Infab Infratructure Pvt.Ltd., Ahmedabad V. The Dy.CIT, Circle-4, Ahmedabad

ITA 1601/AHD/2015

AI Insights

The case involves multiple appeals by Infab Infrastructure Pvt Ltd against the orders of the Deputy Commissioner of Income Tax, Circle-4, Ahmedabad, concerning the disallowance of deductions claimed under Section 80IA(4) of the Income Tax Act for various assessment years. The primary contention was whether the assessee should be classified as a developer or a contractor, which significantly impacts the eligibility for deductions under the said section. The Tribunal examined the nature of contracts, the financial and operational risks undertaken by the assessee, and the specific terms of the agreements with government authorities. The Tribunal concluded that the assessee acted as a developer, thus entitled to the deductions claimed.

• Counselvise Citation: [2023] 140 COUNSELVISE.COM (IT) 124704 (ITAT-AHMEDABAD)
• Duration Of Justice: 7 year(s) 7 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 02-02-2023
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Next Hearing Date: 03-01-2023
• Assessment Year: 2005-2006
• Appeal Filed On: 07-06-2015
• Other Referred Cases: Radhe Developers vs. CIT, Patel Infrastructure vs. DCIT, Katira Construction Ltd. vs. DCIT, S. Sugam Construction P. Ltd. vs. DCIT, Bhinmal Contractor Property and Land Developers P. Ltd. vs. DCIT, Rohan & Rajdeep Infrastructure vs. DCIT, ABG Heavy Industries Ltd. vs. CIT, Koya & Co. Construction P. Ltd. vs. CIT, GVPR Engineers Ltd. vs. CIT, B.T. Patil & Sons Belgaum Construction P. Ltd. vs. CIT, Vadilal Lallubhai vs. CIT, Ocean Sparkle Ltd. vs. DCIT, South Arcot District Co-Operative Marketing Society Ltd. vs. CIT, M/s Radhe Developers & 44 others vs. CIT, M/s. TRG Industries P. Ltd. vs. DCIT, M/s. NEC NCC Maytas-JV vs. ITO, M/s. Vijay M. Mistry Cons. P. Ltd. vs. ACIT, M/s. Patel Engineering Ltd. vs. DCIT, M/s. Katira Constructions vs. DCIT
• Laws Referred To: Income Tax Act, 1961
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Business income; Depreciation; Retrospective amendment; Competent authority; TDS
• Section: 43B; 139; 143(3); 40(a)(ia); 194C; 80P; 80IA; 143(2); 139(1); 64; 44AB; 113; 43; 48; 13; 119; 22

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL “A” BENCH, AHMEDABAD BEFORE SHRI WASEEM AHMED, ACCOUNTANT MEMBER & Ms. MADHUMITA ROY, JUDICIAL MEMBER आयकर अपील सं./ I. T. A. Nos. 160 1, 160 2 & 1603/Ahd/201 5 & 11 15/Ah d/2010, ( नधा रण वष / A ss es sment Years : 2005 -06, 2006 -0 7, 2011 -12 & 200 7-08) M/ s . In f a b I nf r as t ru c t u re Pvt . L t d. 40 2, Pu ni t Pl a z a , B /h . N a vg uj a ra t C o lle ge , A s h ra m R o ad , Ah m e da b a d - 38 0 0 14 बनाम/ Vs . Deputy Commissioner of Income Tax C ir c l e- 4, A h m e da b ad थायी लेखा सं./जीआइआर सं./P A N/ G I R N o . : A A B C I 2 9 6 4 (अपीलाथ /Appellant) . . ( यथ / Respondent) अपीलाथ ओर से /Appellant by : Shri M. K. Patel, Advocate यथ क ओर से/Respondent by : Shri Urjit Shah, Sr. D.R. स ु नवाई क तार ख / D a t e o f H e a r i ng 04/01/2023 घोषणा क तार ख /D a t e o f P ro n o u nc e me n t 03/02/2023 O R D E R PER Ms. MADHUMITA ROY - JM: All four appeals filed by the assessee are directed against the orders dated 27.03.2015 (in A.Ys. 2005-06 & 2006-07), 08.02.2010 (in A.Y. 2007- 08) & 30.03.2015 (in A.Y. 2011-12) passed by the Ld. Commissioner of Income Tax (Appeals)-2, Ahmedabad, arising out of the order dated ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 2 - 12.03.2013 (in A.Ys. 2005-06 & 2006-07) & 21.02.2014 (in A.Y. 2011-12) passed by the DCIT, Circle-4, Ahmedabad, 17.04.2009 (in A.Y. 2007-08) by ITO, Ward4(3), Ahmedabad under Section 143(3) r.w.s. 254 of the Income Tax Act, 1961 (hereinafter referred as to ‘the Act’) for Assessment Year 2005- 06 & 2006-07 & under Section 143(3) of the Act in A.Ys. 2007-08 & 2011- 12; respectively. 2. Since all these appeals are relating to identical issues that too in respect of the same assessee, the entire bunch of appeals are heard analogously and are being disposed of by this common order for the sake of convenience. 3. A perusal of the grounds of appeals, it would indicate that there are certain common grounds, which are as follows: i. Disallowance of claim under Section 80IA(4) of the Act by treating the assessee is a work contractor and not a developer by Revenue. ii. Disallowance on interest on FD iii. Disallowance under Section 40(a)(ia) of the Act. iv. Disallowance under Section 36(1)(va) of the Act. 4. Ground Nos. 1 & 2 relate to the issue as to whether the assessee is a developer or works contractor as the assessee merely executed the contract for the various sites awarded by the various entities as of the ultimate view of the Revenue and the claim made by the assessee under Section 80IA(4) of the Act has, therefore, been rejected. ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 3 - 5. Since the issues raised in all these appeals revolve around similar set of facts, for the convenience of adjudication, we would like to deal with ITA No.1601/Ahd/2015 for the Asstt.Year 2005-06 and cull out facts, figures therefrom and the relevant orders under challenge. 6. The brief facts leading to this case is this that the assessee is a Private Limited Company incorporated under the Companies Act, 1956. It is engaged in the business of developing of infrastructure facilities including CIVIL construction Works. The assessee is claiming to have maintained systematically and regularly the books of accounts in accordance with the provision of Income Tax Act and Companies Act. The assessee filed its return of income electronically for the Assessment Year under appeal on 28.10.2005 declaring total income of Rs.8,44,431/-, which is arrived at after claiming deduction u/s 80IA(4) of the Act for an amount of Rs.17,21,232/-. 7. The Ld. A.O. issued notice u/s 143(2) of the Act in response to which the appellant caused appearance before the Ld. A.O. and claimed to have furnished all the information and details called for by him, to his fullest satisfaction. The appellant had also furnished before the Ld. A.O. audited profit and loss account, balance sheet, and Statutory Auditors Report in accordance with the provisions of the section 44AB of the Act in Form No. 3CA and 3CD and other supporting statements of accounts. 8. The AO finalized the assessment for A.Y.2005-06 vide its order u/s 143(3) dated 20/12/2007 wherein he disallowed the assessee's claim for deduction u/s 80IA(4) for a sum of Rs.17,21,232/-. On appeal filed by the ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 4 - assessee, the Learned CIT(A) -VIII, Ahmedabad vide its appellate order dated 29/02/2008 allowed the appellant's claim for deduction u/s 80IA(4). In appeal filed by the department against the order of the CIT(A), the Co-ordinate Bench restored the matter to the file of the AO to examine the claim for deduction u/s 80IA(4) keeping in mind the amendment introduced to the said section vide Finance Act (No.2) 2009. Pursuant to the order of the ITAT, the AO issued fresh notice u/s 143(2) of the Act and the appellant caused appearance before the AO and filed written submission justifying the claim for deduction u/s 801A(4). The Learned AO disallowed the appellant's claim for deduction u/s 80IA(4) and finalized the assessment vide its order u/s 143(3) r.w.s. 254 dated 12/03/2013 determining total income at Rs.20,81,839/-. In the said order, the AO had made addition / disallowance of Rs. 17,21,232/- on account of claim u/s 80IA(4)of the Act, which was, in turn, confirmed by the Ld. CIT(A). Hence, the instant appeal. 9. The assessee company in support of its claim for deduction under Section 80IA(4) of the Act submitted that the assessee is an industrial enterprise carrying on the business of developing infrastructure facility i.e. irrigation project within the meaning of clause (c) of explanation to section 80IA(4). The business enterprise, which is developing the infrastructure facility i.e. construction of irrigation project is owned by a company registered in India in developing the infrastructure facility i.e. construction of irrigation canal which is one of its objects as per the Memorandum of Association of the company. The assessee has entered into an agreement with State Government/Statutory Body for developing a new infrastructure facility i.e. irrigation project. Namely: (a) Sardar Sarovar Nigam Limited (b) ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 5 - Government of Rajasthan Irrigation Department (c) Govt. of Madhya Pradesh. Water resources department. It has started maintaining the infrastructure facility on or after 01.04.1995. The assessee claims to have satisfied all the requirements in terms of the provision of section 80IA(4) of the Act and is therefore entitled to the benefits of the deduction envisaged under that section in respect of the profit & gains derived from the business of developing the infrastructure facility. 10. The assessee is claiming 801A amounting to Rs.17,21,232/ in respect of Infrastructure Project. The assessee is running six 801A projects namely. Sardar Sarovar Narmada Nigam Limited (SSNNL), Gujarat (4 Nos.). Executive Engineer Irrigation Department (EEID), Rajasthan & Executive Engineer, Kutni Dam Division (EEKDDKC), Madhya Pradesh. Out of these six projects one project, ie. SSNNL is incurring loss and rest of two projects are making profits. 11. Further before the Ld. AO the assessee company in support of its claim for deduction u/s 80IA(4) submitted as follows: “1.1 The assessee is an industrial enterprise carrying on the business of developing infrastructure facility i.e. irrigation project within the meaning of clause (c) of explanation to section 80IA(4). 1.2 The business enterprise, which is developing the infrastructure facility Le construction of irrigation project is owned by a company registered in India The assessee is a company incorporated under the Companies Act 1956 and developing the infrastructure facility i.e. construction of nation canal is one of its objects as per the Memorandum of Association of the company. 1.3 The assessee has entered into an agreement with State Government Statutory Body for developing a new infrastructure facility i.e. irrigation project. Namely: a) Sardar Sarovar Nigam Limited ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 6 - b) Government of Rajasthan Irrigation Department. c) Govt of Madya Pradesh, Water resources department. 1.4 It has started maintaining the infrastructure facility on or after 1/4/1995 The assessee thus fully satisfies all the requirement for the provision of section 80IA(4) and is therefore entitled to the benefits of the deduction envisaged under that section in respect of the profit & gains derived from the business of developing the infrastructure facility. At this stage, it is not out of place to go in to the history of benevolent portion of section 80IA of the Income Tax Act. It may be noted that section 80IA was inserted in the stone by Finance (No.2) Act 1991 wef 1/4/1991. Initially as this provision stood, it provides a deduction for profit and gains derived from any business of an industrial undertaking or a hotel or from operation of ships. However this section was amended by Finance Act 1995 wef 1/4/1996 i.e. from Assessment Year 1996-97 whereby profit and gains derived from some other business which are referred to us "eligible business” were also allowed deduction..................... .........Section 80IA was further amended by Finance Act 1999 wef. 1 st April 2000 i.e. from assessment year 2000-01. After the above modification subsection 4 of section 80IA explains eligible bushes and prescribes the codices can deduction u/s.80IA. This sub-section(4) which is applicable to the assessment year under consideration reads as under: The provision of section 80IA(4) were further simplified by Finance Act 2001 we.f. A.Y. 2002-03, so that the condition for transferring the infrastructure facilities to Government Authority was done away Hence, infrastructure projects for which agreement for development and/or maintenance/ operation have been entered with Government Authorities were eligible. Therefore, the concept of BOT/ BOOT was done away. Hence, the assessee was eligible for deduction u/s 80IA of the Act for developing various projects w.e.f. A.Y. 2002-03. Copy of relevant pages of budget speech, explanatory statement and memorandum regarding delegated legislation of 2001-02 is as under; ...............In view of the factual and legal position as stated above, the appellant having fulfilled all the conditions prescribed under the Act, is legitimately entitled to the deduction u/s.801A(4) of the Act even after the amended explanation introduced by the Finance Act 2007 as well as Finance (No. 2), Act 2009. It is not out of place to mention here that due to insertion of explanatory notes, the main section remains the same and accordingly based on the main section, assessee is fully entitled for legitimate claim of deduction u/s 80IA(4) of the Act.” 12. However, the Ld. AO was of the opinion that the assessee has earned income from work contracts and also on the basis of certification of works by ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 7 - the respective State Authorities. Further that, the assessee failed to prove that it is involved in the conceiving planning, designing and financing of the infrastructure project rather involved only in carrying out the execution of certain well defined jobs planned specified and very lay out by developer as work contract. According to him, the assessee company has acted as a contractor and not a developer. 13. The Ld. Counsel for the assessee reiterated submissions those were made before the Revenue authorities. He further submitted that the assessee has executed construction and development of infrastructure facilities by entering into agreement with State or Central Government, local authority, statutory body etc. These activities include irrigation projects. He also contended that the assessee has fulfilled all the conditions as mentioned in section 80IA(4) of the Act in order to claim relief accordingly. It is the case of the assessee that the AO wrongly construed that assessee is a ‘contractor’ and not carried out any development activity. The Ld.CIT(A) while upholding finding of the AO on this issue, has not taken into consideration the submissions of the assessee as made before us in its proper perspective. It was further contended that though the expression ‘works contract” has not been defined in the Act but various judicial pronouncements examined the issue and held that the term has wider meaning so as to state that if the activities carried out by the assessee involve development of project, engagement of various agencies, undertaking risk element, raises own finances and invests its own funds in the construction of the project, then the case of the assessee falls within the meaning of expression “developer”. A perusal of the tender documents clearly shows that the assessee has to arrange own finances, ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 8 - purchase own plant & machinery and purchase all materials at own cost, deploy qualified personnel for construction and development of infra projects. The authorities gave only general specifications for the project. However, for the specific drawings & designs recommended by the assessee, the same has to be approved by the competent authority and becomes part of the tender. Further that once the tender is awarded, the assessee has to pay earnest money, security deposits, performance guarantee by placing fixed deposits with banks. The assessee is also liable for liquidated damages/penalty, free maintenance and repair during defect liability period. During the construction of project, the assessee has to make all the arrangements and is liable for procurement of water, electricity, all materials, skilled, semi-skilled staff, labourers, plant & machinery, equipments & tools, and also wellbeing of the staff/labourers. A perusal of the books of accounts reveals that the assessee has arranged own finance and fixed assets shown on plant & machinery, profit & loss account also demonstrates purchase and consumption of material. He submitted that the assessee is always burdened with financial risk to carry out the project work on own cost with the fixed rate specified in the tender. The payment would be made by the competent authority only after successful completion of the project, project certification etc. and that too after deduction of the retention money. The construction and development of infrastructure projects is highly technical and required special skill, adherence to quality etc. Moreso, the assessee is not compensated for increase in prices of materials, cost of labourers, overhead expenses etc. in various projects. These facts clearly demonstrate that the financial and other risk, responsibility, obligations is undertaken by the assessee in construction and development of the various infrastructure projects. Hence, as per the ratio of the jurisdictional High Court ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 9 - in the case of Radhe Developers, the assessee is not merely a works contractor, but is engaged in development of project as a whole, and therefore, entitled for claim of deduction under section 80IA(4) of the Act. The Ld. Counsel for the assessee further relied on the following decisions to support his case: “1. Patel Infrastructure (Rajkot ITAT) ITA No.627/Ahd/2014, Dated 30/07/2020 2. Katira Construction Ltd.(Rajkot ITAT) [2020] 119 taxmann.com 489(Rjt) 3. S.Sugam Construction P.Ltd.(And ITAT) (2013) 30 taxmann.com 331 (Ahd) 4. Bhinmal Contractor Property and Land Developers P.Ltd.(Mumbai ITAT) [2018] 93 taxmann.com 296 (Mum) 5. Rohan & Rajdeep Infrastructure (Pune ITAT) [2013] 40 tax.com 136 (Pune) 6. ABG Heavy Industries Ltd.(BOM HC) [2010] 189 taxman.com 54 (Bom) 7. Koya& Co. Construction P.Ltd. [2012] 21 taxmann.com 35 (Hyd.ITAT) 8 . GVPR Engineers Ltd. [2012] 21 taxmann.com 25 (Hyd ITAT) 9. B.T. Patil & Sons Belgaum Construction P.Ltd. [2013] 34 taxmann.com 97 (Pune ITAT)” 10. Radhe Developers Vs.CIT, 341 ITR 403 (Guj) 14. The assessee made written submission before the appellate authority, the crux whereof is as follows: A. Y. 2005-06 3. The Learned Assessing Officer grossly erred in law and on facts of the case in denying the appellant's legitimate claim for deduction us 80IA(4) without considering the submissions filed by the appellant in the course of the Assessment proceedings. The AO had referred to only one submission filed dated 19/02/2013 dealing with different contention which is not part of said submission which referred by AO whereas the appellant had filed four submissions on 19/09/2012, 04/10/2012, 28/01/2013 and 19/02/2013 which had not been considered by the AO while passing the impugned order. The Assessing Officer has denied the appellant's valid claim for deduction w/s 80IA(4) without considering the submissions filed by the appellant in the course of the Assessment proceedings. The AO had referred to only one submission filed dated 19/02/2013 dealing with different contention which is not part of said submission which referred by AO whereas the appellant had filed four submissions on 19/09/2012, 04/10/2012, 28/01/2013 and ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 10 - 19/02/2013 which had not been considered by the AO while passing the impugned order. The AO has taken no notice of the numerous submissions made by the Assessse. The assessee had diligently tried to explain the contention by providing supportive evidences and factual details through submissions. The said submissions have been totally ignored and disregarded by the AO while passing the assessment order. The Appellant sincerely prays that the AO ought to have given due importance to such submissions and after referring to them the deduction-us 80-IA should not have been disallowed. Therefore, the Assessee submits that the disallowance made by the AO without considering the detailed submissions requires to be deleted. ... 3.3 It is submitted that the assessee had during the year under consideration carried out the business of infrastructure facility i.e. irrigation project. Developer means a person who makes the things happen. It is assessee, who by mobilizing and synthesizing people, plan, technical expertise, supervision, coordination and control, developed and create the infrastructure facility i.e. irrigation project. It is further submitted that the assessee has entered in an agreement with the Government/Statutory Body for development of the infrastructure facility. The assessee had undertaken development of infrastructure facility and the term develop should be understood reasonably as bringing about or producing new facility by developing the natural resources (land) to harness the potential of another natural resources being water. It is emphasized that the reference is to the development of facility, which was hitherto not available to the community for use. Thus it is our submission that the assessee has offered to the community new facility for its use. The assessee has utilized his technical expertise and know-how and has undertaken detailed engineering. It has drawn up multiple drawings, it has also undertaken to bare risks, it has mobilize technical and other staff, appropriate materials and equipments to accomplish the development work. It is only because of its expertise, specialization, financial commitment and involvement that the project of construction and development of irrigation canal having such immense national importance was awarded to the assessee and the assessee had developed the said new infrastructure facility of such irrigation project. The assessee is therefore entitled deduction u/s 801A(4) 3.4 The assessee further submits that the amendment brought by the Finance Act 1999 was with the sole intention/purpose for providing deduction u/s 801A to the person who only develops or who only maintains and operates and infrastructure facility. If the Government does not pay a person who only develops the infrastructure facility, the entire cost of development would be a loss in the hands of the developers, as he is not operating the infrastructure facility. When the legislature has provided that the income of the developer of the infrastructure project would be eligible for deduction, it presupposes that there can be income to developer, i.e. to the person who is carrying on the activity of only developing infrastructure facility. A developer would have income only if he is paid for development of infrastructure facility, for the simple ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 11 - reason that he is not having the right/authorization to operate the infrastructure facility and to collect there from has no other source of recoupment of his cost of development. 3.5 It is further submitted that the word "it" used in clauses (a), (b) and (c) of sub clause (i) of sub section (4) of section 80IA of the Income Tax Act referred to the enterprise and has been used to denote enterprise. A plain reading of the said clause (i) makes it clear without any ambiguity that it is 'any enterprise that should fulfill the condition of carrying of the particular type of businesses narrated /specified in the main part of clause (1) of section 80 IA (4). The assessee company itself being enterprise which has developed the infrastructure facility of constructing irrigation project is eligible for deduction u/s 801A (4). 4.1 It is respectfully submitted that if we were to compare sub-section (4A) of section 80LA which stands replaced by sub-section (4) of section 801A by the Finance Act, 1999, defined that clauses (i), (ii) and (iii) of the earlier sub section (4A), the word "enterprise" was used, but in the replaced new sub-section (4) in the corresponding sub-clauses (a),(b)and (c) the word "enterprise" has been replaced by the word "it". Obvious as it is, reading in the above context, it is amply clear that in sub-clause (4), the word "it" needs appropriately to be interpreted to mean enterprise. Moreover if any interpretation other than that submitted above is made, it will lead to an absurd result because sub-clause (b) of clause (1) of sub-section (4) provides that: "It has entered into an agreement with Central Government..." and thus "it" as used in sub-clause (b) has to be someone who/which has entered into an agreement with the Government etc. Obviously the Infrastructure facility cannot be such an entrant, as it cannot enter in to an agreement with the Central Government or anybody else. Understandably, it is only the "enterprise" which can enter into an agreement with the Central government or State Government or any other person. As such viewed as above, also the word "it" denotes the "enterprise" and not the "Infrastructure facility". The assessee company an enterprise and has entered in to the agreement with the State Government/ Statutory Body. 5.1. It is relevant to submit here that the honorable Income Tax Appellate Tribunal ‘F’ Bench Mumbai in the case of Patel Engineering Ltd. v/s Deputy CIT reported in (2005) 94 ITD 411 (Mumbai) had analytically considered the issue and delivered the judgment in favour of the assessee. Copy of the said judgment is attached herewith. It is submitted that the ratio of the decision and judgment in the said case is squarely applicable to the facts of our case. It is therefore prayed that the claim for deduction u/s 80IA(4) may please be allowed. 6.1 The assessee respectfully submits that the stand taken by the department that the assessed is contractor, executing civil contract and so it cannot be a developer as such, is misconceived and misdirected and is devoid of any merit in law and facts of the cases. It is true that in the normal sense of the term, the assessee is contractor. The IT Act has not defined the word 'Contractor’. As per the Contract Act, any person entered in to an agreement with another, either to do or refrain from doing something in consideration of something becomes a contract. A person who entered in to contract with another person will be a contractor no doubt and assess having entered into an ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 12 - agreement with Government Statutory Body for development of infrastructure project is obviously a contractor, but does not derogate the assessee from being a developer as well. The term "Contractor is not essentially contradictory to the term developer, On the other hand, rather section 80IA(4) itself provides that assessee should develop the infrastructure facility as per agreement with the Central Government, State Government, local authority So entering into a lawful agreement and thereby becoming a contractor should, in nowhere, be a bar to one being a developer. The Assessee has developed an Infrastructure facility as per agreement with the State Government/ Statutory Body. Therefore nearly because, in the Agreement for development of infrastructure facility, assessee is referred to a contractor or because some basic specification are laid down, it does not detract the assessee from the position of being a developer, nor will it debar the assessee from claiming deduction us 801A(4). As stated in the preceding paras, the assessee having carried out the work of developing infrastructure facility Le construction of irrigation projects water supply project, is developer and is entitled to deduction w/ 80IA(4) 6.2. It is further submitted that mentioning in the TDS certificates in Form no.16A that the nature of payment on which TDS is made is "payment to the contractor also does not alter the legal position of the assessee's standing as a developer of infrastructure facility. There is no dispute over the fact that the payment as evidenced in the TDS certificates where made towards work of developing infrastructure facility as per the agreement entered into with the State Government Statutory Body. Naturally, since the payment has been made for execution of work of developing infrastructure facility as per the agreement, the payer deducter has mentioned the nature of payment as payment to contractor. The assessee emphatically says that the payment pertains to the work of developing infrastructure facility only and therefore it is entitled to deduction u/s 80IA(4). Reliance is placed on the judgment of the ITAT Mumbai Bench in the case of Patel Engineering Ltd. 2005 94 ITD 411. 7.1 In the case of M/s Radhe Developers & 44 others in ITA no. 2482/Ahd/2006 reporter in (2005) 113 TTJ 300. The ITAT Ahmedabad Bench has recently delivered a landmark judgment dated 29/6/2007. The issue before the Tribunal in the 45 cases of M/s Radhe Developers and others were centered around the admissibility of deduction u/s 80IB(10) of the IT Act. The assessing officer has disallowed the assessee's claim for deduction u/s 80IB(10) on the ground that claimants were not owners of the land on which the development had been carried out and that the assesses were only civil contractors. In these cases also, The ITAT interpreted the word "develop" with reference to its scope and amplitude and after quoting from various law lexicons and judicial pronouncement, rendered their decision in favour of the assessee. Kind reference is invited to Para 30 of the said judgment. 7.2 The Supreme Court in the case of Gujarat Industrial Development Corporation and others, 227 ITR 414 SC., considering the meaning of developer, held that the word development appearing in the provisions should be understood in its wider sense and ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 13 - therefore granted exemption, even though Gujarat Industrial Development Corporation was engaged in the Industrial development. 7.3. The Supreme Court in the case of CIT vs VadilalLallubhai, 86 ITR 02 (SC) hat wed that nothing more than what is stated in the statute can be read and added to find out the meaning of the provision. 7.4. ITAT Hydrabad Bench "A" in the case of Ocean Sparkle Ltd, v/s Deputy CIT 99 TTJ 582 (Hyd) held that section 801A(4) does not provide that the infrastructure facility should be owned either by the enterprise developing the infrastructure facility or by the enterprise operating and maintaining the said facility. Proviso aims at granting deduction to enterprise engaged in the operation and maintenance of the infrastructure facility. 7.5. The Supreme Court in the case of CIT v/s South Arcot District Co-Operative Marketing Society Ltd. 176 ITR 117 (SC) dealt with the concept of liberal construction for granting deduction u/s 80P of the Act. It held that a liberal interpretation should be given to the language of the provision while dealing with the exemption provision. It is stated that having regard to the object with which the provision has been enacted, it is apparent that a liberal construction should be given to the language of the provisions. ... In view of the above submission, the assessee says that the interpretation of section 801A as made by the AO in A.Y 2004-05 is erroneous and the denial of deduction u/s 80IA(4) by such narrow interpretation is unjustified. "During the year we have carried out projects of developing infrastructure facilities in Gujarat, Rajasthan and Madhya Pradesh. In respect of each of the projects we have obtained separate audit report in Form 10CCB and had claimed deduction u/s 801A of the IT Act, 1961 in respect of each of the projects of infrastructure facilities together with details of authorities with whom agreements had been entered into. The above projects are for developing infrastructure facilities as per section 80IA(4) (i) (b) of the IT Act, 1961. The auditors of the company have duly certified the same in the comments forming part of the audit report for each of the projects." The appellant submits that all the conditions for deduction u/s 80IA(4) are duly satisfied and fulfilled and necessary evidence in this regard has already been before the AO in the course of assessment proceedings. Section 80IA(4) applies to any enterprise carrying on business of developing or operating and maintaining or developing, operating and maintaining any infrastructure facilities which all the following (a) It is owned by a Company registered in India or by consortiums of such companies or by an authority or board or a corporation or any other body established or constituted under any Central of State Act. (b) It has entered into an agreement with the Central Govt. or State Govt. or Local Authority or any other statutory body for developing or operating and ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 14 - maintaining or developing, operating and maintaining a new infrastructure facility. (c) It has started or starts operating and maintaining the infrastructure facility on or after 1 day of April, 1995. As per the clause (c) of explanation below section 80LA(4) which defines infrastructure facility, it is explained that for the purpose of section 801A(4) infrastructure facility includes a water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management system clause (c) of explanation below section 801A(4). The appellant therefore prays that the disallowance of claim u/s 80IA(4) made by the AO which is unjustified in law and unwarranted by facts may please be deleted. It is submitted that in the return of income the appellant has claimed deduction of Rs 11,88,204/- u/s 80IA(4) However in the course of assessment proceedings the claim was revised for a sum of Rs.17,21,232 In the assessment order the AO has not dealt with enhanced claim of Rs.17,21,232 It is therefore prayed that the appellants claim for deduction u/s 801A(4) may be allowed for the sum of Rs. 17,21,232/-.” 15. After considering the above submissions made by the assessee and upon perusal of the materials made available before the First Appellate Authority, the following observation was made: 3.3. Decision: I have carefully considered the facts of the case, the assessment order and the written submission of the appellant. The appellant has claimed deduction u/s. 80IA(4) of the Act, claiming that he is a developer of the infrastructure facilities. The AO in both the years involved, has discussed various contracts taken by the appellant for construction. It has also discussed different terms and conditions in various contracts before holding that the company has merely executed the work contracts before holding that the company has merely executed the work contract entered with the authorities and not acted as the owner of the project. It is also been pointed out by the AO that in the profit and loss account the income has been shown as work certified. The appellant has failed to prove that it was involved in conceiving planning, designing and financing of the infrastructure project. The receipt of payment under section 194C clearly indicates that the assessee company had acted as a contractor and not as a developer or owner of the project. The AO has further held that it has failed to prove that the investment risk and reward was belonging to it for the development project which was the basic requirement of the developer. The appellant on the other hand has vehemently insisted that it was o developer of the project as it has fulfilled all the conditions for section 80 I-A. It has also been pointed out by the appellant that the judgement given by honourable Gujarat High ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 15 - Court in the case of Katira Constructions. 352 ITR 513 was not applicable on the facts and circumstances of the appellant's case. The appellant has pointed out to various clauses of contract agreements and has submitted that it was acting as a developer of the infrastructure facility as it has used technical expertise and financial resources for construction of these projects. It is also pointed out that in the assessment years 2008- 09 and 2009-10 the CSIT(A) have allowed the appeal and held that it was acting as a developer of the infrastructure facilities and some of the projects from which the income has been shown in these two years were also there in those years as well. It has also pointed out to certain Judicial pronouncements which have been delivered after the judgement of honourable Gujarat High Court mentioned above and has submitted that the direction be allowed. Various submissions given by the appellant have been reproduced in the preceding discussion. On a careful consideration of entire facts of the case it is noted that this the appellant has done various construction works during the year, which it claims to be in the nature of development of infrastructure facilities. Before analysing all the construction works it is to be seen, whether it is development of infrastructure facility or not? We will first discuss the reason for which the section 801A was introduced in the Act and other related issues such as the meaning of 'develop' or 'developer' and 'contractor'. The heading of Section 80IA mentions that it is for deductions in respect of profits and gains from industrial undertakings or enterprises engaged in Infrastructure Development etc. Section 80IA contains the provisions for those undertaking which are involved in development of Infrastructural facilities such as telecommunication development of industrial park, development of special economic zone, power generation and distribution of power etc. In addition to this, the deduction is also available for certain infrastructure facilities such as toll road, bridge, rail system, highway project, water supply project, port, airport, Inland waterway etc. It is apparent from the scheme of the section that the deduction u/s. 801A has been brought in the statute as an incentive to promote economic growth and industrialization and give an incentive by way of deduction from Income Tax Act for making such investment. All the projects for which the deduction is available requires huge financial investment and technical skills. Therefore, one of the most important ingredients for being entitled to claim deduction u/s. 801A is the financial investment and risk. Honourable Gujarat High Court has dealt with the issue of deduction under section 80 1-A in its recent order in the case of Katira Constructions (352 ITR 513]. While deciding the appeal in that case, it has been held by the honourable Court that the deduction under section 80 I-A is available only to the concerns of the assessees who are doing the work of infrastructure development themselves e.g. on BOT or BOOT basis. It has been held by the honourable Court offer examining various provisions of section 80 1-A since its inception, the Explanatory Memorandums to the various amendments related to the section and other views on the subject that it was available only for Public private participation. It was explicitly held by the honourable Court that the deduction was not ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 16 - available in case of works contract. The honourable Court has also taken help from its earlier decision in the case of Radhe Developers to distinguish between the contractor and the 'developer’. It would be appropriate to reproduce the relevant paragraphs of the honourable Court which contains the provisions of section 80 I-A, the relevant Explanatory Memorandums and the observations of the honourable court regarding the provisions: - 9. Section 80IA of the Act was introduced for the first time in the year 1991, granting deduction of income from industrial undertakings, etc. in certain cases. Infrastructure development was not contained in the said provision at the inception. Sub-section (4A) was introduced in section 80IA of the Act with effect from 1.4.96 making deduction applicable to any enterprise carrying on developing, maintaining and operating any infrastructure facility subject to fulfillment of the conditions contained therein. Sub section (4A) as it originally stood at the time of its introduction with effect from 1.4.96 read as under: "(4A) This section applies to any enterprise carrying on the business of developing maintaining and operating any infrastructure facility which fulfils all the conditions, namely:- the enterprise is owned by a company registered in India or by a i) consortium of such companies: the enterprise has entered into an agreement with the Central ii) Government or a State Government or a local authority or any other statutory body for developing, maintaining and operating a new infrastructure facility subject to the conditions that such infrastructure facility shall be transferred to the Central Government, State Government, local authority or such other statutory body, as the case may be, within the period stipulated in the agreement; the enterprise starts operating and maintaining the iii) infrastructure facility on or after the 1 st day of April, 1995.” Notes on clauses for introduction of such amendment stated as under: Clear 19 seeks to amend section 80IA of the Income-tax Act relating to Induction in respect of profit and gains from industrial underestings, etc. in certain cases. The proposed amendment seeks to enlarge the scope of deduction under section 80IA. It is proposed to provide hundred per cent deduction from the profits and gains of enterprise carrying on the business of development maintenance and operation of infrastructure facility for the initial five assessment years and thereafter thirty percent of such profit and gains. The deduction will be available the enterprise (a) is owned by a company or consortium of companies registered in India; b) enters into an agreement with the Central or a State Government or a local authority or any other statutory body for development, maintenance and operation of a new infrastructure facility; (c) transfers such infrastructure facility after the period stipulated in the agreement to such ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 17 - Government or authority or body concerned, and (d) starts operating and maintaining the infrastructure facility on or after 1st April 1993. "Infrastructure facility” has been defined to mean a road, highway, bridge, airport, port or rail system or any other public facility of similar as may be notified by the Board." Explanatory memorandum explaining such provision read as under. "Under the provisions of section 80LA, new industrial undertakings are allowed deduction of 2536 (30% for companies) for the first ten years (twelve years for the cooperative sector) of production. However, to an industrial undertaking engaged in the generation or generation and distribution of power to an industrial undertaking set up in specified backward State/districts, a five year full tax holiday is allowed For undertakings entitled to the five year full tax holiday, normal deduction of 25% (30% for companies) is allowed for the balance period after the five year holiday. Industrial moderanisation requires a massive expansion of and qualitative Improvement in infrastructure Our country is very deficient in infrastructure such a expressways, highways, airports, ports and rapid urban rail transport systems Additional resources are needed to fulfil the requirements of the country within reasonable time frame. In many countries the BOT (build-operate-transfer) or the BOOT (build-own-operate-transfer) concepts have been utilised for developing new infrastructure. Applying commercial principles in the operation of infrastructure facilities com provide bath managerial and financial efficiency. In view of this, it is proposed to allow a five year tax holiday for any enterprise which builds, maintains and operates any fracture facility such as roads, highways, or expressways or new bridges, airports, parts and rapid rail transport system on BOT or BOOT or similar other basis (where there is an ultimate transfer of the facility to a Government or public authority) The enterprise mat have entered into an agreement with the Central or State Government or a local authority or any other statutory authority for this purpose. The period within which the infrastructure facility has to be transferred needs to be stipulated in the agreement between the undertaking and the Government concerned. The tax holiday will be in respect of income derived from the use of the infrastructure facilities developed by them. The five year period will be counted from the year in which the infrastructure facility become operational. It will apply in respect of infrastructure facilities becoming operational on or after 1.4.1995.” With effect from 1.4.2000, the Legislature split the existing section 80IA into two separate sections, section 80IA and 80IB. For our limited purpose, we may record that sub-section (4A) which formed part of erstwhile section 80IA was renumbered as sub- section (4) of newly recast section 801A. ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 18 - 10. The next significant legislative change came with effect from 1.4.2002, wherein the language used in sub-section (4) of section 80IA was materially altered. Such amended sub-section (4) of section 80IA with effect from 1.4.2002 read as under: 10 This section applies to i) any enterprise carrying on the business of developing or (ii) operating and maintaining or (ii) 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 (ii) 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. Provided that where an infrastructure facility is transferred on or after the 1st day of April 1999 by an enterprise which developed such-infrastructure facility (hereafter referred to in this section as the transferor enterprise) to another enterprise (hereafter in this section referred to as the transferee enterprise) for the purpose of operating and maintaining the infrastructure facility on its behalf in accordance with the agreement with the Central Government, State Government, local authority or statutory body, the provisions of this section shall apply to the transferee enterprise as if it were the enterprise to which this clause applies and the deduction from profits and gains would be available to such transferee enterprise for the unexpired period during which the transferor enterprise would have been entitled to the deduction if the transfer had not taken place. Explanation -For the purpose of this clause, "Infrastructure facility means a) a road including toll road a bridge or a rail system......” The language used in sub-section (4) of section 80IA was changed from the requirement of "developing, operating and maintaining” to any enterprise "carrying on business of developing or operating and maintaining or developing, opening and maintaining any infrastructure facility" Thus, instead of the previous red of cumulative satisfaction of the said conditions, the Legislature now permitted the same deduction to those enterprises carrying on business of either developing or opening of maintaining or developing, operating and maintaining any infrastructure facility. Explanation to sub-section (4) of section 80IA which defines "infrastructure facility" was also slightly changed to refer to road including toll road. Further, the requirement of the enterprise fulfilling the condition that such infrastructure facility shall be transferred to the Central Government, State Government, local authority or such other authority, as the case may be, within the period stipulated in the agreement was done away with. ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 19 - 11. Explaining such proposed amendment, explanatory memorandum for the Finance Bill 2001 recorded as under. "Under the existing provisions of section 80IA, roads, highways, bridges, airports, ports and rail systems are regarded as infrastructure facilities and the enterprises engaged in developing or operating and maintaining or developing operating and maintaining such infrastructure are entitled to a tax holiday for five years and a deduction of 30% of profits for the next five years. The benefit may be availed by an enterprise is ten consecutive years out of fifteen years beginning with the year in which such enterprise develops the infrastructure facility. An enterprise claiming such benefit has to enter into an agreement with the Central or Starz Government or a local authority or any other statutory authority, to which the enterprise which develops such facility has to transfer such facility to the Government or public authority after the stipulated period In other words, the required condition for availing of this benefit is that transfer under BOT (Build Own Transfer) or BOOT (Build Own, Operate and Transfer) schemes has to be met. Investments in infrastructure has to compete with Investment in other sectors and must therefore be attractive. There is, in particular, a need to encourage investment in the area of surface transport, water supply, water treatment system, irrigation project, sanitation and sewerage system or solid waste management systems. The Bill therefore, proposes to relax the existing two tier benefit to provide a ten year tax holiday. Keeping in view the capital intensive nature, the higher allowances depreciation in the initial years in such enterprise and the need for improved cash flows. It is further proposed that for an infrastructure facility in the nature of a road including a toll road bridge rail system, highway project, water supply project, sanitation, sewerage and solid waste management system in place of two-tier tax holiday, a ten year tax holy may be availed consecutively out of twenty years beginning from the year in which the undertaking begins operating the infrastructure facility. In the case of other infrastructure, namely, for airport, part, Inland port and Inland waterways, it is also prepared in relax the existing two tier fiscal Incentive. The Bill proposes an identical ten year tax holiday that may be availed in a block of fifteen years is also proposed to do away with the mandatory requirement that such infrastructure facility shall be transferred the Central Government State Government, local authority or any other statutory authority.” 12. In 2007, an explanation was added below sub-section (13) of section 801A by the Finance Act 2007, with retrospective effect from 1.4.2000. Such explanation reads as under: ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 20 - "Explanation: For the removal of doubts, it is hereby declared that nothing contained in this section shall apply to a person who executes a works contract entered into with the undertaking or enterprise, as the case may be.” Explanatory memorandum for introduction of such amendment reads as under: "Section 80IA, 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 investment in development of the infrastructure sector and not for the persons who merely execute the civil construction works or any other works contract. Accordingly, it is proposed to clarify that the provisions of section 80IA shall not apply to a person who executes a works contract entered into with the undertaking or enterprise referred to in the said section. Thus, in a case where an person makes the investment and himself executes the development work, ie, carries out the civil construction work, he will be eligible for tax benefit under section 80IA. In contrast to this, person who enters into a contract with another person (ie. undertaking or enterprise referred to in section 80IA) for executing works contract, will not be eligible for the tax benefit under section 80IA. 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." The above explanation was substituted by a new explanation by Finance Act No. 2 of 2009 with effect from 1.4.2000. Such explanation which is under challenge before us 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 rub- section (4) which is in- the nature of works contract awarded by any person (including the Central or State Government and excited by the undertaking or enterprise referred to in sub-section (1)." Notes on clauses for introduction of such amendment read at under: "It is also proposed to amend the Explanation to said section to clarify that nothing contained in the said section shall apply in relation to a business referred to in sub-section (4) which is in the nature of a works contract ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 21 - awarded by any person (including Central or State Government) and executed by the undertaking or enterprise referred to in sub-section (1) of said section." The explanatory memorandum for introducing such amendment reads as under. "The profit linked deductions in Chapter VIA are prone to considerable misuse. Further, since the scope of the deductions under various provisions of Chapter VIA overlap, the tax payers, at times, claim multiple deductions for the same profits. With a view to preventing such misuse, it is proposed to amend the provisions of section 50x of the Income Tax Act to provide the following namely: Further with a view to preventing the misuse of the tax holiday under section 801A 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." 13. These, in the nutshell, are the relevant legislative changes brought about by the Parliament from time to time. The central question is, whether in the present case, the explanation below sub-section (13) to section 801A introduced by the Finance Act No.2 of 2009 with effect from 1.4.2000 transgresses the legislative competence of the Parliament. --- --- --- 18. The case of the petitioners is that the impugned explanation below sub- section (13) to section 80IA provides for a levy of tax which was hitherto unknown. It is, therefore, urged that the Court should examine the reasonableness of such provision particularly when the same is brought into operation with retrospective effect. Section 80IA(4) provides for deduction under certain circumstances. If such deductions are withdrawn with retrospective effect, surely there would be a case of providing for a levy which was till then not known. In that context, if the impugned explanation provides for withdrawal of the deductions, that too, retrospectively, question of judging the reasonableness thereof in the background of the same being made retrospectively applicable from a long period of time would certainly arise. The however is, does this explanation provide for a fresh levy? In other words, did the Legislature in introducing the impugned explanation materially change the exemption which existed till such explanation was introduced? To our rind, this is the crucial test which would ultimately decide the outcome of these petitions. ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 22 - To put it differently, if the effect of the explanation is to withdraw the existing deductions, the question of the same being unreasonable or arbitrary would arise. 19. To be able to judge the question, we need to first understand the nature of the explanation. Ordinarily, an explanation is introduced by the Legislature for clarifying some doubts or removing confusion which may be possible from the existing provisions. Normally, therefore, an explanation would not expand the scope of the main provision and the purpose of the explanation would be to fill a gap left in the statute, to suppress a mischief, to clear a doubt or as is often said to make explicit what was implicit. --- --- --- 27. In the present case, therefore, from both the angles, namely, whether the explanation aims to expand the prevailing provision and whether being in the nature of a tax statute, such change can be permitted with retrospective effect, it would be crucial for us to discern the true effect of such explanation. In this context, we may recall that the impugned explanation below sub-section (13) to section 80IA starts with an expression "for the removal of doubts, it is hereby declared that" and provides that nothing contained in this section shall apply to 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). Thus the explanation in question was introduced for the removal of doubts and it declared that nothing containing in sub-section (4) would apply to a business in the nature of works contract. We may recall that sub-section (4) of section 80IA even after amendment of 2002, envisaged deduction in case of any enterprise carrying on the business of developing or operating and maintaining or developing, operating and maintaining any infrastructure facility. Thus, the Legislature by way of the impugned amendment distinguished between the cases of developing/operating and maintaining/developing. operating and maintaining any infrastructure facility from the works contract awarded by any person, be it the Central or the State Government, executed by the undertaking or enterprise seeking such an exemption. That there is an intrinsic difference between developing an infrastructure facility and executing a works contract, in our opinion, can hardly be disputed. 28. In the case of CIT v. Radhe Developers [2012] 341 ITR 403/204 Taxman 543/17 taxmann.com 156 (Guj.), a Division Bench of this Court had an occasion to examine these aspects in the context of a deduction provided under section 80IB(10) of the Act for development of housing projects. The Revenue had contended that since the assessees did not own the lands in question and only developed the same for and on behalf of someone else would not be eligible for the deduction in question. This Court examined the question what can be the meaning of the term 'develop' and who consequently can be stated to be a 'developer. Noting that section 801B(10) of the Act provides for deduction ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 23 - to an undertaking engaged in the business of developing and constructing housing projects and does not provide that the land must be owned by the assessees seeking such deduction, it was held that the assessees cannot be treated as works contractors. Noting that the assessees took full risk of executing the housing project and thereby making profit or loss, as the case may be, and that the assessees invested their own finds in the cost of construction and engagement of several agencies, it was held that the deduction was available to assessees. It was observed as under: “....The Tribunal itself in the impugned order has traced different meanings term developer explained in different dictionaries, which read as under: a. The Webster’s Encyclopedia unabridged of the English Language gives following meaning of the term ‘developer’ as: 1. One who or that which develops; 2. A person invests in and develops Suburban potentialities real estate. Oxford Advanced Learners Dictionary of Current English Fourth Indian Edition giveshttp://10.225.19.9/applications/index_db.php meaning the term developer persons company that develops land. Random House Dictionary the English Language, the following can be found. Develop To bring the capabilities or possibilities bring to a mare advanced affective state. To cause to grow or expand. Developer: The act or process developing, progress. Synonym: Expansion, elaboration, growth, evolution, unfolding, maturing, maturation. Webster Dictionary, the following definitions emerge: To realize the potential of: To aid in the growth of Strength, develop the biceps, To bring into being: make active (develop a business) To convert (a tract of land) for specific purpose, as by building extensively. Law lexicon Dictionary: The following definitions could be seen: Development ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 24 - To act, process or result of development or growing or causing to grow, the state of being developed.” Happening.” 34. We have reproduced relevant terms of development agreements in both the sets of cares. It can be seen from the terms and conditions that the assessee had taken full responsibilities for execution of the development projects. Under the agreements, the assessee had full authority to develop the land as per his discretion. The assessee could engage professional help for designing and architectural work Assessee would enroll members and collect charges. Profit or loss which may result from execution of the project belonged entirely to the assessee. It can thus be seen that the assessee had developed the housing project. The fact that the assessee may not have owned the land would be of no consequence. 36. We have noted at some length, the relevant terms and conditions of the development agreement between the assessees and the land owners in care of Radhe Developers. We also noted the terms of the agreement of sale entered into between the parties. Such conditions would Immediately reveal that the owner of the land had received part of sale consideration. In lieu thereof he had granted development permission to the assessee. He had also parted with the possession of the land. The development of the land was to be done entirely by the assessee by constructing residential units thereon as per the plans approved by the local authority. It was specified that the assessee would bring in technical knowledge and skill required for execution of such project. The assessee had to pay the fees to the Architects and Engineers Additionally. assessee was also authorized to appoint any other Architect or Engineer, legal adviser and other professionals. He would appoint Sub-contractor or labour contractor for execution of the work The assessee was authorized to admit the persons willing to join the scheme. The assessee was authorised to receive the contributions and other deposits and also raise demands from the members for dues and execute such demands through legal procedure. In case, for some reason, the member already admitted is deleted, the assessee would have the full right to include new member in place of outgoing member. He had to make necessary financial arrangements for which purpose he could raise funds from the financial institutions, banks etc. The land owners agreed to give necessary signatures, agreements, and even power of attorney to facilitate the work of the developer, In short, the assessee had undertaken the entire task of development, construction and sale of the housing units to be located on the land belonging to the original land owners. It was also agreed between the parties that the assessee would be entitled to use the full FSI as per the existing rules and regulations. However, in future, rules be amended and additional FSI be available, the assessee would have the full right to use the same, also. The sale proceeds of the units allotted by the assessee in favour of the members enrolled would be appropriated towards the land price. Eventually after paying off the land owner and the erstwhile proposed purchasers the surplus amount would remain with the assessee. Such terms and conditions under which the assessee undertook the development project and took over the possession of the land from the original owner, leaves little doubt in our mind that the assessee had total and complete control over the land in question. ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 25 - The assessee could put the land to use at agreed between the parties The assessee had full authority and also responsibility to develop the housing project by not only putting up the construction but by carrying out various other activities including enrolling members, accepting members, carrying out modifications engaging professional agencies and so on. Most significantly, the risk element was entirely that of the assessee. The land owner agreed to accept only a fixed price for the land in question. The assessee agreed to pay off the land owner first before appropriating any part of the sale consideration of the housing units for his benefit. In short, assessee took the full risk of executing the housing project and thereby making profit or loss o the case may be. The assessee invested its own funds in the cost of construction and engagement of several agencies. Land owner would receive & fix predetermined amount towards the price of land and was thus innlated against any risk. 37. By no stretch of imagination can it be said that the assessee acted only as a works contractor....” 29. In our, opinion, what the explanation aims to achieve is to clarify that deduction under section 801A(4) of the Act would not be available in case of execution of works contract. The fact that such interpretation of the existing provisions of sub- section (4) of section 80IA of the Act, even without the aid of the explanation was possible, in our opinion, is not disputable. As noted, sub-section (4) of section 80IA even after the amendment in the year 2002 envisaged deduction in case of developing or operating and maintaining or developing, operating and maintaining any infrastructure facility. Even without the aid of the explanation, it was possible to contend that such expression did not include an enterprise executing a works contract. Particularly, bearing in mind the observations made by this Court in the case of Radhe Developers (supra), there would certainly be a demarcation between developing the facility and execution of works contract awarded by an agency engaged in developing such facility. 30. We may examine the issue from the angle of legislative changes. We have already noticed in the earlier portion of this judgment that from the inception in the year 1996, benefits under such deduction, then covered under sub-section (4A) of section 80LA of the Act were available to an enterprise engaged in developing, maintaining and operating any infrastructure facility. From time to time, legislative changes have been made to suit the requirements of the changing conditions. The explanatory memorandum contemporaneous to the introduction of sub-section (4A) from 1.4.96 has already been reproduced earlier. It would be useful once again to note the relevant portion thereof. "Industrial modernisation requires a massive expansion of and qualitative improvement in, infrastructure. Our country is very deficient in infrastructure such as expressways, highways, airports-ports and rapid urban rail transport systems Additional resources are needed to fulfill the requirements of the country within a reasonable time frame. In many countries the BOT (build-operate-transfer) or the BOOT (build-own-operate- transfer) concepts have been utilised for developing new infrastructure. ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 26 - Applying commercial principles in the operation of infrastructure facilities con provide both managerial and financial efficiency. In view of this, it is proposed to allow a five year tax holiday for any enterprise which builds, maintains and operates Infrastructure facility such as roads, highways, or expressways or new bridges, airports, ports and rapid rail transport system on BOT or BOOT or similar other basis (where there is an ultimate transfer of the facility to a Government or public authority) The enterprise must have entered into an agreement with the Central or State Government or a local authority or any other statutory authority for this purpose The period within which the infrastructure facility has to be transferred needs to be stipulated in the agreement between the undertaking and the Government concerned. The tax holiday will be in respect of income derived from the use of the infrastructure facilities developed by them. The five year period will be counted from the year in which the tracture facility become operational. It will apply in respect of infrastructure facilities becoming operational on or after 1.4.1995.” Thus at the very first stage, deduction was made available to draw additional resources for fulfilling the requirements of the country of rapid improvement in the such as expressway, highways, airports, port, etc in which areas development was found to be deficient Adopting the module of BOT or BOOT utilized by several other countries in developing infrastructure facilities, deduction was introduced. The principal idea behind granting deduction was to achieve rapid growth in infrastructure development with private participation. Specific period was also stipulated which must form part of the agreement between undertaking and the Government within which the infrastructure facilities so developed would be transferred. It was explained that the tar holiday was in respect of the income derived in use of the infrastructure facilities developed by them. 31. From the inception, thus the concept of development of infrastructure through private participation was clearly discernible Principal purpose was to infuse private investment is such projects to speed up infrastructure development which required massive expansion Even after bifurcation of section 80IA into section 80IA and section 80IB, with effect from 1.4.2000, this fundamental concept was not discarded. Sub-section (4) which formed part of the recast section 80IA did not carry any material changes from the earlier provisions of sub-section (4A) of section 80IA which existed prior to 1.4.2000 32. It is true that with effect from 1.4.2002 some significant changes were made in the said provisions. We have already noticed three of these changes which are material for our purpose. Such changes were () that sub-section (4) of section 8014 now required the enterprise to carry on the business of developing or operating and maintaining or developing operating and maintaining any infrastructure facility. This was in contrast to the previous requirement of all three conditions being cumulatively satisfied: (1) that the explanation of the term infrastructure facility was changed to besides others, a road including toll road instead of hitherto existing expression road and (ii) that the requirement of transferring the infrastructural facilities developed by ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 27 - the enterprise to the Central or the State Government or the local authority within the time stipulated in the agreement was done away with. 33. To our mind, these changes, however, would it alter the situation vis-à-vis the impugned amendment. These legislative changes did enlarge the scope of the deduction and in a sense, made it available to certain assessees who would not have been, but for the changes eligible for such deduction, Nevertheless, the basic requirement of the enterprise carrying on the business of developing or operating and maintaining or developing operating and Infrastructure facility was not done away with In other words, in our understanding even the amended section 80IA(4) with effect from 1.4.2002 could be construed as not including con of works contract at one of the eligible activities for claiming deduction. We may, once again fall back on the explanatory memorandum explaining such legislative amendments It was explained that investment in infrastructure has to compete with the investment in other sectors and mat therefore be attractive. There is, therefore, in particular a need to encourage investment in the area of surface transport, water supply, water treatment system Irrigation project, sanitation and sewerage system or solid waste management system. The bill therefore, proposed to relax the existing system to provide for a ten year tax holiday Significantly, it was stated that keeping in view the capital Intensive nature, the higher allowances of depreciation in the initial years in such enterprise and the need for improved cash flows, it is further proposed that for an infrastructure facility in the nature of a road including a toll road, bridge, roll system, highway project, water supply project, sanitation, sewerage and solid waste management system in place of two-tier tax holiday, a ten year tax holiday may be availed consecutively out of twenty years beginning from the year in which the undertaking begins operating the infrastructure facility. In the case of other Infrastructure, namely, for airport, port, inland part and inland waterways, it also proposed to relax the existing two tier fiscal Incentive. The till proposed an identical ten year tax holiday that may be availed in a block of fifteen years. It is also proposed to do away with the mandatory requirement that such infrastructure facility shall be transferred to the Central Government, State Government, local authority or any other statutory authority. 34. Clearly, thus, post 1.4.2002 also, the involvement of the enterprise in developing infrastructure facility when the claim was covered under such expression was essential. In the same context, we must understand the expression "developing or operating and maintaining or developing, operating and maintaining". Keeping in mind the new areas where such private participation would be required and therefore had to be encouraged and keeping in mind that such areas, such as, surface transport, water supply, water treatment system, Irrigation project, etc. would necessarily be highly investment Intensive, the Legislature provided for a tax break of 10 consecutive years out of a total of 20 years period and also proposed to do away with the requirement of such Infrastructure facility being transferred to the Central or the State Government or the local authority. 35. In 2007, the explanation below sub-section (13) of section 801A came to be added which clarified that nothing contained in the said section shall apply to a person who executes a works contract entered into with the undertaking or enterprise, as the ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 28 - case may be. In clear terms, this explanation targeted the second level works contractor who might have been employed by the enterprise developing the infrastructure facility. However, this was not found to be sufficient explanation clearing do appellant has portly executed these works in both the assessment years involved. The appellant has given a detailed analysis of the lender clause of the contracts related to Dams awarded by government of Madhyo Pradesh and also by Rajasthan Government. A perusal of various details given by the appellant in respect of various terms and conditions of the contract show that most of the conditions of both the contracts are similar. It is noted that the specifications, funds and the idea was provided by the government agencies. It is clearly mentioned in the contract agreements that the specifications drawing showing the broad outline of the arrangement of the equipments and parameters and data based on which the designs and drawings were to be prepared were given by the Government Authorities. Further the drawing of said designs given by the appellant were to be approved by the Government Authorities. The appellant was paid for the work done by it from time to time during the execution of the project. In none of the projects, the appellant invested the whole amount initially in the project and, thereafter, it shared the revenue or income derived from that project with the government. The liability or risk of the appellant was also limited by contract clause in the tender document. It is clearly mentioned that the security deposit would be 5% of the amount of the contract. The claim of the appellant that it used technical experience and machinery for execution of the project and, therefore, it should be treated as developer, is also not acceptable as in the contracts which are of a technical nature, such use of machinery and technical experience is normally required, but merely use of these things will not make the person a 'developer. The fact remains that the appellant has merely executed a contract as per the specifications and according to the terms and conditions between the developer, i.e. the government agency, and the contractor, i.e. the appellant. Regarding the contracts related to works in canals and channels of Sardar Sarovar Narmada Nigam Ltd. it is noted that the work is of such nature that it cannot be considered as development from any angle. The appellant has been awarded the work of construction of minor lined channel which included earth-work. brick, mining- brick conduit and structure in the command area of the canal. Here also, even though the projects were awarded by government authority, the appellant is merely an executor of the contract which has specified nature and the details of drawing and other things must have also been provided by the authority as it is only part of the bigger project Sardar Sarovar. The appellant has not invested in full value of the project but it has received regular payment on the basis of work completed and measured by the authority and those receipts have also been shown by the appellant on which the deduction has been claimed. Accordingly the financial risk, of the magnitude which is taken by the developer is not there. The appellant does not enjoy the profit arising out of the project but it is only a contractor in executing a part of it. The financial risk is limited to the part executed by it and that too is of a very limited percentage. The risk is only limited to the warranty clause provided in the agreement. Here also appellant has merely executed a contract as per the specifications and according to the terms and conditions between the developer, i.e. the government agency, and the contractor, L.e. the appellant. ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 29 - Another most important aspect, which is very crucial in determining whether a person is a 'contracter' or a 'developer' is the financial risk which is taken by that person. It is clear from the details available that the appellant is executing the project in a phased manner. It is getting payment on a monthly basis in accordance with the work completed and verified by the government authorities. Therefore at a given point of time the financial risk of the appellant is limited. The cost of the overall project is very high and the appellant cannot say that it has taken the risk of that extent in a project which is totally developed, financed and executed by a developer the whole finance and risk is borne by the developer and in case of a failure of loss, the entire financial risk is that of the developer. He bears the profit or the loss arising out from that project. In the case of the appellant, it has only executed the limited part of the project and that foo on a contractual basis. The liability of the appellant was only limited to the defects of the project constructed by it or as provided in the contract but nowhere the appellant can be said to be taking the risk of whole of the project value. The appellant has also placed strong reliance on the judgment of CIT (A) in the preceding year, namely, A. Ys. 2008-07 and 2009-10. In those years, the claim of the appellant regarding deduction under section 80 1-A was disallowed by the AO, but the CIT(A) allowed the claim following the judgment of honourable ITAT, Ahmedabad in the case of Sugam Constructions (supra). The appellant has pointed out that the judgment has been delivered after the decision of Gujarat High Court in the case of Katira Constructions(supra). have carefully perused both the judgments and it is noted that no reference to that judgment has been made while deciding the case. The judgments are per incuriam of the judgment of honourable Gujarat High Court, which is the jurisdictional High Court in the case of the appellant. Therefore, the findings given by the CITIA) for those years are not valid and are not binding even if the facts are similar. I, therefore, respectfully distinguish the judgments of CIT(A) relied by the appellant in its own case for earlier years. The appellant has also relied on the recent decision of ITAT, Rajkot Bench in the case of Tarmat Bel (JV). Rajkot vs. ITO in ITA No.1111/RJT/2010 and other judgments which have been reproduced in the preceding discussion where the appellant's submission are mentioned. I have carefully perused the judgment, and the nature of contracts undertaken by the appellant during the year, it is noted that the facts of the case are different to the present case and the judgment is respectfully distinguished. Further, the judgement of fourable Gujarat High Court in the case of Koko Conductions (supra) was not available with the honourable bench at that time. Therefore, the bench did not have the benefit of the same Accordingly, the judgment is distinguished it is also pointed out here that In none of the judgments mentioned by the oppellant the judgement of Gujarat High Court in the case of Katra Constructions (supra) has been discussed or distinguished The appellant has also placed reliance on several other judgments which have been mentioned in the preceding discussion at the place where the argument given by the appellant have been reproduced. It is noted that the judgments are not applicable to the present case as the Judgment of honourable Gujarat High Court Kafira Constructions (supra) which is directly on the issue has not been considered and ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 30 - distinguished in those decisions. Accordingly the judgments are respectfully distinguished. The appellant has also placed reliance on the judgement of Honourable Hyderabad ITAT in the case of Ramky Infrastructures Ltd. Vs ACIT ITA Nos. 472/Hyd/09, 473/Hyd/09, 474/Hyd/09. 475/ Hyd/09. 1906/Hyd/11, 1668/Hyd/11 Dated 17.07.2013 and has submitted that the judgement has been given after the decision of honourable Gujarat High Court in the case of Katira Constructions. have carefully perused the judgement.. It is noted that the judgement of honourable ITAT is primarily based on facts and the issue has been set aside to the file of the AO for examination whether the appellant was developer or a contractor. Accordingly, the judgement is respectfully distinguished. Further, it is not binding or there is a contrary judgement of the jurisdictional High Court in the present case. From perusal of all the judgements on the issue, it is noted that the issue is basically factual in nature and each case may have different facts For deciding whether the person is a developer or contractor, facts will have to be examined keeping in view the guidelines given by the honourable Gujarat High Court and thereafter the issue can be decided. The judgements which are given by other courts other than Gujarat High Court would not be applicable to the present case as the factual analysis of the contractual detalls as well as the guidelines given by the honourable Gujarat High Court clearly holds that the appellant is developer. In view of the above discussion, it is clear that the amendment made by the Finance Act, 2009 with retrospective effect from 01/04/2000 by modifying the explanation below sub section (13) of section 80 1-A is applicable in the case of the appellant. The claim of deduction made by the appellant u/s. 801A(4) of the Act cannot be allowed, as it is a contractor, and the related grounds of appeal are, therefore, dismissed for both the years under consideration. 16. In view of the above observation and conclusion of the Revenue, in order to ascertain whether a civil construction work is assigned on development basis or contract basis only on the appellant, the terms and conditions of the agreement needs to be considered by us. Only on the basis of the terms and conditions and the scope, ambit and nature of the contract assigned to the appellant it could be ascertained whether it is a "works contract" or a "development contract”. The right and obligations of the assessee in the projects implemented by the assessee on behalf of the Government entities is also required to be ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 31 - examined. Our this approach has also been strengthened by the observation made by the Rajkot Bench in the matter of Patel Infrastructure Pvt. Ltd. Vs. DCIT, ITA No.627/Rjt/2014, Asst.Year 2010-11. We, therefore proceed to analyse the facts of the present case to find out whether the appellant acted as a “Developer or “Works Contractor”. 17. We have carefully considered different clauses prescribed in the tender notices in respect of Mahi Maim Dam Project awarded by the Government of Madhya Pradesh for the year under consideration which specifically deals with the design, manufacturing, supply & erection & commissioning, testing of 8 Nos. Radial Gates, Size: 14M x 11.2M and one set stoplog unit for spillway of Mahi Maim Dam Project form Government of Madhya Pradesh – A.Y. 2005-06. 18. This endeavor has further been made so as to ascertain the financial involvement / risk factors/liabilities involved in the project undertaken by the assessee for development of Infrastructure projects as mentioned above. 19. We have carefully considered the tender document appearing in the paper book filed before us wherein Page 46 clearly specifies that Contractor must have necessary experience, facilities, ability, financial resources, specific experience in designing and manufacture, supply, erection and commissioning of Radial Gates for Dams, personnel, plant & machinery, etc. to perform the work. ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 32 - 20. Clause 18, 2.1.0 & 2.2.0 appearing at Page 36, 105 and 106 of the Paper Book of Tender documents speaks about the general specifications are given by the respective Authorities. However, the specific preliminary drawings & designs, technical information, detailed layout drawings , etc. are to be given by the Contractor which shall be approved by the Competent Authority and shall form part of the accepted Tender. 21. Clause 2.22.1 to 3 & Clause 2.34.1 of Tender appearing at Page 54 of the Paper Book specifies that no materials will be issued by the Government Department. The assessee has to arrange all the necessary materials, labour, power and other required qualitative materials & tools, plants, equipments and its transportation at its own cost. 22. We have ascertained from the P&L account of the assessee company that total materials consumed during the year is of Rs. 42,26,046/- as per schedule P. The same is appearing at Page 13 of the Paper Book. 23. Clause 3.6 of Tender at Page 64 of the Paper Book specifies that the various materials and workmanship are also got to be tested by the assessee at its own cost from time to time, provide all facilities for testing, and replace the defective work, if found. 24. Page 5A of Paper Book being part of the tender document specifies that the assessee has to arrange own finance by raising adequate capital, reserves & surplus, secured & unsecured loans Balance Sheet. The total amount raised is of Rs. 2,99,40,748/-. ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 33 - 25. Schedule E of fixed assets on Page 9 of Paper Book specifies that the assessee has to use and invest heavily in purchasing own P & M, Equipments, tools etc. in order to be eligible to bid for Tender and carry out the development of various projects - Schedule E of fixed assets on Page 9 of PB. The gross block of assets are to the tune of Rs. 58,75,134 /-. The total amount raised is of Rs.2,99,40,748/- is also reflecting from the financial Statement filed by the appellant. 26. Clause 2.45.3 of Tender specifies that the assessee has to employ own team of experienced and qualified Project Engineers/ Supervisors, Sub Engineer, etc having adequate experience, and arrange for skilled, semi-skilled & unskilled workers. 27. As per Clause 2.4.2 of Tender of Page 50 of the Paper Book, the rate of Earnest Money to be submitted as follows: (i) For tender upto Rs.1 lakh - 2% (ii) For tender more than Rs.1 lakh and upto Rs.5 lakh - 1%, subject to minimum Rs.2,000/- (iii) For tenders more than Rs.5 lakh and upto Rs. 2 crores - 0.75%, subject to a minimum of Rs.5.000/- (iv) For tenders above Rs. 2 crores - 0.5 % subject to a minimum of Rs.1.5 lakh and maximum of Rs. 5 lakhs. 28. Clause 12 of Tender document appearing at Page 35 of the Paper Book specifies that assessee has to pay Security Deposit (Performance Security) equal to 10% of contract value, out of which 5% will be deposited at the time of execution of supplementary agreement and remaining 5% security will be deducted from the running bill. ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 34 - 29. Clause 4.3.17.2 of Tender of Page 13 of Paper Book specifies that Security Deposits are released after completion of period of 12 months from the date of issue of Certificate of completion of work. 30. Clause 12 of Tender of Page 35 of the Paper Book specifies that Retention money shall be deducted @ 5% from each running bill and shall be released after 12 months of completion of work and certificate issued by Engineer in charge. 31. Clause 4.3.3. of Tender specifies that if the contractor fails to complete contract by the stipulated date, or breaches any of the terms of agreement, he shall be liable to pay penalty by way of cancellation of contract, forfeiture of Security Deposit, etc. The same is reflecting at Page 86 of Paper Book. 32. Page 93 of the Paper Book deals with Clause 4.3.17.1 of Tender which specifies 12 months free maintenance and guarantee period from the certified date of completion of work. 33. Clause 3.23.2 & 3.24 of Tender of Page 68 of Paper Book specifies that advance on P & M ( 90% for new and 50% for used P & M), subject to maximum of 10 % of contract value can be availed, and such advance will bear interest @ 14 % p.a. which shall be deducted from running bills in equal instalments. 34. Clause 4.3.7 of Tender specifies that the Contractor shall submit monthly statements of estimated value of work completed, and it will be ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 35 - subject to final Certification, determination and approval by the Engineer and that too after deductions like retention, other recoveries, taxes etc. which is appearing at page 88 of Paper Book. 35. Clause 2.18 to 2.20 & Annexures A & B of Tender of Page 52 & 69 of the Paper Book specifies that the assessee has to arrange for labour and is also responsible for safety of all concerned. The assessee is liable under Workmen compensation insurance & is liable to pay Compensation, provide Medical Aid , provide safety equipments, build sufficient huts, provide drinking water, proper sanitation, drainage , rest rooms, canteen facilities, etc. 36. Clause 3.14 & Annexure H of Tender ... being part of Paper Book, particularly, Page 63 thereof specifies that Contactor has to provide suitable scaffolds, ladders, and working platforms, gangways, stair ways, materials, plants, tools etc. and shall comply all types of safety measures 37. Clause 3.9 of Tender of Page 65 of Paper Book specifies that Contractor will be liable for any damage done to any materials, machinery, plants, tools etc. till the handing over of the completed work and obtaining the completion certificate from the Engineer-in-chief. 38. Clause 4.3.2 of Tender of Page 86 of Paper Book specifies that if the assessee defaults in work or violates any terms of contract, it shall be liable to penalty in terms of lien of Government over the plant, machinery, equipments, etc. forfeiture of security deposit etc. - Page 86 of PB, Clause - 4.3.2 of Tender. ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 36 - 39. From the records available before us we gather that the terms and conditions of the tender documents in respect of the above projects are mostly identical. Various clauses of Tender documents reveal that the tender work under consideration are not for a specific work, rather they are for development facility as a whole. The responsibility is fully assigned to the developer for execution and completion of the work. Various stipulations contained in the Tender documents demonstrate various risks undertaken by the assessee for execution of the project work awarded by the competent authority in terms of financial resources, manpower deployment, both technical and administrative expertise, drawing and designing of the project specifications and getting approval from the competent authority, safety and security of project and human resources, compliances of various statutory rules and laws. 40. As to whether the assessee can be termed as “developer” or a “contractor” as contended by the Revenue in its written submissions, we find, in fact, it only attempts to give a general meaning of the term “contractor” and “developer”. In the cases in hand, we find that in terms of tender documents, audited accounts and facts on record suggest that the assessee has fully undertaken the work of development of various infrastructure projects as a whole by undertaking the risk & responsibility, arranged own finances, materials, personnel, labour, machinery, other equipments etc. and thereby fulfilled the test of being a “developer” as per the principles laid down by Hon’ble Gujarat High Court in the case of Radhe Developers, 341 ITR 403 (Guj). It is imperative upon us to take note of the relevant portion of the above judgments for better understanding of the issue on hand. ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 37 - “34. We have reproduced relevant terms of development agreements in both the sets of cases. It can be seen from the terms and conditions that the assessee had taken full responsibilities for execution of the development projects. Under the agreements, the assessee had full authority to develop the land as per his discretion. The assessee could engage professional help for designing and architectural work. Assessee would enroll members and collect charges. Profit or loss which may result from execution of the project belonged entirely to the assessee. It can thus be seen that the assessee had developed the housing project. The fact that the assessee may not have owned the land would be of no consequence. 35. With respect to the question whether the assessee had acquired the ownership of the land for the purposes of the Income Tax Act and, in particular, Section 80IB(10) of the Act and to examine the effect of Explanation to Section 80IB(10) introduced with retrospective effect from 1.4.2001, since several aspects overlap, it would be convenient to discuss the same together. 36. We have noted at some length, the relevant terms and conditions of the development agreements between the assessees and the land owners in case of Radhe Developers. We also noted the terms of the agreement of sale entered into between the parties. Such conditions would immediately reveal that the owner of the land had received part of sale consideration. In lieu thereof he had granted development permission to the assessee. He had also parted with the possession of the land. The development of the land was to be done entirely by the assessee by constructing residential units thereon as per the plans approved by the local authority. It was specified that the assessee would bring in technical knowledge and skill required for execution of such project. The assessee had to pay the fees to the Architects and Engineers. Additionally, assessee was also authorized to appoint any other Architect or Engineer, legal adviser and other professionals. He would appoint Sub-contractor or labour contractor for execution of the work. The assessee was authorized to admit the persons willing to join the scheme. The assessee was authorised to receive the contributions and other deposits and also raise demands from the members for dues and execute such demands through legal procedure. In case, for some reason, the member already admitted is deleted, the assessee would have the full right to include new member in place of outgoing member. He had to make necessary financial arrangements for which purpose he could raise funds from the financial institutions, banks etc. The land owners agreed to give necessary signatures, agreements, and even power of attorney to facilitate the work of the developer. In short, the assessee had undertaken the entire task of development, construction and sale of the housing units to be located on the land belonging to the original land owners. It was also agreed between the parties that the assessee would be entitled to use the full FSI as per the existing rules and regulations. However, in future, rules be amended and additional FSI be available, the assessee would have the full right to use the same also. The sale proceeds of the units allotted by the assessee in favour of the members enrolled would be appropriated towards the land price. Eventually after paying off the land owner and the erstwhile proposed purchasers, the surplus amount would remain with the assessee. Such terms and conditions under which the assessee undertook the development project and took over the possession of ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 38 - the land from the original owner, leaves little doubt in our mind that the assessee had total and complete control over the land in question. The assessee could put the land to use as agreed between the parties. The assessee had full authority and also responsibility to develop the housing project by not only putting up the construction but by carrying out various other activities including enrolling members, accepting members, carrying out modifications engaging professional agencies and so on. Most significantly, the risk element was entirely that of the assessee. The land owner agreed to accept only a fixed price for the land in question. The assessee agreed to pay off the land owner first before appropriating any part of the sale consideration of the housing units for his benefit. In short, assessee took the full risk of executing the housing project and thereby making profit or loss as the case may be. The assessee invested its own funds in the cost of construction and engagement of several agencies. 41. The provisions of section 80IA(4) of the Act provides that deduction would be available to any enterprise which carries on the business of – (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility which fulfills the conditions prescribed therein. 42. As per the Explanation, even a road and bridge is an infrastructure facility for the purposes of section 80-IA(4). The primary condition is that the enterprise must carry on the work of "developing" an infrastructure facility. As mentioned above, Explanation under sub-section (13) of section 80- IA clarifies that this section will not apply to any business which is in the nature of a "works contract". In other words, the essence of this section is that, the benefit of section 80-IA(4) would be available to a developer and not to a contractor simplicitor. In the present case the lower authorities have denied the benefit of section 80-IA(4) to the appellant-company on the assumption that the appellant-company is engaged in executing merely a work contract and it is not carrying on the business of developing an infrastructure ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 39 - facility. But we find that the assessee has undertaken entirely and exclusively the projects awarded by the Government authorities, as it is evident from the records as explained and already narrated hereinabove and therefore, there is hardly any basis for assuming that it is merely a contractor executing a works contract. The difference between a "developer" and a "contractor" has to be properly analyzed and understood. This issue has come up before the Hon'ble ITAT, Amritsar Bench in the case of M/s. TRG Industries P. Ltd. in ITA Nos. 433 etc./Asr/2009. The Tribunal after relying various case laws has laid down the following parameters when to treat an assessee as a developer or contractor. (i) The assessee does not have to develop the entire infrastructure facility to qualify for deduction u/s.80-IA(4) and if only a part of the infrastructure facility is developed, the assessee would be eligible for deduction. (ii) The three requirements of section 80-IA(4) viz. development, operation and maintenance are not cumulative. Thus, an enterprise which only develops facility would also be entitled to the benefit of section 80-IA(4). (iii) Merely because the assessee is referred to as a contractor in the agreement, it would not debar it from claiming deduction. (iv) Direct agreement between the transferee-assessee and the specified authority is not a mandatory requirement u/s.80-IA(4) of the I.T. Act. Needless to mention that the assessee qualified all the criterion fixed by the Amritsar Bench. 43. We have already dealt with relevant clauses of the tender documents stipulating various conditions viz. financial involvements, risks, obligations ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 40 - and responsibilities of the assessee in developing, operating and maintaining of infrastructure facilities, which clearly make the case of the assessee within the scope and ambit of section 80IA(4) of the Act so as to claim the impugned deduction. 44. The terms and conditions of tender documents / agreements / work order and comprehensive view of the activities undertaken by the assessee as discussed above clearly demonstrates that the assessee-company has undertaken substantial activities in respect of various projects awarded by various statutory bodies, which makes the assessee to qualify as a developer of Infra facility and to make claim necessary benefits under section 80IA(4) of the Act. 45. So far as case law relied on by the Revenue on the decision of ITAT, Hyderabad Bench in the case of M/s. NEC NCC Maytas-JV in ITA No.496/Hyd/2018 is concerned, the same is distinguishable on facts. In that case the assessee has not executed entire project but only a part of the project was undertaken, whereas in the instant case, the assessee has executed the entire project. In that case, the assessee has not established entrepreneurial risk or financial involvement of assessee before the lower authorities and the assessee was only a JV with no assets and no wherewithal to execute the projects. Payments were released on multiple occasions from time to time i.e. fixed sum on monthly basis and also received advance payment against supply of goods at site. While in the case of present assessee, entire project has been executed by the assessee; there are risks, responsibilities and obligations till the project completion; payment would be released only after completion of ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 41 - the project, that too, after due certification from the competent authority of the local authority. Ten percent of mobilization advance could be received only after furnishing bank guarantees in the form of fixed deposits. In the present case, the assessee itself had to procure materials for the projects and make payments. It has also to deploy men and machineries. Therefore, both the cases, i.e. case of the assessee before us and the assessee before the ITAT, Hyderabad (referred above) are clearly distinguishable on all respects. 46. However, this particular aspect has already been considered in the matter of CIT vs. ABG Heavy Industries Ltd. [2010] 189 Taxman 54 (Bombay). The paragraph 22 of the said judgment suggests that in the particular facts and circumstances of the case in hand, the assessee is entitled to relief claimed under Section 80IA(4) of the Act. The first and foremost condition imposed by the statutory provision is that the enterprise must start operating and maintaining the infrastructure facility on or after 01.04.1995. Thereafter, time-to-time the provision though has been amended under this particular condition enunciated therein, that the assessee has to be granted conditions stipulated, fulfilling of which the assessee said to be a developer and entitled to the claim under Section 80IA of the Act. The view has been narrated in the said judgment in the following manner: “22. Another submission which was urged on behalf of the revenue is that under clause (iii) of sub-section (4A) of section 80-IA, one of the conditions imposed was that the enterprise must start operating and maintaining the infrastructure facility on or after 1-4-1995. The same requirement is embodied in sub-clause (c) of clause (i) of sub- section (4) of the amended provisions of section 80-IA. On this basis, it was urged that since the assessee was not operating and maintaining the facility, he did not fulfil the condition. This submission is fallacious both in fact and in law. As a matter of fact, the Tribunal has entered a finding that the assessee was operating the facility and this finding has been confirmed earlier in this judgment. That the assessee was maintaining the facility is not in dispute. The facility was commenced after 1-4-1995. Therefore, the ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 42 - requirement was met in fact. Moreover, as a matter of law, what the condition essentially means is that the infrastructure facility should have been operational after 1-4-1995. After section 80-IA was amended by the Finance Act of 2001, the section applies to an enterprise carrying on the business of (i) developing; or (ii) operating and maintaining; or (iii) developing, operating and maintaining any infrastructure facility which fulfils certain conditions. Those conditions are : (i) Ownership of the enterprise by a Company registered in India or by a consortium; (ii) An agreement with the Central or State Government, local authority or statutory body; (iii) The start of operation and maintenance of the infrastructure facility on or after 1-4-1995. The requirement that the operation and maintenance of the infrastructure facility should commence after 1-4-1995 has to be harmoniously construed with the main provision under which a deduction is available to an assessee who develops; or operates and maintains; or develops, operates and maintains an infrastructure facility. Unless both the provisions are harmoniously construed, the object and intent underlying the amendment of the provision by the Finance Act of 2001 would be defeated. A harmonious reading of the provision in its entirely would lead to the conclusion that the deduction is available to an enterprise which (i) develops; or (ii) operates and maintains; or (iii) develops, maintains and operates that infrastructure facility. However, the commencement of the operation and maintenance of the infrastructure facility should be after 1-4-1995. In the present case, the assessee clearly fulfilled this condition. 23. In the view which we have taken, all the assessment years in question to which this batch of appeals relates would be governed by the same principle. The subsequent amendment of section 80-IA(4A) of the Act to clarify that the provision would apply to an enterprise engaged in (i) developing; or (a) operating and maintaining; or (iii) developing, operating and maintaining an infrastructure facility was reflective of a position which was always construed to hold the field. Before the amendment that was brought about by Parliament by the Finance Act of 2001, we have already noted that the consistent line of circulars of the Board postulated the same position. The amendment made by Parliament to section 80-IA(4) of the Act set the matter beyond any controversy by stipulating that the three conditions for development, operation and maintenance were not intended to be cumulative in nature.” 47. It is contended by Revenue that the profit element is already embedded in the tender price quoted by the assessee. Moreso, there is no financial risk involved as the assessee was getting the payment for the construction done by him from time to time as one of the major remarks and/or observations made by the CIT(A) in negating the claim made by assessee. We have carefully considered this particular aspect of the matter. If the contention of the Revenue is encouraged then possibly none of the developers ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 43 - will be entitled to the claim made under Section 80IA(4) of the Act. Our this view has been strengthened by the observation and the ratio laid down by the Hon’ble Delhi High Court in the case of CIT vs. VRM India Ltd., reported in [2015] 57 taxmann.com 325 (Delhi). While dealing with this particular aspect of the matter the Hon’ble Court has been pleased to observe as follows: “15. Since the assessee developed an infrastructure facility/project and was not required to maintain or operate, it was entitled to cost, plus the margin of income or profit; not to expect this treatment would render one who develops an infrastructure facility project, unable to realise its cost. If the infrastructure facility is, after its development, transferred to the Government, naturally the cost would be paid by the Government. Therefore, the mere circumstance that the Indian Railways or DDA paid for development of a housing project carried out by the assessee, did not mean that the assessee did not develop the residential complex. If the revenue's interpretation is accepted, no enterprise, carrying on the business of only developing the infrastructure facility, would be entitled to deduction under section 80-IB (10). The conclusions of the ITAT in this context were rendered after a detailed analysis of the facts and the contracts entered into by the assessee with IRWO and DDA. The narrow ground on which the AO concluded that the projects were "owned" by IRWO or DDA and that the assessee was only a works contracts, was unwarranted.” We, therefore, do not have any doubt in regard to the admissibility of the claim made by the assessee and to entertain the same by giving relief to that effect. 48. Before parting with the matter we would like to mention that we have considered the judgements relied upon by the Ld. AR passed by different judicial forums including the judgement passed in the matter of Patel infrastructure and Katira construction (supra) passed by the Rajkot Bench and Katira construction passed by the Hon’ble jurisdictional High Court wherein the constitutional validity of insertion of explanation below sub Section 13 of Section 80 IA of the Act was challenged. The Ld. Representative appearing for the Revenue vehemently argued on this point that the jurisdictional High ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 44 - Court in the said matter already decided the issue against the assessee. Fact remains that the jurisdictional High Court in that particular matter dealt with the constitutional validity of the insertion of explanation as mentioned hereinabove and decided the same in favour of the revenue to this effect that such explanation brought with retrospective effect from 01.04.2000 by the Finance Act No. 2 of 2009 was very well within the competence of Parliament. As such there was no issue whether the assessee is acting as a developer or contractor was raised before the Hon’ble Jurisdictional High Court neither the said has been decided in the said judgement. 49. We have further considered the judgment passed by the Co-ordinate Bench in the matter of Rajkamal Builders Infrastructure Pvt. Ltd. in ITA No.441/Ahd/2011 & 20 Ors., order dated 13.05.2022, where the assessee had undertaken infrastructure facilities, such as, development infrastructure facilities such as development of roads, bridges, water treatment plants, canals, siphon work (irrigation projects), sewage treatment plant etc. by entering into contract with various Government authorities. In fact, we find that the clauses stipulated in the Tender document is almost akin to the clauses mentioned in the Tender document in respect of the assessee before us. Relevant to mention that though the assessee has taken different projects, the clauses mentioned mostly in all tendered documents are in respect of different projects entrusted upon assessee by the statute authorities in different years are identical. We find that on the identical facts and circumstances of the case, the assessee was found to be eligible for claiming deduction under Section 80IB(4) of the Act taking into consideration the overall aspect of works undertaken by the assessee therein. We are inspired by the ratio laid down by ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 45 - the Co-ordinate Bench in the said judgment Rajkamal Builders Infrastructure Pvt. Ltd. (supra) in holding the assesse eligible under the identical facts and circumstances of the case. 50. We have further considered the judgment passed by the Co-ordinate Bench in Vijay M. Mistry (supra) on the identical issue wherein the basis of identical facts, the relief has been granted under Section 80IA(4) of the Act to the assessee. 51. In the light of the above discussion and perusal of various clauses of Tender documents and case laws relied upon by both the parties, it reveals that the tender work under consideration are not for a specific work, rather they are for development facility as a whole. The responsibility is fully assigned to the developer for execution and completion of the work. Various stipulations contained in the Tender documents demonstrate various risks undertaken by the assessee for execution of the project work awarded by the competent authority in terms of financial resources, manpower deployment, both technical and administrative expertise, drawing and designing of the project specifications and getting approval from the competent authority, safety and security of project and human resources, compliances of various statutory rules and laws. Therefore, merely because in the agreement for development of infrastructure facility, assessee is referred to as contractor or because if some basic specifications are laid down, it does not detract the assessee from the position of being a developer, nor will deprive the assessee from claiming deduction u/s.80IA(4) of the Act. As such, looking to the overall aspects of work undertaken by the assessee we can safely come to the conclusion that the ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 46 - assessee is engaged in development of the infrastructure facility and therefore, a developer, which entails the assessee to claim benefits under section 80IA(4) of the Act. Thus, the issue of claim of deduction under section 80IA(4) of the Act is allowed in favour of the assessee and against the Revenue. This common ground raised in all the appeals are accordingly disposed of. 52. In view of the above, following additions made in the respective year are deleted: A.Y. Amount 2005-06 Rs.17,21,232/- 2006-07 Rs.1,17,53,756/- 2007-08 Rs.79,87,237/- 2011-12 Rs.43,70,188/- 53. The second ground relates to interest income claimed to be eligible for deduction under Section 80IA(4) of the Act to the tune of Rs.8,50,443/-. This particular interest is on the mandatory fixed deposits as security and bank guarantee. 54. At the time of hearing of the matter, Ld. Counsel appearing for the assessee submitted before us that the issue is squarely covered in favour of the assessee by and under judgment passed in ITA No.2938/Ahd/2011 & Ors. dated 23.12.2022 in the case of Vijay M. Mistry Cons. P. Ltd. vs. ACIT & Ors. The contention of the Ld. AR has not been able to be controverted by the Ld. DR. In fact, the Ld. AR relied upon paragraph 36 of the said judgment in ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 47 - case of Vijay M. Mistry (supra), the copy whereof has been also filed before us. 55. We have carefully considered the judgment passed by the Co-ordinate Bench. We find that while granting relief on the identical issue of bank interest on bank guarantee in favour of the assessee holding said interest income eligible for deduction under Section 80IA(4) of the Act, the Co- ordinate Bench has been pleased to observe as follows: “36. So far as the bank interest on bank guarantee is concerned, the same is found to be covered in favour of the assessee by the judgment passed in case of Rajkamal Builders Infrastructure P. Ltd. vs. DCIT in ITA Nos. 118/Ahd/2019 & Ors. While granting relief to the assessee, the Co-ordinate bench has been pleased to observe as follows: “46. Before us, the counsel for the assessee reiterated submissions as were made before the lower authorities. The counsel further submitted that the interest income is earned only on fixed deposits for obtaining bank guarantee and security deposit to be placed mandatorily as per the tender when work was awarded. Hence, such interest income is business income and eligible for deduction under section 80IA(4) of the Act. In support of his contentions, the counsel relied upon the following decisions: i) AVM Cine Products Vs. DCIT, (2021) 123 taxamnn.com 41 (Mad); ii) CIT Vs. Alloys Ltd. (2017) 84 taxmann.com 256 (Guj) iii) Empire Pumps P. Ltd. Vs. ACIT, (2015) 54 taxmann.com 317 (Guj) 47. For countering the above submissions of the assessee, the DR supported orders of the Revenue authorities, which was based on the decision of Hon’ble Supreme Court in the case of Pandian Chemicals Ltd. 48. We have considered submissions of both the parties; perused relevant orders and case laws cited by the parties. We have already hold the assessee a developer and eligible for deduction under section 80IA(4) of the Act. We further note that the amount of Rs 8,61,827 has been received by the assessee as other income which appears from the records is nothing but the claim approved and received by the assessee for the assessment year 2004-05 in respect of the infrastructure project undertaken by the assessee. We find that before the lower authorities the assessee has explained regarding interest income earned by it from the fixed deposits, security deposits, margin-money and from the bond, with the banks and other institutions, as per the terms and conditions of the contract agreement with the Government authorities. Furnishing of fixed ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 48 - deposits for bank guarantees, security deposits etc. are the pre-condition for awarding the project work by the competent authority, and therefore, these are necessity of regular course of business and has direct nexus with the activities. Jurisdictional High Court in the case of Empire Pumps P. Ltd (supra) held that interest income having direct nexus with its business, was to be considered as income ‘derived from’ business. Thus, deduction under section 80I of the Act was allowed on such income. Yet in another decision by jurisdictional High Court in the case of CIT Vs. Shah Alloys Ltd. (supra) has held that interest received on margin money placed for business purpose cannot be treated as income from other sources and is, therefore, eligible for deduction under section 80IA of the Act. Further, various higher judicial authorities have held that profits of the business of the undertaking include other incidental incomes derived from the business of the undertaking. This being the position of law, we have no hesitation in accepting the claim of the assessee that the income earned from the deposits is business income is eligible for deduction under section 80IA of the Act. Accordingly, this common ground raised in the appeals under consideration is allowed in favour of the assessee and against the Revenue.” We do not find any reason to deviate from the stand taken by the Co-ordinate Bench in identical facts and circumstances of the case. We, therefore, respectfully relying on the same, allow this bank interest on bank guarantee to the tune of Rs.11,46,733/- for the deduction made under Section 80IA of the Act. This ground of appeal will apply mutatis mutandis in the appeal preferred by the assessee for A.Ys. 2008-09 & 2009-10.” 56. Having regard to the facts and circumstances of the case and on the identical issue decided by the Co-ordinate Bench, we do not find any reason to deviate from the stand taken by the Co-ordinate Bench which has been finally decided by relying on the judgment passed by the Jurisdictional High Court in the case of CIT vs. Shah Alloys Ltd. (supra), whereby the profits of business of the undertaking includes other incidental incomes derived from the business of the undertaking has been accepted as the business income and holding the income earned from deposits as business income eligible for deduction under Section 80IA of the Act. We, therefore, respectfully relying upon the same allow this bank interest on bank guarantee to the tune of Rs.8,50,443/- as eligible for deduction under Section 80IA(4) of the Act as claimed by the ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 49 - assessee. The addition is, therefore, deleted. This ground of appeal is, therefore, allowed. 57. Disallowance of Rs.1,74,334/- under Section 40(a)(ia) of the Act on the count that TDS not paid in due time is the subject matter before us. 58. We have heard the respective parties and perused the materials available on record. 59. The assessee made payment to one M/s. Babubhai Patel & Co. as professional fees upto February 2007 to the tune of Rs.30,850/-. Such TDS on such amount was made on 31.03.2007 but deposited on 29.05.2007. According to Ld. AO, the TDS so deducted ought to have been deposited by 31.03.2007. Similarly, the appellant credited total amount of Rs.1,54,339/- in the account of Raj Security Services (MP) towards security charges. The sum of Rs.1,43,484/- were credited before February 2007 and remaining Rs.10,855/- were credited in the month of March 2007. However, the TDS on full amount was made on 31.03.2017 but paid to the Government on 30.05.2007. As the same was not deposited within stipulated time i.e. by 31.03.2007, the Ld. AO disallowed the said amount invoking the provision of Section 40(a)(ia) of the Act and added the same to the total income of the appellant, which was further confirmed by the First Appellate Authority. Hence, the instant appeal before us. 60. The case of the assessee before us is this that as the TDS was paid before filing of return under Section 139(1) of the Act, the disallowance made ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 50 - under Section 40(a)(ia) of the Act is bad in law and not sustainable. In this regard, he relied upon the judgment passed by the Hon’ble Apex Court in the case of CIT vs. Calcutta Export Company (2018) 404 ITR 654 (SC), whereby and whereunder it has been held that once TDS is paid before due date of filing of return, no disallowance is called for. The copy of the said judgment has also been handed over to us. It is pertinent to mention that Ld. DR has failed to make any contrary submission in respect of the said contention made by the Ld. AR. While doing so, the Hon’ble Apex Court has been pleased to discuss the amendment made in the provision of Section 40(a)(ia) of the Act by Finance Act, 2010, which has given effect from 01.04.2001. The observation made by the Hon’ble Apex Court is as follows: “22) In order to remedy this position and to remove hardships which were being caused to the assessees belonging to such second category, amendments have been made in the provisions of Section 40(a) (ia) by the Finance Act, 2010. 23) Section 40(a)(ia), as amended by Finance Act, 2010, with effect from 01.04.2010 and now reads as under: “4(a)(ia) any interest, commission or brokerage, rent, royalty, fees for professional services or fees for technical services payable to a resident, or amounts payable to a contractor or sub-contractor, being resident, for carrying out any work (including supply of labour for carrying out any work), on which tax is deductible at source under Chapter XVII-B and such tax has not been deducted or; after deduction, has not paid on or before the due date specified in sub-section (1) of Section 139: Provided that where in respect of any such sum, tax has been deducted in any subsequent year, or has been deducted during the previous year but paid after the due date specified in sub- section (1) of section 139, such sum shall be allowed as a deducted in computing the income of the previous year in which such tax has been paid.” 24) Thus, the Finance Act, 2010 further relaxed the rigors of Section 40(a)(ia) of the IT Act to provide that all TDS made during the previous year can be deposited with the Government by the due date of filing the return of income. The idea was to allow additional time to the deductors to deposit the TDS so made. However, the Memorandum explaining the provisions of the Finance Bill, 2010 expressly mentioned as follows: “This amendment is proposed to take effect retrospectively from 1st April, 2010 and will, accordingly, apply in relation to the Assessment Year 2010-11 and subsequent years.” ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 51 - 25) The controversy surrounding the above amendment was whether the amendment being curative in nature should be applied retrospectively i.e., from the date of insertion of the provisions of Section 40(a)(ia) or to be applicable from the date of enforcement. 26) TDS results in collection of tax and the deductor discharges dual responsibility of collection of tax and its deposition to the government. Strict compliance of Section 40(a)(ia) may be justified keeping in view the legislative object and purpose behind the provision but a provision of such nature, the purpose of which is to ensure tax compliance and not to punish the tax payer, should not be allowed to be converted into an iron rod provision which metes out stern punishment and results in malevolent results, disproportionate to the offending act and aim of the legislation. Legislature can and do experiment and intervene from time to time when they feel and notice that the existing provision is causing and creating unintended and excessive hardships to citizens and subject or have resulted in great inconvenience and uncomfortable results. Obedience to law is mandatory and has to be enforced but the magnitude of punishment must not be disproportionate by what is required and necessary. The consequences and the injury caused, if disproportionate do and can result in amendments which have the effect of streamlining and correcting anomalies. As discussed above, the amendments made in 2008 and 2010 were steps in the said direction only. Legislative purpose and the object of the said amendments were to ensure payment and deposit of TDS with the Government. 27) A proviso which is inserted to remedy unintended consequences and to make the provision workable, a proviso which supplies an obvious omission in the Section, is required to be read into the Section to give the Section a reasonable interpretation and requires to be treated as retrospective in operation so that a reasonable interpretation can be given to the Section as a whole. 28) The purpose of the amendment made by the Finance Act, 2010 is to solve the anomalies that the insertion of section 40(a)(ia) was causing to the bona fide tax payer. The amendment, even if not given operation retrospectively, may not materially be of consequence to the Revenue when the tax rates are stable and uniform or in cases of big assessees having substantial turnover and equally huge expenses and necessary cushion to absorb the effect. However, marginal and medium taxpayers, who work at low gross product rate and when expenditure which becomes subject matter of an order under Section 40(a)(ia) is substantial, can suffer severe adverse consequences if the amendment made in 2010 is not given retrospective operation i.e., from the date of substitution of the provision. Transferring or shifting expenses to a subsequent year, in such cases, will not wipe off the adverse effect and the financial stress. Such could not be the intention of the legislature. Hence, the amendment made by the Finance Act, 2010 being curative in nature required to be given retrospective operation i.e., from the date of insertion of the said provision. 29) Further, in Allied Motors (P) Limited (supra), this Court while dealing with a similar question with regard to the retrospective effect of the amendment made in ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 52 - section 43-B of the Income Tax Act,1961 has held that the new proviso to Section 43B should be given retrospective effect from the inception on the ground that the proviso was added to remedy unintended consequences and supply an obvious omission. The proviso ensured reasonable interpretation and retrospective effect would serve the object behind the enactment. The aforesaid view has consistently been followed by this Court in the following cases, viz., Whirlpool of India Ltd., vs. CIT, New Delhi (2000) 245 ITR 3, CIT vs. Amrit Banaspati (2002) 255 ITR 117 and CIT vs. Alom Enterprises Ltd. (2009) 319 ITR 306. 30) Hence, in light of the forgoing discussion and the binding effect of the judgment given in Allied Moters (supra), we are of the view that the amended provision of Sec 40(a)(ia) of the IT Act should be interpreted liberally and equitable and applies retrospectively from the date when Section 40(a)(ia) was inserted i.e., with effect from the Assessment Year 2005-2006 so that an assessee should not suffer unintended and deleterious consequences beyond what the object and purpose of the provision mandates. As the developments with regard to the Section recorded above shows that the amendment was curative in nature, it should be given retrospective operation as if the amended provision existed even at the time of its insertion. Since the assessee has filed its returns on 01.08.2005 i.e., in accordance with the due date under the provisions of Section 139 IT Act, hence, is allowed to claim the benefit of the amendment made by Finance Act, 2010 to the provisions of Section 40(a)(ia) of the IT Act. 31) In light of the forgoing discussion, we are of the view that judgment of the High Court does not call for any interference and, hence, the appeals are accordingly dismissed. In view of the above, all the connecting appeals, interlocutory applications, if any, transferred cases as well as diary numbers are disposed off accordingly. Parties to bear cost on their own.” As it appears from the above judgment, the Finance Act, 2010 further rigors of Section 40(a)(ia) of the Act to provide all TDS made during the previous year can be deposited with the Government by the due date of filing of return of income. Further that, the amendment has been made effect from 01.04.2010 and therefore will apply in relation to A.Y. 2010-11 and subsequent year. In that view of the matter, the submission made by the Ld. Counsel for the assessee that the TDS since paid before filing of return under Section 139(1) of the Act, the disallowance made by the Revenue is not permissible is found to be acceptable, particularly, in view of the ratio laid down by the Hon’ble apex Court. Therefore, respectfully relying upon the same, we allow this ITA No. 1601/Ahd/2015 (Infab Infrastructure Pvt Ltd. vs. DCIT) A.Y.– 2005-06, 2006-07, 2007-08 & 2011-12 - 53 - ground of appeal preferred by the assessee by deleting the addition made by the Revenue. 61. In regard to the ground of appeal regarding to disallowance under Section 36(1)(va) of the Act raised by the assessee for A.Y. 2011-12 has not been pressed by the Ld. Counsel appearing for the assessee at the time of hearing of the instant appeal. Hence, same is dismissed as not pressed. 62. In the combined result, assessee’s appeals for A.Ys. 2005-06, 2006-07 & 2007-08 are allowed and for A.Y. 2011-12 is partly allowed. This Order pronounced on 03/02/2023 Sd/- Sd/- (WASEEM AHMED) (MADHUMITA ROY) ACCOUNTANT MEMBER JUDICIAL MEMBER Ahmedabad; Dated 03/02/2023 True Copy S. K. SINHA आदेश क त ल प अ े षत/Copy of the Order forwarded to : 1. अपीलाथ / The Appellant 2. यथ / The Respondent. 3. संबं%धत आयकर आय ु 'त / Concerned CIT 4. आयकर आय ु 'त(अपील) / The CIT(A)- 5. *वभागीय -त-न%ध, आयकर अपील य अ%धकरण, अहमदाबाद / DR, ITAT, Ahmedabad 6. गाड3 फाईल / Guard file. आदेशान ु सार/ BY ORDER, उप/सहायक पंजीकार (Dy./Asstt. Registrar) आयकर अपील$य अ%धकरण, अहमदाबाद / ITAT, Ahmedabad