ACIT NON CORPORATE CIRCLE 10 (1), CHENNAI V. M/S LAKSHMI NARAYAN CONSTRUCTIONS, CHENNAI

ITA 1736/CHNY/2018

• Counselvise Citation: [2019] 118 COUNSELVISE.COM (IT) 6365 (ITAT-CHENNAI)
• Duration Of Justice: 7 month(s) 11 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-01-2019
• Appeal Filed By: Department
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2015-2016
• Appeal Filed On: 22-05-2018
• Result in Favour of: Revenue
• Court: TRIBUNAL
• Keywords: Set aside
• Section: 80IA

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL A BENCH, CHENNAI ... , , # BEFORE SHRI N.R.S. GANESAN, JUDICIAL MEMBER AND SHRI S. JAYARAMAN, ACCOUNTANT MEMBER /. I.T.A. NO. 1736/CHNY/2018 / ASSESSMENT YEAR : 2015-16 ASSISTANT COMMISSIONER OF INCOME TAX, NON CORPORATE CIRCLE 10(1), 121, MAHATMA GANDHI ROAD, CHENNAI 600 034. VS. M/S LAKSHMI NARAYAN CONSTRUCTIONS, NO. 46/26, 1 ST SOUTH STREET, KENNEDY SQUARE, SEMBIUM, CHENNAI 600 011. [PAN: AACFL 6543K] ( / APPELLANT) ( / RESPONDENT) %& / APPELLANT BY : SHRI. AR V SREENIVASAN, JCIT )*%& / RESPONDENT BY : NONE & /DATE OF HEARING : 02.01.2019 & /DATE OF PRONOUNCEMENT : 03.01.2019 / O R D E R PER S. JAYARAMAN, ACCOUNTANT MEMBER: THE REVENUE FILED THIS APPEAL AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS)-12, CHENNAI IN ITA NO. 63/CIT(A)-12/17-18, DATED 16.03.2018 FOR ASSESSMENT YEAR 2015-16. :-2-: ITA NO.1736/CHNY/2018 2. M/S. LAXMI NARAYAN CONSTRUCTIONS, THE ASSESSEE, A FIRM IS A CONTRACTOR FOR LAYING OF ROADS AND IS CARRYING ON T HE WORK OF CONSTRUCTION OF STORM WATER DRAIN, LAYING OF ROADS, STRENGTHENIN G AND WIDENING OF ROADS ETC. WHILE MAKING THE ASSESSMENT FOR ASSESSM ENT YEAR 2015-16, THE ASSESSING OFFICER REQUIRED THE ASSESSEE TO SHOW CAUSE AS TO WHY THE DEDUCTION CLAIMED BY IT U/S. 80IA SHOULD NOT BE DIS ALLOWED. AFTER CONSIDERING THE ASSESSEES SUBMISSIONS, MATERIALS, THE AO HELD THAT THE ASSESSEE FIRM WAS GIVEN ONLY WORKS CONTRACT AND NOT ANY INDEPENDENT DEVELOPMENT WORK. THE ASSESSEE WAS NOT VESTED WITH ANY INTEREST IN ANY OF THE DEVELOPMENT WORKS. A CONTRACT WAS AWARDED T O EXECUTE SPECIFIC CIVIL WORK FOR WHICH AN AGREED AMOUNT WAS PAID TO T HE ASSESSEE. NONE OF THE PREMISES WERE OWNED BY THE ASSESSEE EITHER B ENEFICIALLY OR OTHERWISE. THE ASSESSEE FIRM WAS NOT ENGAGED IN CO NSTRUCTION OF INFRASTRUCTURE FACILITY, BUT IS A MERE CONTRACTOR. SINCE, THE ASSESSEE FIRM WAS NOT INVOLVED IN ANY ENDEAVOUR AS DEVELOPER BUT MERELY EXECUTED THE WORKS CONTRACT AWARDED BY THE ROADWAYS AUTHORITIES, IT IS NOT ENTITLED TO CLAIM THE DEDUCTION AS PER THE PROVISIONS OF EXPLAN ATIONS TO SECTION 80IA(4) AND HENCE, HE ADDED THE DEDUCTION CLAIMED U /S. 80IA. AGGRIEVED, THE ASSESSEE FILED AN APPEAL BEFORE THE CIT(A). THE CIT(A) ALLOWED THE APPEAL. :-3-: ITA NO.1736/CHNY/2018 3. AGGRIEVED AGAINST THE ORDER OF THE CIT(A), THE R EVENUE FILED THIS APPEAL WITH THE FOLLOWING GROUNDS OF APPEAL: 1. THE ORDER OF THE LEARNED CIT(A) IS ERRONEOUS IN LAW AND OPPOSED TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2.1 THE LEARNED C1T(A) ERRED IN DIRECTING THE ASSES SING OFFICER TO ALLOW THE ASSESSEES APPEAL HOLDING THAT THE ASSESSEE IS ELIG IBLE FOR CLAIMING DEDUCTION U/S 80IA(4)(I) OF RS. RS.64,78,332/-. 2.2 THE LD.CIT(A) FAILED TO APPRECIATE THE FACT THAT THE ASSESSEE IS ONLY A WORK CONTRACTOR AND MERELY EXECUTING THE JOB WORK A SSIGNED BY THE GOVERNMENT OF TAMILNADU THROUGH CONTRACT AGREEMENT WHICH IS OF THE NATURE OF LAYING OF ROAD AND STORM WATER DRAIN AND HENCE CAN NOT BE CONSTRUED AS DEVELOPER OF INFRASTRUCTURE. 2.3 THE LEARNED CIT(A) HAS FAILED TO CONSIDER THAT E XPLANATION TO SECTION 80IA INSERTED IN FINANCE ACT, 2009 WITH EFFECT FROM 1 .4.2000 HAS SPECIFICALLY CLARIFIED THAT SUB-SECTION (4) OF SECTION 801A IS NOT APPLICABLE TO BUSINESS IN THE NATURE OF WORKS CONTRACT AWARDED BY ANY PERSON INCLUDING CENTRAL OR STATE GOVERNMENT. 2.4 THE LEARNED CT(A) OUGHT TO HAVE CONSIDERED THE DECISION OF THE THAT THE HONBLE TRIBUNAL, IN THE CASE OF MIS. ESHWARNATH CO NSTRUCTION IN EPA NO.185/MDS/2012 DATED 15.01.2013, HAS DECIDED SIMIL AR ISSUE IN FAVOUR OF THE DEPARTMENT HOLDING THAT THE ASSESSEE IS A FIRM AND HENCE NOT ELIGIBLE FOR CLAIMING DEDUCTION U/S 80IA(4)(I)(A) AND THE SECTIO N IS APPLICABLE ONLY FOR COMPANIES REGISTERED IN INDIA. 2.5 THE LD.CIT(A) FAILED TO NOTE THAT IN THE ABOVE C IRCUMSTANCES, THE ASSESSEE CANNOT BE CONSIDERED TO HAVE SATISFIED THE CONDITIONS PRESCRIBED IN SECTION 80IA. 3. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE LEARNED CIT (A) MAY BE SET ASIDE AND THAT OF THE ASSESSING OFFICER BE RESTORED. 4. THE LD. DR SUBMITTED THAT THE LD. CIT(A) ERRED I N FOLLOWING THE DECISION OF THE HONBLE ITAT A BENCH HYDERABAD IN I TA NO. 1829/HYD/2014 DATED 04.12.2015 IN THE CASE OF SUSHE E INFRA PVT. LTD. :-4-: ITA NO.1736/CHNY/2018 THE DR INVITED OUR ATTENTION TO PARA 4 OF THE JUDGE MENT, THE RELEVANT PORTION IS EXTRACTED AS UNDER: AS PER THE TERMS OF AGREEMENT, EVEN THE INITIAL PR OPOSALS FORMULATED BY THE DEPARTMENT WHICH ARE STATED TO BE TENTATIVE, TH E ASSESSEE HAS THE LIBERTY TO MAKE DIFFERENT PROPOSALS WITHOUT DETRIME NTAL TO THE GENERAL FEATURES OF THE DEPARTMENTAL PROPOSAL, LIKE ROAD LE VEL/BOTTOM OF DECK LEVEL, MFL, SILL LEVEL, LINEAR WATER WAY, WIDTH OF THE BRIDGE ETC. RIGHT FROM THE DRAWINGS TO THE WORK OF CONSTRUCTION HAS BEEN D ONE BY THIS ASSESSEE AND HAS BORNE THE COST ITSELF THE COMPANY HAS CONST RUCTED, DELIVERED AND MAINTAINED AND SECURITY IS ALSO MAINTAINED THEREAFT ER. SO, THIS IS A CASE OF TRANSFER OF PROPERTY IN CHATTEL AND NOT A CONTRACT OF SERVICE. A DEVELOPER AS PER THE ADVANCED LAW LEXICON MEANS A PERSON ENG AGED IN DEVELOPMENT OR OPERATION OR MAINTENANCE OF SPECIAL ECONOMIC ZONE, AND ALSO INCLUDES ANY PERSON AUTHORIZED FOR SUCH PURPOS E BY ANY SUCH DEVELOPER. IN THE CASE OF ACIT VS BHARAT UDYOG LTD , F BENCH OF ITAT MUMBAI, HAS CONCLUDED THAT ANY ASSESSEE WHO IS ENGA GED IN DEVELOPING THE INFRASTRUCTURE FACILITY AND ALSO OPERATING AND MAINTAINING THE SAME, IS ENTITLED TO THE BENEFIT OF DEDUCTION ULS 801A(4). A COPY OF THIS DECISION IS ENCLOSED AT PAGE 139 OF THE PAPER BOOK. IN THE CASE OF PATEL ENGINEERING LTD VS DY. CIT 84 TTJ (MUMBAI) 646 [COPY ENCLOSED A T PAGE NO.145 OF THE PAPER BOOK], IT HAS BEEN HELD THAT A PERSON, WHO EN TERS INTO A CONTRACT WITH ANOTHER PERSON WILL BE TREATED AS A CONTRACTO R UNDOUBTEDLY; AND THAT ASSESSEE HAVING ENTERED INTO AN AGREEMENT WITH THE GOVERNMENT OF MAHARASHTRA AND ALSO WITH APSES FOR DEVELOPMENT OF THE 3A NO. 1828/HYD/2014 SUSHEE INFRA PVT. LTD. INFRASTRUCTURE PROJECTS, IS OBVIOUSLY A CONTRACTOR BUT DOES NOT DEROGATE THE ASSESSEE FROM BEING A DEVELOPER AS WELL. THE TERM CONTRACTOR IS NOT NECESSARILY CONT RADICTORY TO THE TERM DEVELOPER. ON THE OTHER HAND, RATHER SECTION 80IA (4) ITSELF PROVIDES THAT ASSESSEE SHOULD DEVELOP THE INFRASTRUCTURE FACILITY AS PER THE AGREEMENT WITH THE CENTRAL GOVERNMENT, STATE GOVERNMENT OR A LOCAL AUTHORITY. SO, ENTERING INTO A LAWFUL AGREEMENT AND THEREBY BECOMI NG A CONTRACTOR SHOULD IN NO WAY BE A BAR TO THE ONE BEING A DEVELOPER. :-5-: ITA NO.1736/CHNY/2018 AND SUBMITTED THAT, HOWEVER, THE FACTS OF THE ASSES SEES CASE IS TOTALLY DIFFERENT AS IT IS A MERE CONTRACTOR AND IT IS NOT A DEVELOPER. RELYING ON THIS TRIBUNAL DECISION IN THE CASE OF M/S. ESHWARNA TH CONSTRUCTIONS VS ACIT IN ITA NO. 185/MDS/2012 DATED 15.01.2013 FOR A SSESSMENT YEAR 2008-09, THE DR PLEADED THAT THE REVENUES APPEAL M AY BE ALLOWED. NONE WAS PRESENT FOR THE ASSESSEE, ALTHOUGH THE AO SERVED THE HEARING NOTICE AND PLACED THE ACKNOWLEDGEMENT IN RECORDS. 5. WE HEARD THE LD. DR AND GONE THROUGH THE RELEVAN T MATERIAL. THE RELEVANT PORTION OF THE ORDER OF THIS TRIBUNAL IS E XTRACTED AS UNDER: *IT INTRODUCED BY FINANCE (NO.2) ACT, 2009 W.R.E.F. 1.4.2000 A PERUSAL OF THE STATUTORY PROVISIONS MAKES IT CLEA R THAT IT DOES NOT PROVIDE A BLANKET DEDUCTION I.E. IN ORDER TO SU CCEED IN A CLAIM OF DEDUCTION; THE CONCERNED ASSESSEE HAS TO DERIVE PRO FITS AND GAINS FROM ANY BUSINESS REFERRED TO IN SUB-SECTION 4. FUR THER, SUB-SECTION 4 PRESCRIBES APPLICABILITY OF CLAUSE I.E. THE CASE IN WHICH THE DEDUCTION PROVISION WOULD APPLY. IT IS IN THIS SUB-SECTION TH AT THE LEGISLATURE HAS ENUMERATED THE NATURE OF THE UNDERTAKINGS, THEIR AC TIVITIES IN CONTRIBUTING RAISING OF INFRASTRUCTURE. FURTHER, IN THE EXPLANATION ATTACHED TO THE SUB-SECTION, THE LEGISLATURE HAS AL SO ENTRUSTED THE MEANING OF THE INFRASTRUCTURE FACILITIES. IN OUR OP INION, AN ASSESSEE WHILE CLAIMING DEDUCTION HAS TO SATISFY ALL CONDITI ONS IN SUB-SECTION 4(1)(A) OR (B) OR (C). IT IS MANDATORY FOR THE ASSE SSEE TO FIRST SATISFY SUB- SECTION CLAUSE I(A), THEN (B) THEN (C), THEN PROVIS O AND SO ON. IN CASE THE CONCERNED ASSESSEE FAILS IN ANY ONE OF THE CLAU SES, EVEN IF IT SATISFIES THE OTHER PART OF THE SUB-SECTION, THE CL AIM HAS TO BE REJECTED. NOW WE PROCEED TO DECIDE AS TO WHETHER THE ASSESSEE FIRM SATISFIES SUB-SECTION 4(I) OF THE ACT OR NOT. FOR THE SAID SUB-SECTION, A READING OF THE PROVISION MAKES IT UNAMBIGUOUS THAT THE CONC ERNED CLAIMANT HAS TO BE AN ENTERPRISES CARRYING ON THE BUSINESS OF DE VELOPING OR OPERATING AND MAINTAINING OR DEVELOPING, OPERATING AND MAINTAINING :-6-: ITA NO.1736/CHNY/2018 ANY INFRASTRUCTURE FACILITY AND IT HAS TO BE OWNED BY A CONSORTIUM OF SUCH COMPANY OR BY AN AUTHORITY OR A BOARD OR A COR PORATION OR ANY OTHER BODY ESTABLISHED OR CONSTITUTED UNDER ANY CEN TRAL OR STATE ACT. ADMITTEDLY, THE ASSESSEE IS A PARTNERSHIP FIRM. AS WE NOTICE FROM THE RELEVANT STATUTORY PROVISION, THE ENTERPRISE IN THE NATURE OF FIRM NOWHERE FINDS MENTION IN THE MANDATE OF THE LEGISLA TURE. ALTHOUGH THE ASSESSEE HAS EMPHASIZED FROM THE DEFINITION OF THE WORD BODY IN THE LAW LEXICON WHICH READS AS FOLLOWS: STATUTORY DEFINITION, INCLUDES PARTNERSHIP, FINANC IAL SERVICES AND MARKETS ACT, 2000 (C.8), S. 367(2) (ST ROUD, 6 TH EDN., 2000, SUPPLEMENT, 2003). IT ALSO INCLUDES GROUP OF BODIES, PARTNERSHIP OF EN TERPRISE CARD ON BY ONE OR MORE PERSONS OR BODIES AND A BODY WHICH IS SUBSTANTIALLY THE SAME AT OR SUCCESSOR, TO, ANOTHER BODY, GOVERNMENT RESOURCES AND ACCOUNTS ACT, 2000 (C.20), S. 17(7) ( STROUD, 6 TH EDN., 2000, SUPPLEMENT, 2003). THE MAIN-CENTRAL OR PRINCIPAL PART [ART. 110 (2), C ONST.]; PHYSICAL OR MATERIAL FRAME OF A MAN OR ANIMAL; GANG OF THIEVES ETC. IN OUR OPINION, THE SAID DEFINITION BEING A GENERAL PREPOSITION DOES NOT HELP THE ASSESSEES CASE. IT IS A TRITE PREPOSITION OF LAW WHILE INTERPRETING A STATUTE AND MORE SO A FISCAL STATUE, NEITHER THE JUDICIAL FORUM CONCERNED CAN INSERT ITS OWN WORDS NOR IT CAN TAKE AWAY ANY FROM THE STATUTE. AS IT IS SEEN, THE EARLIER PORTIO N OF THE STATUTORY PROVISION PRESCRIBES A COMPANY REGISTERED IN INDIA OR A CONSORTIUM OF SUCH COMPANIES OR BY AN AUTHORITY OR CORPORATION OR ANY OTHER BODY ESTABLISHED OR CONSTITUTED AND SO ON. IN OUR VIEW, THE LATTER PART IS LIABLE TO BE READ IN THE LIGHT OF THE EARLIER PA RT BY FOLLOWING THE PRINCIPLES OF EJUSDEM GENERIS. THE VEHEMENT CONTENT ION OF THE ASSESSEE IS THAT IT IS ALSO A BODY ESTABLISHED OR C ONSTITUTED UNDER A CENTRAL ACT AS IT IS GOVERNED BY PARTNERSHIP ACT, C ANNOT BE ACCEPTED FOR THE REASON THAT UNDER THE PROVISIONS OF PARTNER SHIP ACT A FIRM IS NOT CREATED I.E. IT IS NOT A CREATION OF STATUTE, BUT I T IS A BODY OF INDIVIDUAL REGULATED BY THE STATUTE NAMELY PARTNERSHIP ACT. HE NCE, WE HOLD THAT THE ASSESSEE FAILS TO SATISFY THE APPLICABILITY CLA USE OF THE PROVISION AS ENVISAGED UNDER SECTION 80IA(4)(I) OF THE ACT. 9. SO FAR AS CATENA OF THE JUDGMENTS SUBMITTED BY THE AR OF THE ASSESSEE, WE NOTICE THAT THEY ONLY PERTAIN TO SECTI ON 80IA(4)(I)(B) I.E. :-7-: ITA NO.1736/CHNY/2018 REGARDING THE ISSUE OF CONTRACTOR VIZ-A-VIS DEVELOP ER. HENCE, WE DO NOT DEEM IT APPROPRIATE TO DECIDE ON THE SAID ISSUE SIN CE THE ASSESSEE DOES NOT FULFILL THE CONDITION ENUMERATED IN THE FI RST PART OF THE STATUTORY PROVISION. WE MAKE IT CLEAR THAT ALTHOUGH THE ISSUE ADJUDICATED BY US HAS NOT BEEN LOOKED INTO BY THE ASSESSING OFFICER O R CIT(A), BUT IN THE LARGER INTEREST OF THE JUSTICE AND IN VIEW OF THE F ACT THAT BEFORE AVAILING DEDUCTION UNDER SECTION 80IA, ALL THE NECESSARY CON DITIONS HAVE TO BE SATISFIED WE HAVE PROCEEDED TO EXAMINE THE APPLICAB ILITY OF THE DEDUCTION PROVISION CONTAINED IN SECTION 80IA(4)(I) OF THE ACT. 10. CONSEQUENTLY, IN THE LIGHT OF OUR ABOVE DISCUS SION, THE ASSESSEES APPEAL FAILS. ACCORDINGLY IT IS DISMISSE D BEING DEVOID OF ANY MERITS. 6. THIS BEING SO, IN THIS CASE, THE ASSESSEE IS, AS POINTED OUT BY THE ASSESSING OFFICER, A MERE CONTRACTOR, IT HAS NOT LA ID ANY MATERIAL EITHER BEFORE THE ASSESSING OFFICER OR BEFORE THE CIT(A), TO ESTABLISH ITS CASE THAT IT IS FALLING WITHIN THE SCOPE OF PROVISIONS O F SECTION 80IA AND HENCE ITS DEDUCTION CLAIM IS NEITHER PROVED BEFORE THE AO NOR BEFORE THE CIT(A) OR BEFORE US. FOLLOWING THE COORDINATE BENCH DECIS ION, SUPRA, THE REVENUES APPEAL IS ALLOWED. 7. IN THE RESULT, THE REVENUES APPEAL IS ALLOWED. ORDER PRONOUNCED ON THURSDAY, THE 03 RD DAY OF JANUARY, 2019 AT CHENNAI. SD/- ( . . . ) (N.R.S. GANESAN) ! /JUDICIAL MEMBER SD/- ( ) (S. JAYARAMAN) ! /ACCOUNTANT MEMBER :-8-: ITA NO.1736/CHNY/2018 /CHENNAI, 0 /DATED: 03 RD JANUARY, 2019 JPV &)1232 /COPY TO: 1. % / APPELLANT 2. )*% /RESPONDENT 3. 4 ) ( /CIT(A) 4. 4 /CIT 5. 2) /DR 6. 7 /GF