IA OF THE I.T. A CT FOR SUCH FACILITY. APPLYING THE SAID RATIO TO THE FACTS OF T HE CASE BEFORE US, WE FIND THAT THE INITIAL AGREEMENT HAS BEEN ENTERED INTO BY THE GOVERNMENT AGENCY I.E., THDC WITH PCL-ILHC WHICH HA S FURTHER SUB-CONTRACTED THE ENTIRE EXECUTION OF THE WORK TO RITHWIK SWATI J.V. THOUGH THE RITHWIK SWATI J.V. HAS EXECUTED PAR T OF THE AGREEMENT, IT WAS DISSOLVED THEREAFTER AND THE ENTI RE PROJECT HAS BEEN SUB-CONTRACTED TO THE ASSESSEE HEREIN WITH ALL ITS ASSETS AND LIABILITIES AND RISKS INVOLVED, AS PER THE ORIG INAL CONTRACT. IT IS SEEN THAT AT PAGE 110 OF THE PAPER BOOK FILED BY THE ASSESSEE, VIDE LETTER DATED 28.02.2011, THE CHIEF GENERAL MAN AGER OF THDC INDIA LTD., HAS CERTIFIED THAT THE OFFICIAL SU B-CONTRACTOR FOR THE CONSTRUCTION OF CIVIL WORKS OF DAM, SPILLWAY, P OWER-HOUSE 18 ITA.NOS. 1781/H/2013 & 1552/H/2014 M/S. RITHWIK PROJECTS P. LTD., HYDERABAD. AND SWITCHYARD OF KOTESHWAR DAM HEP IS M/S. RITHWIK PROJECTS P. LTD., HYDERABAD (ASSESSEE HEREIN). THUS, IT CAN BE SEEN THAT THE THDC I.E., THE JOINT VENTURE BETWEEN THE GOVERN MENT OF INDIA AND STATE OF UTTAR PRADESH HAS OFFICIALLY RE COGNISED M/S. RITHWIK PROJECTS P. LTD., HYDERABAD AS THE OFFICIAL SUB- CONTRACTOR. FURTHER, WE ALSO FIND FROM THE INCOME T AX RETURNS OF PCL-ILHC AND ALSO THE RETURNS OF RITWIK SWATI JV FO R THE A.YS. 2003-04 TO 2008-09 THAT NONE OF THEM HAVE BOOKED TH E INCOME FROM THE SAID PROJECT. FURTHER, THE ASSESSEE HAS AL SO FURNISHED A CERTIFICATE FROM PCL-ILHC TO STATE THAT THERE WAS N O CLAIM OF DEDUCTION MADE UNDER SECTION 80IA OF THE ACT FOR TH E SAID PROJECT. THE ASSESSEE HAS ALSO FILED COPIES OF PERF ORMANCE GUARANTEES GIVEN BY THE ASSESSEE ON BEHALF OF PCL-I LHC AS AN ADDITIONAL EVIDENCE TO PROVE THAT THE ASSESSEE HAD UNDERTAKEN THE FINANCIAL OBLIGATIONS AS WELL. ON GOING THROUGH THESE DOCUMENTS, WE FIND THAT THE GOVERNMENT AGENCY I.E., THDC HAS ACCEPTED THE ASSESSEE TO BE THE OFFICIAL SUB-CONTRA CTOR EXECUTING THE ENTIRE PROJECT AND EVEN THE ORIGINAL CONTRACTOR AND THE RITHWIK SWATI J.V. HAVE ACCEPTED THE ASSESSEE TO BE THE SUB- CONTRACTOR WHO HAS TAKEN ON ALL THE ASSETS, RISKS A ND LIABILITIES OF THE CONTRACT. THOUGH IN THE CASE OF AYUSH AJAY CONS TRUCTIONS LTD., (CITED SUPRA) THERE WAS A TRIPARTITE AGREEMEN T BETWEEN THE ASSESSEE THEREIN, THE ORIGINAL CONTRACTOR AND THE G OVERNMENT, IN THE CASE OF THE A.L. LOGISTICS P. LTD., THE HONBLE MADRAS HIGH COURT HAS HELD THAT WHERE THE GOVERNMENT HAS GIVEN AN APPROVAL TO THE ASSESSEE TO EXECUTE THE WORK, EVEN IN THE ABSENCE OF ANY SPECIFIC AGREEMENT, THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA OF THE ACT. TAKING ALL THE ABOVE INTO CONSIDERATION, WE ARE IN AGREEMENT WITH THE CO NTENTIONS OF 19 ITA.NOS. 1781/H/2013 & 1552/H/2014 M/S. RITHWIK PROJECTS P. LTD., HYDERABAD. THE ASSESSEE THAT THE ASSESSEE IS ELIGIBLE FOR MAKI NG CLAIM UNDER SECTION 80IA(4) OF THE I.T. ACT AS THE ASSESSEE IS CONSIDERED TO BE THE OFFICIAL SUB-CONTRACTOR OF THE SAID PROJECT AND ALSO IN VIEW OF THE FACT THAT THE EMPLOYER OR THE ORIGINAL CONTRACT OR OR THE RITHWIK SWATI JV HAVE NOT CLAIMED THE DEDUCTION UND ER SECTION 80IA OF THE ACT. THIS ISSUE IS THEREFORE DECIDED IN FAVOUR OF THE ASSESSEE. 9.4. AS REGARDS THE OTHER CONDITIONS LAID DOWN UND ER SECTION 80IA(4) OF THE ACT AND AS TO WHETHER THE AS SESSEE HAS FULFILLED THE SAID CONDITIONS, WE FIND THAT THE CIT (A) HAS NOT GIVEN ANY FINDING ON THIS ISSUE. THE A.O. HAD HELD THAT T HE ASSESSEE WAS A MERE WORKS CONTRACTOR, WHEREAS, THE ASSESSE E HAS FILED BEFORE US VOLUMINOUS DOCUMENTS TO DEMONSTRATE THAT IT HAS INVESTED MONEY AND TECHNICAL LABOUR FOR EXECUTION O F THE WORK AND THEREFORE, IS NOT A WORKS CONTRACTOR BUT IS A CONTRACTOR AS PER THE CONDITIONS LAID DOWN UNDER SECTION 80IA(4) OF THE I.T. ACT. SINCE THE CIT(A) HAS NOT GIVEN ANY FINDING ON THIS ISSUE AND PARTICULARLY BECAUSE THE ASSESSEE HAS FILED ADDITIO NAL EVIDENCE BEFORE US IN THE FORM OF PERFORMANCE GUARANTEES GIV EN ON BEHALF OF PCL-ILHC TO THDL, WE DEEM IT FIT AND PROPER TO A DMIT THE ADDITIONAL EVIDENCE AND REMAND THE ISSUE TO THE FIL E OF THE CIT(A) TO GIVE A FINDING AS TO THE NATURE OF THE WORK CARR IED OUT BY THE ASSESSEE HEREIN AND ALSO WHETHER THE ASSESSEE IS EL IGIBLE FOR DEDUCTION UNDER SECTION 80IA(4) ON SUCH GROUNDS. 9.5. FURTHER, ONE OF THE ARGUMENTS TAKEN-UP BY THE LD. D.R. WAS THAT THE PROJECT WAS NOT AN INFRASTRUCTUR E FACILITY AS DEFINED UNDER SECTION 80IA(4). THE ASSESSEE HAD FIL ED ADDITIONAL EVIDENCE IN THE FORM OF A LETTER DATED 13.10.2015.A S DISCUSSED IN 20 ITA.NOS. 1781/H/2013 & 1552/H/2014 M/S. RITHWIK PROJECTS P. LTD., HYDERABAD. THE EARLIER PARAGRAPHS THAT THE KOTESHWAR DAM IS A MULTIPURPOSE PROJECT WHERE HYDRO-POWER GENERATION, WATER SUPPLY AND IRRIGATION FOR D/S ARE INVOLVED AND THAT IT IS AN IRRIGATION PROJECT,THIS ADDITIONAL EVIDENCE ALSO NE EDS TO BE CONSIDERED BY THE AUTHORITIES BELOW. IN VIEW OF THE SAME, WE ADMIT THE SAID ADDITIONAL EVIDENCE ALSO AND REMAND THE ISSUE TO THE FILE OF THE CIT(A) FOR RECONSIDERATION IN ACCOR DANCE WITH LAW. NEEDLESS TO MENTION THAT THE ASSESSEE SHALL BE GIVE N A FAIR OPPORTUNITY OF HEARING. THUS GROUNDS OF APPEAL 2 T O 4 OF THE ASSESSEE ARE TREATED AS ALLOWED FOR STATISTICAL PUR POSES. 10. AS REGARDS GROUND NO.6 AGAINST THE ADDITION OF RS.9.00 LAKHS MADE BY THE AO TOWARDS UNEXPALINED EX PENDITURE, THE BRIEF FACTS ARE THAT THE ASSESSEE HAD SHOWN SUB CONTRACT PAYMENT OF RS.9.00 LAKHS TO HAVE BEEN MADE TO ONE S HRI B. PRABHAKAR NAIDU. DURING THE COURSE OF THE ASSESSMEN T PROCEEDINGS, THE ASSESSEE FURNISHED THE ADDRESS AND PAN OF THE SAID PERSON. SUMMON U/S 131 WAS ISSUED TO THE SAID PERSON FOR EXAMINING HIM ON OATH. WHEN MR. PRABHAKAR NAIDU WAS QUESTIONED AS TO THE DETAILS OF THE WORK TAKEN UP B Y HIM IN RITHWIK PROJECTS LTD, CONSIDERATION RECEIVED THROUG H CHEQUE AND AS TO HOW THE CONTRACT RECEIPTS WERE UTILISED, THE SAID PERSON REPLIED THAT HE DID NOT DO ANY SUB CONTRACT WORK WI TH M/S RITHWIK PROJECTS (P) LTD AND THAT THE TOTAL SUM OF RS.9.00 LAKHS HAS BEEN RECEIVED BY HIM THROUGH RTGS ON VARIOUS DA TES AT THE REQUEST OF ONE MR. RATAKONDA SAGAR REDDY, S/O RANGA REDDY AND THAT IT WAS WITHDRAWN BY THE ASSESSEE AND HANDE D OVER TO HIM AGAIN. HE ALSO SUBMITTED THAT HE HAS SHOWN THE AMOUNT RECEIVED FROM RITHWIK PROJECTS LTD FOR WHICH HE HAS RECEIVED 21 ITA.NOS. 1781/H/2013 & 1552/H/2014 M/S. RITHWIK PROJECTS P. LTD., HYDERABAD. FORM NO.16A BY POST. HE SUBMITTED THAT HE DOES NOT KNOW THE PERSON WHO HAS POSTED FORM 16 AND THAT HE HAS NOT E NTERED INTO ANY AGREEMENT FOR ANY WORK NOR IS ANY WORK ORDER RE CEIVED FROM THEM TILL THE DATE OF STATEMENT. TAKING THE SAME IN TO CONSIDERATION, THE AO DISALLOWED THE SAME AS UNEXPL AINED EXPENDITURE AND BROUGHT IT TO TAX. ON APPEAL, THE C IT (A) CONFIRMED THE SAID DISALLOWANCE AND THE ASSESSEE IS IN 2 ND APPEAL BEFORE US. THE LEARNED COUNSEL FOR THE ASSES SEE SUBMITTED THAT THOUGH THE PARTY TO WHOM THE PAYMENT HAS BEEN MADE HAS DENIED EXECUTING ANY WORK TO THE ASSESSEE COMPANY, THEY HAVE NOT DENIED THE RECEIPT OF PAYMENT. HE SUB MITTED THAT THE PAYMENTS WERE FOR THE EXECUTION OF CERTAIN WORK AND THAT THE REVENUE HAS NOT DOUBTED THE INCURRING OF EXPENDITUR E, BUT HAS ONLY DOUBTED THE QUANTUM OF THE PAYMENT AND THE REC IPIENT OF THE PAYMENT. THEREFORE, ACCORDING TO HIM, ONLY A PE RCENTAGE OF EXPENDITURE AND NOT THE ENTIRE EXPENDITURE SHOULD B E DISALLOWED. THE LEARNED DR, HOWEVER, SUPPORTED THE ORDERS OF TH E AUTHORITIES BELOW AND STATED THAT THE ONUS WAS ON THE ASSESSEE TO PROVE THE BUSINESS EXPEDIENCY AND GENUINENESS OF THE EXPENDIT URE. SINCE THE ASSESSEE HAS FAILED TO ESTABLISH BOTH THE ABOVE CRITERIA, ACCORDING TO THE LEARNED DR, THE DISALLOWANCE HAS B EEN RIGHTLY UPHELD. 11. HAVING REGARD TO THE RIVAL CONTENTIONS AND THE MATERIAL ON RECORD, WE ARE SATISFIED THAT THE ASSES SEE HAS NOT PROVEN THAT THE EXPENDITURE HAS BEEN INCURRED FOR T HE BUSINESS PURPOSE OF THE ASSESSEE AND SINCE THE RECIPIENT HAS DENIED HAVING EXECUTED ANY WORK, IT CANNOT BE CONSIDERED A S GENUINE 22 ITA.NOS. 1781/H/2013 & 1552/H/2014 M/S. RITHWIK PROJECTS P. LTD., HYDERABAD. EXPENDITURE AND CANNOT BE ALLOWED. HENCE GROUND NO. 6 IS REJECTED. 12. AS REGARDS GROUND NO.7 AGAINST THE DISALLOWANC E U/S 40A(3) OF THE I.T. ACT, THE BRIEF FACTS ARE THAT DU RING THE ASSESSMENT PROCEEDINGS, AO VERIFIED THE BOOKS OF AC COUNTS AND FOUND THAT THE ASSESSEE HAS MADE PAYMENTS TOTALLING TO RS.21,35,295 IN CASH IN EXCESS OF RS.20,000. HE THE REFORE, DISALLOWED THE ENTIRE AMOUNT OF RS.21,35,295 U/S 40 A(3) AND BROUGHT IT TO TAX. AGGRIEVED, THE ASSESSEE PREFERRE D AN APPEAL BEFORE THE CIT (A) STATING THAT THE AO HAD TAKEN IN TO A/C THE PAYMENTS FROM HEAD OFFICE TO VARIOUS SITES TOWARDS SITE EXPENDITURE ON AN EMERGENCY BASIS FROM TIME TO TIME FOR DISALLOWANCE U/S 40A(3) OF THE ACT. IT WAS SUBMITTE D THAT THE AMOUNT HAS BEEN PAID TO A PERSONS WHO DO NOT HAVE A NY BANK ACCOUNT AND THAT THE ASSESSEE HAD NO ALTERNATIVE BU T TO INCUR THE EXPENDITURE IN CASH. THE CIT (A) CONFIRMED THE ORDER OF THE AO BY HOLDING THAT THE AR HAS FURNISHED ANY EXPLANA TION, LEAVE ALONE BUT THE EVIDENCE TO SHOW THAT IT WAS COVERED BY ANY OF THE EXPENSES GIVEN UNDER RULE 6DD. AGGRIEVED, THE ASSES SEE IS IN APPEAL BEFORE US. THE LEARNED COUNSEL FOR THE ASSES SEE REITERATED THE SUBMISSIONS MADE BEFORE THE CIT (A) AND SUBMITT ED THAT IF AT ALL THE DISALLOWANCE IS TO BE MADE, IT SHOULD BE RE STRICTED TO THE PERCENTAGE OF THE DISALLOWANCE MADE BY THE AO. 13. HAVING REGARD TO THE RIVAL CONTENTIONS, THE AS SESSEE HAS NOT FILED ANY EVIDENCE IN SUPPORT OF HIS CONTEN TIONS EITHER BEFORE THE CIT (A) OR BEFORE US. IN VIEW OF THE SAM E, WE DO NOT FIND ANY REASON TO INTERFERE WITH THE ORDER OF THE LEARNED CIT (A) AND THIS GROUND OF APPEAL IS ALSO REJECTED. 23 ITA.NOS. 1781/H/2013 & 1552/H/2014 M/S. RITHWIK PROJECTS P. LTD., HYDERABAD. 14. IN THE RESULT, ASSESSEES APPEAL FOR A.Y 2009- 10 IS PARTLY ALLOWED. 15. AS REGARDS ASSESSEES APPEAL FOR A.Y 2010-11, GROUND NO.2 TO 6 ARE AGAINST THE DISALLOWANCE OF TH E CLAIM MADE U/S 80IA OF THE ACT. THE FACTS AND CIRCUMSTANCES AN D THE REASONS FOR THE DISALLOWANCE OF THE CLAIM ARE THE S AME AS IN THE EARLIER YEAR. FOR THE DETAILED REASONS GIVEN BY US IN THE ASSESSEES APPEAL FOR A.Y 2009-10 ABOVE, THESE GROU NDS ARE ALSO SET ASIDE TO THE FILE OF THE LEARNED CIT (A) FOR FR ESH CONSIDERATION IN THE LIGHT OF THE DIRECTIONS GIVEN THEREIN. THESE GROUNDS ARE THEREFORE, TREATED AS ALLOWED FOR STATISTICAL PURPO SES. 16. GROUND NO.7 IS AGAINST THE ADDITION MADE ON AC COUNT OF DISALLOWANCE OF DEDUCTION U/S 80G OF THE ACT OF RS.1,30,000, THE LEARNED COUNSEL FOR THE ASSESSEE SUBMITTED THAT THE ASSESSEE IS NOT PRESSING THIS GROUND OF APPEAL. THIS GROUND IS ACCORDINGLY REJECTED AS NOT PRESSED. 17. AS REGARDS GROUND NOS. 8 TO 10, THEY ARE AGAIN ST UPHOLDING THE RESTRICTION OF TDS CLAIM OF THE ASSES SEE BY THE AO, MERELY BASING ON THE FORM 26AS. WE DEEM IT FIT AND PROPER TO REMAND THESE GROUNDS ALSO TO THE FILE OF THE CIT (A ) FOR RECONSIDERATION IN ACCORDANCE WITH LAW AFTER GIVING THE ASSESSEE A FAIR OPPORTUNITY OF HEARING. 18. AS REGARDS GROUND NO.11 AGAINST THE INITIATIO N OF PENALTY PROCEEDINGS U/S 271(C) OF THE ACT, WE REJEC T THE SAME AS IT IS A PREMATURE GROUND. 19. GROUND NOS. 1 AND 12 BEING GENERAL IN NATURE N EED NO ADJUDICATION. 24 ITA.NOS. 1781/H/2013 & 1552/H/2014 M/S. RITHWIK PROJECTS P. LTD., HYDERABAD. 20. IN THE RESULT APPEALS FOR THE A.YS 2009-2010 A ND 2010-11 ARE TREATED AS PARTLY ALLOWED FOR STATISTIC AL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 04.07.2016. SD/- SD/- (B. RAMAKOTAIAH) (SMT. P. MADHAVI DEVI) ACOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 04 TH JULY, 2016 VBP/- & PVV COPY TO : 1. M/S. RITHWIK PROJECTS P. LTD., HYDERABAD. C/O. MR. P. MURALI & CO., CHARTERED ACCOUNTANTS, 6- 3-655/2/3, 1 ST FLOOR, SOMAJIGUDA, HYDERABAD. 2. THE JCIT, CIRCLE - 3(1), HYDERABAD. 3. CIT(A) - IV, HYDERABAD. 4. CIT - III, HYDERABAD. 4. D.R. ITAT A BENCH, HYDERABAD. 5. GUARD FILE