MAYTAS-NCC (Joint Venture), Hyderabad V. Addl. CIT, Range-6, Hyderabad

ITA 1875/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66412 (ITAT-HYDERABAD)
• Duration Of Justice: 11 month(s) 26 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 31-10-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 04-11-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V SRINIVAS
• Assessee Lawyers: S RAMA RAO

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER I.T.A. NO. 1875/HYD/2011 ASSESSMENT YEAR 2008-09 M/S. MAYTAS - NCC (JV) HYDERABAD PAN: AALFM2137K V . THE ASST. CIT CIRCLE-6(1) HYDERABAD APPELLANT RESPONDENT APPELLANT BY: SRI S. RAMA RAO RESPONDENT BY: SRI V. SRINIVAS DATE OF HEARING: 2 6 .0 9 .2012 DATE OF PRONOUNCEMENT: 31.10.2012 O R D E R PER CHANDRA POOJARI, AM: THIS APPEAL BY THE ASSESSEE IS DIRECTED AGAINST TH E ORDER OF THE CIT(A)-IV, HYDERABAD DATED 29.7.2011 FOR THE A.Y. 2 008-09. 2. THE ASSESSEE RAISED THE FOLLOWING GROUNDS OF APPEAL : (1) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, T HE ORDER OF THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) IS ERRONEOUS IN LAW AND FACTS OF THE CASE . (2) ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE TH E LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW AND FACTS OF THE CASE IN CONFIRMING THE DISALLOWANCE OF DEDUCTION UNDER SECTION 80IA OF THE PROFITS AND GAINS DERIVED BY THE APPELLANT FROM THE ELIGIBLE BUSINESS OF DEVELOPING A NEW INFRASTRUCTUR E FACILITY BEING A IRRIGATION PROJECT. THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THAT THE LARGER BENCH DECISION IN B T PATIL BELGAUM CONSTRUCTION P. LTD., VS. ACIT IS NO LONGER A GOOD LAW AFTER THE HONOURABLE BOMBAY HIGH COURT JUDGMENT IN ABG HEAVY ENGINEERING (2010) 322 ITR 323. (3) THE LEARNED COMMISSIONER OF INCOME TAX (APPEALS) ERRED IN LAW AND FACTS OF THE CASE IN NOT ALLOWING CREDIT FOR TAX DEDUCTED AT SOURCE ON MOBILIZATION 2 ITA NO. 1875/HYD/2011 M/S. MAYTAS-NCC (JV) ================= ADVANCE. ON THE FACTS AND IN THE CIRCUMSTANCES OF TH E LEARNED COMMISSIONER OF INCOME TAX (APPEALS) OUGHT TO HAVE APPRECIATED THE FACT THAT THE MOBILIZATION ADVANCE REPRESENTS REPAYABLE OBLIGATION AND THERE IS NO INCOME COMPRISED IN THE SAID PAYMENT, THEREFORE, TAX OUGHT NOT TO HAVE BEEN DEDUCTED FROM THE SAID PAYMENT, HAVING DEDUCTED CREDIT OUGHT TO HAVE BEEN GIVEN TO THE ASSESSEE FOR THE FINANCIAL FOR WHICH THE SAME IS DEDUCTED. 3. AFTER HEARING BOTH THE PARTIES WE ARE OF THE OPINIO N THAT THE ALLOWABILITY OF DEDUCTION U/S. 80IA IS SUBJECT MATT ER OF APPEAL BEFORE THIS TRIBUNAL IN VARIOUS CASES AND THE TRIBUNAL GIV EN A FINDING IN THESE CASES. THE SAME ISSUE CAME FOR CONSIDERATION BEFO RE THIS TRIBUNAL IN ASSESSEES OWN CASE IN ITA NO. 1292/HYD/2010 FOR A. Y. 2007-08. THE TRIBUNAL VIDE ORDER DATED 27.8.2012 HELD AS FOLLOWS : '22. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN OUR OPINION, THIS ISSUE CAME FOR CON SIDERATION BEFORE THIS TRIBUNAL IN THE CASE OF M/S. KOYA & CO. CONSTRUCTION (P) LTD. V. ACIT, 51 SOT 203 (HYD) (UR O) WHEREIN THE TRIBUNAL HELD AS FOLLOWS: 24. WE FIND THAT THE PROVISIONS OF SECTION 80IA (4) OF THE ACT WHEN INTRODUCED AFRESH BY THE FINANCE ACT, 1999 , THE PROVISIONS UNDER SECTION 80IA (4A) OF THE ACT WERE DELETED FROM THE ACT. THE DEDUCTION AVAILABLE FOR ANY ENTER PRISE EARLIER UNDER SECTION 80IA (4A) ARE ALSO MADE AVAILABLE U NDER SECTION 80IA (4) ITSELF. FURTHER, THE VERY FACT TH AT THE LEGISLATURE MENTIONED THE WORDS (I) DEVELOPING OR (II) OPERATING AND MAINTAINING OR (III) DEVELOPING, O PERATING AND MAINTAINING CLEARLY INDICATES THAT ANY ENTERPRISE WHICH CARRIED ON ANY OF THESE THREE ACTIVITIES WOULD BECOME ELIGI BLE FOR DEDUCTION. THEREFORE, THERE IS NO AMBIGUITY IN THE INCOME-TAX ACT. WE FIND THAT WHERE AN ASSESSEE INCURRED EXPE NDITURE FOR PURCHASE OF MATERIALS HIMSELF AND EXECUTES THE DEVE LOPMENT WORK I.E., CARRIES OUT THE CIVIL CONSTRUCTION WORK, HE WILL BE ELIGIBLE FOR TAX BENEFIT UNDER SECTION 80 IA OF THE ACT. IN CONTRAST TO THIS, A ASSESSEE, WHO ENTERS INTO A CON TRACT WITH ANOTHER PERSON INCLUDING GOVERNMENT OR AN UNDERTAKI NG OR ENTERPRISE REFERRED TO IN SECTION 80 IA OF THE ACT, FOR EXECUTING WORKS CONTRACT, WILL NOT BE ELIGIBLE FOR THE TAX BE NEFIT UNDER SECTION 80 IA OF THE ACT. WE FIND THAT THE WORD O WNED IN SUB-CLAUSE (A) OF CLAUSE (1) OF SUB SECTION (4) OF SECTION 80IA OF THE ACT REFER TO THE ENTERPRISE. BY READING OF T HE SECTION, IT IS 3 ITA NO. 1875/HYD/2011 M/S. MAYTAS-NCC (JV) ================= CLEARS THAT THE ENTERPRISES CARRYING ON DEVELOPMENT OF INFRASTRUCTURE DEVELOPMENT SHOULD BE OWNED BY THE C OMPANY AND NOT THAT THE INFRASTRUCTURE FACILITY SHOULD BE OWNED BY A COMPANY. THE PROVISIONS ARE MADE APPLICABLE TO THE PERSON TO WHOM SUCH ENTERPRISE BELONGS TO IS EXPLAINED IN SUB -CLAUSE (A). THEREFORE, THE WORD OWNERSHIP IS ATTRIBUTABLE ONL Y TO THE ENTERPRISE CARRYING ON THE BUSINESS WHICH WOULD MEA N THAT ONLY COMPANIES ARE ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA (4) AND NOT ANY OTHER PERSON LIKE INDIVIDUAL, HUF, FIRM ETC. 25. WE ALSO FIND THAT ACCORDING TO SUB-CLAUSE (A), CLAUSE (I) OF SUB SECTION (4) OF SECTION 80-IA THE WORD IT DENO TES THE ENTERPRISE CARRYING ON THE BUSINESS. THE WORD IT CANNOT BE RELATED TO THE INFRASTRUCTURE FACILITY, PARTICULARL Y IN VIEW OF THE FACT THAT INFRASTRUCTURE FACILITY INCLUDES RAIL SY STEM, HIGHWAY PROJECT, WATER TREATMENT SYSTEM, IRRIGATION PROJEC T, A PORT, AN AIRPORT OR AN INLAND PORT WHICH CANNOT BE OWNED BY ANY ONE. EVEN OTHERWISE, THE WORD IT IS USED TO DENOTE AN ENTERPRISE. THEREFORE, THERE IS NO REQUIREMENT THAT THE ASSESSE E SHOULD HAVE BEEN THE OWNER OF THE INFRASTRUCTURE FACILITY. 26. THE NEXT QUESTION IS TO BE ANSWERED IS WHETHER THE ASSESSEE IS A DEVELOPER OR MERE WORKS CONTRACTOR. THE REVEN UE RELIED ON THE AMENDMENTS BROUGHT IN BY THE FINANCE ACT 200 7 AND 2009 TO MENTION THAT THE ACTIVITY UNDERTAKEN BY TH E ASSESSEE IS AKIN TO WORKS CONTRACT AND HE IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA (4) OF THE ACT. WHETHER THE ASS ESSEE IS A DEVELOPER OR WORKS CONTRACTOR IS PURELY DEPENDS ON THE NATURE OF THE WORK UNDERTAKEN BY THE ASSESSEE. EACH OF TH E WORK UNDERTAKEN HAS TO BE ANALYZED AND A CONCLUSION HAS TO BE DRAWN ABOUT THE NATURE OF THE WORK UNDERTAKEN BY THE ASSE SSEE. THE AGREEMENT ENTERED INTO WITH THE GOVERNMENT OR THE GOVERNMENT BODY MAY BE A MERE WORKS CONTRACT OR FOR DEVELOPMENT OF INFRASTRUCTURE. IT IS TO BE SEEN FRO M THE AGREEMENTS ENTERED INTO BY THE ASSESSEE WITH THE GO VERNMENT. WE FIND THAT THE GOVERNMENT HANDED OVER THE POSSESS ION OF THE PREMISES OF PROJECTS TO THE ASSESSEE FOR THE DEVELO PMENT OF INFRASTRUCTURE FACILITY. IT IS THE ASSESSEES RESPO NSIBILITY TO DO ALL ACTS TILL THE POSSESSION OF PROPERTY IS HANDED OVER TO THE GOVERNMENT. THE FIRST PHASE IS TO TAKE OVER THE EX ISTING PREMISES OF THE PROJECTS AND THEREAFTER DEVELOPING THE SAME INTO INFRASTRUCTURE FACILITY. SECONDLY, THE ASSESSEE SH ALL FACILITATE THE PEOPLE TO USE THE AVAILABLE EXISTING FACILITY EVEN WHILE THE PROCESS OF DEVELOPMENT IS IN PROGRESS. ANY LOSS TO THE PUBLIC CAUSED IN THE PROCESS WOULD BE THE RESPONSIBILITY O F THE ASSESSEE. THE ASSESSEE HAS TO DEVELOP THE INFRASTR UCTURE FACILITY. IN THE PROCESS, ALL THE WORKS ARE TO BE EXECUTED BY THE ASSESSEE. IT MAY BE LAYING OF A DRAINAGE SYSTEM; M AY BE 4 ITA NO. 1875/HYD/2011 M/S. MAYTAS-NCC (JV) ================= CONSTRUCTION OF A PROJECT; PROVISION OF WAY FOR THE CATTLE AND BULLOCK CARTS IN THE VILLAGE; PROVISION FOR TRAFFI C WITHOUT ANY HINDRANCE, THE ASSESSEES DUTY IS TO DEVELOP INFRAS TRUCTURE WHETHER IT INVOLVES CONSTRUCTION OF A PARTICULAR IT EM AS AGREED TO IN THE AGREEMENT OR NOT. THE AGREEMENT IS NOT F OR A SPECIFIC WORK, IT IS FOR DEVELOPMENT OF FACILITY AS A WHOLE. THE ASSESSEE IS NOT ENTRUSTED WITH ANY SPECIFIC WORK TO BE DONE BY THE ASSESSEE. THE MATERIAL REQUIRED IS TO BE BROUG HT IN BY THE ASSESSEE BY STICKING TO THE QUALITY AND QUANTITY IR RESPECTIVE OF THE COST OF SUCH MATERIAL. THE GOVERNMENT DOES NOT PROVIDE ANY MATERIAL TO THE ASSESSEE. IT PROVIDES THE WOR KS IN PACKAGES AND NOT AS A WORKS CONTRACT. THE ASSESSEE UTILIZES ITS FUNDS, ITS EXPERTISE, ITS EMPLOYEES AND TAKES THE RESPONSIBILI TY OF DEVELOPING THE INFRASTRUCTURE FACILITY. THE LOSSES SUFFERED EITHER BY THE GOVT. OR THE PEOPLE IN THE PROCESS OF SUCH DEVELOPMENT WOULD BE THAT OF THE ASSESSEE. THE ASS ESSEE HANDS OVER THE DEVELOPED INFRASTRUCTURE FACILITY TO THE G OVERNMENT ON COMPLETION OF THE DEVELOPMENT. THEREAFTER, THE ASS ESSEE HAS TO UNDERTAKE MAINTENANCE OF THE SAID INFRASTRUCTURE FO R A PERIOD OF 12 TO 24 MONTHS. DURING THIS PERIOD, IF ANY DAMAGE S ARE OCCURRED IT SHALL BE THE RESPONSIBILITY OF THE ASSE SSEE. FURTHER, DURING THIS PERIOD, THE ENTIRE INFRASTRUCTURE SHALL HAVE TO BE MAINTAINED BY THE ASSESSEE ALONE WITHOUT HINDRANCE TO THE REGULAR TRAFFIC. THEREFORE, IT IS CLEAR THAT FROM AN UN-DEVELOPED AREA, INFRASTRUCTURE IS DEVELOPED AND HANDED OVER T O THE GOVERNMENT AND AS EXPLAINED BY THE CBDT VIDE ITS CI RCULAR DATED 18-05-2010, SUCH ACTIVITY IS ELIGIBLE FOR DED UCTION UNDER SECTION 80IA (4) OF THE ACT. THIS CANNOT BE CONSIDE RED AS A MERE WORKS CONTRACT BUT HAS TO BE CONSIDERED AS A D EVELOPMENT OF INFRASTRUCTURE FACILITY. THEREFORE, THE ASSESSE E IS A DEVELOPER AND NOT A WORKS CONTRACTOR AS PRESUMED BY THE REVEN UE. THE CIRCULAR ISSUED BY THE BOARD, RELIED ON BY LEARNED COUNSEL FOR THE ASSESSEE, CLEARLY INDICATE THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA (4) OF THE ACT. THE D EPARTMENT IS NOT CORRECT IN HOLDING THAT THE ASSESSEE IS A MERE CONTRACTOR OF THE WORK AND NOT A DEVELOPER. 27. WE ALSO FIND THAT AS PER THE PROVISIONS OF THE SECTION 80IA OF THE ACT, A PERSON BEING A COMPANY HAS TO ENTER I NTO AN AGREEMENT WITH THE GOVERNMENT OR GOVERNMENT UNDERTA KINGS. SUCH AN AGREEMENT IS A CONTRACT AND FOR THE PURPOSE OF THE AGREEMENT A PERSON MAY BE CALLED AS A CONTRACTOR AS HE ENTERED INTO A CONTRACT. BUT THE WORD CONTRACTOR IS USED TO DENOTE A PERSON ENTERING INTO AN AGREEMENT FOR UNDERTAKING T HE DEVELOPMENT OF INFRASTRUCTURE FACILITY. EVERY AGRE EMENT ENTERED INTO IS A CONTRACT. THE WORD CONTRACTOR IS USED TO DENOTE THE PERSON WHO ENTERS INTO SUCH CONTRACT. E VEN A PERSON WHO ENTERS INTO A CONTRACT FOR DEVELOPMENT OF INFRA STRUCTURE 5 ITA NO. 1875/HYD/2011 M/S. MAYTAS-NCC (JV) ================= FACILITY IS A CONTRACTOR. THEREFORE, THE CONTRACTO R AND THE DEVELOPER CANNOT BE VIEWED DIFFERENTLY. EVERY CONT RACTOR MAY NOT BE A DEVELOPER BUT EVERY DEVELOPER DEVELOPING INFRASTRUCTURE FACILITY ON BEHALF OF THE GOVERNMENT IS A CONTRACTOR. 28. WE FIND THAT THE DECISION RELIED ON BY THE LEAR NED COUNSEL FOR THE ASSESSEE IN THE CASE OF CIT VS. LAXMI CIVIL ENGINEERING WORKS [SUPRA] SQUARELY APPLICABLE TO THE ISSUE UNDE R DISPUTE WHICH IS IN FAVOUR OF THE ASSESSEE WHEREIN IT WAS H ELD THAT MERE DEVELOPMENT OF A INFRASTRUCTURE FACILITY IS AN ELIG IBLE ACTIVITY FOR CLAIMING DEDUCTION UNDER SECTION 80IA OF THE AC T AFTER CONSIDERING THE JUDGEMENT OF THE MUMBAI HIGH COURT IN THE CASE OF ABG HEAVY ENGINEERING [SUPRA]. THE CASE OF ABG IS NOT THE PURE DEVELOPER WHEREAS, IN THE PRESENT CASE , THE ASSESSEE IS THE PURE DEVELOPER. WE ALSO FIND THAT SECTION 80IA OF THE ACT, INTENDED TO COVER THE ENTITIES CARRYING OUT DEVELOPING, OPERATING AND MAINTAINING THE INFRASTRU CTURE FACILITY KEEPING IN MIND THE PRESENT BUSINESS MODEL S AND INTEND TO GRANT THE INCENTIVES TO SUCH ENTITIES. THE CBDT , ON SEVERAL OCCASIONS, CLARIFIED THAT PURE DEVELOPER SHOULD ALS O BE ELIGIBLE TO CLAIM DEDUCTION UNDER SECTION 80IA OF THE ACT, W HICH ULTIMATELY CULMINATED INTO AMENDMENT UNDER SECTION 80IA OF THE ACT, IN THE FINANCE ACT 2001, TO GIVE EFFECT TO THE AFORESAID CIRCULARS ISSUED BY THE CBDT. WE ALSO FIND THAT, T O AVOID MISUSE OF THE AFORESAID AMENDMENT, AN EXPLANATION W AS INSERTED IN SECTION 80IA OF THE ACT, IN THE FINANCE ACT-2007 AND 2009, TO CLARIFY THAT MERE WORKS CONTRACT WOULD NOT BE ELIGIBLE FOR DEDUCTIONS UNDER SECTION 80IA OF THE A CT. BUT, CERTAINLY, THE EXPLANATION CANNOT BE READ TO DO AWA Y WITH THE ELIGIBILITY OF THE DEVELOPER; OTHERWISE, THE PARLIA MENT WOULD HAVE SIMPLY REVERSED THE AMENDMENT MADE IN THE FINA NCE ACT, 2001. THUS, THE AFORESAID EXPLANATION WAS INSERTED, CERTAINLY, TO DENY THE TAX HOLIDAY TO THE ENTITIES WHO DOES ON LY MERE WORKS CONTACT OR SUB-CONTRACT AS DISTINCT FROM THE DEVELOPER. THIS IS CLEAR FROM THE EXPRESS INTENSION OF THE PAR LIAMENT WHILE INTRODUCING THE EXPLANATION. THE EXPLANATORY MEMORA NDUM TO FINANCE ACT 2007 STATES THAT THE PURPOSE OF THE TAX BENEFIT HAS ALL ALONG BEEN TO ENCOURAGE INVESTMENT IN DEVELOPME NT OF INFRASTRUCTURE SECTOR AND NOT FOR THE PERSONS WHO M ERELY EXECUTE THE CIVIL CONSTRUCTION WORK. IT CATEGORICAL LY STATES THAT THE DEDUCTION UNDER SECTION 80IA OF THE ACT IS AVAI LABLE TO DEVELOPERS WHO UNDERTAKES ENTREPRENEURIAL AND INVES TMENT RISK AND NOT FOR THE CONTRACTORS, WHO UNDERTAKES ONLY BU SINESS RISK. WITHOUT ANY DOUBT, THE LEARNED COUNSEL FOR THE ASSE SSEE CLEARLY DEMONSTRATED BEFORE US THAT THE ASSESSEE AT PRESENT HAS UNDERTAKEN HUGE RISKS IN TERMS OF DEPLOYMENT OF TEC HNICAL 6 ITA NO. 1875/HYD/2011 M/S. MAYTAS-NCC (JV) ================= PERSONNEL, PLANT AND MACHINERY, TECHNICAL KNOW-HOW, EXPERTISE AND FINANCIAL RESOURCES. 29. AS PER SUBMISSION OF THE ASSESSEES COUNSEL BRO ADLY THE TECHNICAL NATURE OF THE WORK UNDERTAKEN BY THE ASSE SSEE IS AS FOLLOWS: I) DESIGNING AND MANUFACTURING OF PIPES: THE ASSES SEE SPECIALLY DESIGNED AND MANUFACTURED PRE-STRESSED CONCRETE PIPES AND IT HAS BEEN DONE IN ACCORDANCE W ITH SPECIFIC REQUIREMENTS. II) DESIGN AND MANUFACTURING OF PIPE FITTINGS OR S PECIALS II) TRANSPORTING, LAYING AND JOINING OF PIPES CONF ORMING WITH SPECIFICATIONS. THE ACTIVITY INVOLVES EARTH WO RK EXCAVATION, TRENCH EXCAVATION, HARD ROOK BLASTING, LOWERING AND LAYING OF PIPES, FITTING OF SPECIALS, FITTING OF RUBBER RINGS AT THE JOINTS, TESTING PIPE JOINTS AND PIPELINE. III) CONSTRUCTION OF PUMP HOUSE, PROVIDING AND FIT TING OF PUMP SETS. SUPPLY AND FITTING OF SUBMERSIBLE PUMPS , CENTRIFUGAL PUMPS, TURBINE PUMPS, SUBMERSIBLE MOTOR S, MOTORS FOR TURBINES AND CENTRIFUGAL PUMP SETS, TRANSFORMER, GENERATOR, PANEL BOARDS ETC. IV) DESIGN AND CONSTRUCTION OF RAW WATER PUMPING S TATIONS, WATER TREATMENT PLANT, TREATED WATER PUMPING STATIO N, TREATED WATER TRANSMISSION MAIN, CONSTRUCTION OF SU RGE TANK AND PIPE CONNECTION ARRANGEMENT, BOOSTER STATI ONS, INTERNAL TRANSMISSION MAIN AND FEEDER MAINS, CONSTRUCTION OF SERVICE RESERVOIRS AND MASTER RESER VOIRS. V) MOBILISATION OF LABOURERS, [PREPARATION OF PLAN S TECHNICAL EXPERTISE, SUPERVISION, CO-ORDINATION AND CONTROL, SET UP MANUFACTURING FACILITY NEARBY THE PROJECT SITE TO MANUFACTURE PROJECT SPECIFIC PIPES AS PER THE REQUIRED SPECIFICATIONS WHICH REQUIRES WELL EQU IPPED MACHINES, EMPLOYMENT OF SKILLED LABOUR AND TECHNICA L EXPERTS, EQUIPMENT TO TRANSPORT HEAVY PIPES TO LAYI NG SITES, EQUIPMENT TO LIFT AND LOWERING OF PIPES AT T HE EXCAVATED SITES, PROVIDE QUALIFIED AND EXPERIENCE ENGINEER FOR EACH PROJECT SITE ETC TO BRING IN TO E XISTENCE AN INFRASTRUCTURE FACILITY. MANUFACTURING OF PIPE S TO SITES, EXCAVATION UNDER VARIOUS CONDITIONS OF SOIL AND ROCK, LOWERING AND LAYING OF PIPES, JOINTING AND TE STING OF PIPE JOINT AND PIPE LINE AS A WHOLE, CONSTRUCTIO N OF PUMP HOUSES, STORAGE TANK/COLLECTION WELL, TREATMEN T 7 ITA NO. 1875/HYD/2011 M/S. MAYTAS-NCC (JV) ================= PLANTS, DISTRIBUTION PLANTS ETC AND ALL THESE TOGE THER DEVELOP IN TO A NEW INFRASTRUCTURE WATER SUPPLY FAC ILITY. 30. FURTHER, THE ORDER OF TRIBUNAL IN THE CASE OF B.T. PATIL CITED SUPRA IS PRIOR TO AMENDMENT TO SEC 80IA(4), AFTER T HE AMENDMENT THE SECTION 80IA(4) READ AS (I) DEVELOPIN G OR (II) OPERATING AND MAINTAINING OR (III) DEVELOPING, OPER ATING AND MAINTAINING ANY INFRASTRUCTURE FACILITY, PRIOR TO A MENDMENT THE OR BETWEEN THREE ACTIVITIES WAS NOT THERE, AFTER THE AMENDMENT OR HAS BEEN INSERTED W.E.F. 1-4-2002 B Y FINANCE ACT 2001. 31. ACCORDINGLY, THE ASSESSEE IS ENTITLED FOR DEDUC TION UNDER SECTION 80IA OF THE ACT ON THE PROJECTS WHICH INVOL VE ABOVE ACTIVITIES. THEREFORE, IN OUR CONSIDERED VIEW, THE ASSESSEE SHOULD NOT BE DENIED THE DEDUCTION UNDER SECTION 80 IA OF THE ACT IF THE CONTRACTS INVOLVES DEVELOPMENT, OPERATI NG, MAINTENANCE, FINANCIAL INVOLVEMENT, AND DEFECT COR RECTION AND LIABILITY PERIOD, THEN SUCH CONTRACTS CANNOT BE CAL LED AS SIMPLE WORKS CONTRACT TO DENY THE DEDUCTION U/S 80IA OF AC T. IN OUR OPINION THE CONTRACTS WHICH CONTAIN ABOVE FEATURES TO BE SEGREGATED ON THIS DEDUCTION U/S. 80-IA HAS TO BE G RANTED AND THE OTHER AGREEMENTS WHICH ARE PURE WORKS CONTRACTS HIT BY THE EXPLANATION SECTION 80IA(13), THOSE WORK ARE NOT EN TITLE FOR DEDUCTION U/S 80IA OF THE ACT. THE PROFIT FROM THE CONTRACTS WHICH INVOLVES DEVELOPMENT, OPERATING, MAINTENANC E, FINANCIAL INVOLVEMENT, AND DEFECT CORRECTION AND LI ABILITY PERIOD IS TO BE COMPUTED BY ASSESSING OFFICER ON PRO-RATA BASIS OF TURNOVER. THE ASSESSING OFFICER IS DIRECTED TO EXAM INE THE RECORDS ACCORDINGLY AND GRANT DEDUCTION ON ELIGIBLE TURNOVER AS DIRECTED ABOVE. IT IS NEEDLESS TO SAY THAT SIMILAR VIEW HAS BEEN TAKEN BY THE CHENNAI BENCH OF THE TRIBUNAL AND DEDU CTION U/S. 80IA WAS GRANTED IN THE CASE OF M/S. CHETTINAD LIGN ITE TRANSPORT SERVICES (P) LTD., IN ITA NO. 2287/MDS/06 ORDER DATED 27 TH JULY, 2007 FOR THE ASSESSMENT YEAR 2004-05. LATER IN ITA NO. 1179/MDS/08 VIDE ORDER DATED 26 TH FEBRUARY, 2010 THE TRIBUNAL HAS TAKEN THE SAME VIEW. 23. IN THE CASE OF GVPR ENGINEERS LTD. V. ACIT, 51 SOT 207 (HYD) (URO) WHEREIN THE TRIBUNAL HELD THAT DEDUCTIO N U/S. 80IA IS AVAILABLE TO DEVELOPERS WHO UNDERTAKE ENTRE PRENEURIAL INVESTMENT RISK AND NOT FOR THE CONTRACTORS, WHO UN DERTAKE ONLY BUSINESS RISK. WITHOUT ANY DOUBT, THE ASSESSEE CLE ARLY DEMONSTRATED THAT THE PLANT AND MACHINERY, TECHNICA L KNOW- HOW, EXPERTISE AND FINANCIAL RESOURCES. THEREFORE, IF THE CONTRACTS INVOLVE DESIGN, DEVELOPMENT, OPERATION & MAINTENANCE, FINANCIAL INVOLVEMENT AND DEFECT CORRE CTION AND LIABILITY PERIOD, THEN SUCH CONTRACTS CANNOT BE CAL LED AS SIMPLE 8 ITA NO. 1875/HYD/2011 M/S. MAYTAS-NCC (JV) ================= WORKS CONTRACT, TO DENY THE DEDUCTION UNDER SECTION 80IA. THE CONTRACTS WHICH CONTAIN ABOVE FEATURES TO BE SEGREG ATED HAVE TO BE GRANTED DEDUCTION UNDER SECTION 80IA AND THE OTHER AGREEMENTS WHICH ARE PURE WORKS CONTRACTS HIT BY TH E EXPLANATION TO SECTION 80IA(13) ARE NOT ENTITLED FO R DEDUCTION UNDER SECTION 80IA. THE PROFIT FROM THE CONTRACTS WHICH INVOLVE DESIGN, DEVELOPMENT, OPERATING & MAINTENANC E, FINANCIAL INVOLVEMENT AND DEFECT CORRECTION AND LIA BILITY PERIOD IS TO BE COMPUTED BY THE ASSESSING OFFICER ON PRO R ATA BASIS OF TURNOVER. THE ASSESSING OFFICER IS DIRECTED TO EXA MINE THE RECORDS, ACCORDINGLY, AND GRANT DEDUCTION ON ELIGIB LE TURNOVER. 4. IN THE CASE OF KMC CONSTRUCTION LTD. V. ACIT, 51 S OT 214 (HYD) (URO) WHEREIN THE TRIBUNAL HAS TAKEN THE SAME VIEW . 5. IN THE CASE OF SUSHEE HI-TECH CONSTRUCTIONS PVT. LT D. VS. DCIT, IN ITA NOS. 269 & 1165/HYD/2009 AND ITA NO. 1171/HYD/2 010 DATED 16 TH MARCH, 2012 WHEREIN THE TRIBUNAL HELD AS FOLLOWS: THE ASSESSEE SHOULD NOT BE DENIED THE DEDUCTION UNDER SECTION 80IA OF THE ACT AS THE CONTRACTS INVOLVES, DEVELOPM ENT, OPERATING, MAINTENANCE, FINANCIAL INVOLVEMENT, AND DEFECT COR RECTION AND LIABILITY PERIOD, THEN SUCH CONTRACTS CANNOT BE CAL LED AS SIMPLE WORKS CONTRACT. IN OUR OPINION THE CONTRACTS WHICH CONTA IN ABOVE FEATURES TO BE SEGREGATED AND ON THIS DEDUCTION U/S. 80-IA HAS TO BE GRANTED AND THE OTHER AGREEMENTS WHICH ARE PURE WORKS CONTR ACTS HIT BY THE EXPLANATION SECTION 80IA(13), THOSE WORK ARE NOT EN TITLE FOR DEDUCTION U/S 80IA OF THE ACT. THE PROFIT FROM SUCH CONTRACTS WHICH INVOLVES DEVELOPMENT, OPERATING, MAINTENANCE, FINAN CIAL INVOLVEMENT, AND DEFECT CORRECTION AND LIABILITY PE RIOD IS TO BE COMPUTED BY ASSESSING OFFICER ON PRO-RATA BASIS OF TURNOVER. THE ASSESSING OFFICER IS DIRECTED TO EXAMINE AND GRANT DEDUCTION ON ELIGIBLE TURNOVER AS DIRECTED ABOVE. 26. IN VIEW OF THE ABOVE ORDERS OF THE TRIBUNAL ON SIMILAR ISSUE RELATING TO DEDUCTION U/S. SECTION 80-IA(4), WE ARE INCLINED TO REMIT THE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER TO DECIDE THE ISSUE IN THE LIGHT OF THE ABOVE ORDER.' 6. FURTHER THE SAME ISSUE CAME FOR CONSIDERATION IN TH E CASE OF BHOORATNAM CONSTRUCTION CO. PVT. LTD. IN ITA NOS. 2 70 & 271/HYD/ 2011. THE TRIBUNAL VIDE ORDER DATED 7.9.2012 HELD AS FOLLOWS: '8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATERIAL ON RECORD. IN OUR OPINION, AS SEEN FROM THE FACTS OF THE CASE, THE ASSESSEE HAS NOT PRODUCED COPIES OF TENDER/CONTRACT EXECUTED BY IT BEFORE THE LOWER AUTHORITIES. BEFORE US THE ASSESS EE FILED CERTAIN 9 ITA NO. 1875/HYD/2011 M/S. MAYTAS-NCC (JV) ================= COPIES OF TENDERS SUGGESTING NATURE OF ACTIVITY CAR RIED ON BY THE ASSESSEE AND ARGUED THAT THE ISSUE IS ALREADY DECID ED BY THIS TRIBUNAL IN FAVOUR OF THE ASSESSEE BY VARIOUS DECIS IONS CITED SUPRA. HOWEVER, AT THIS STAGE WE ARE NOT IN A POSITION TO EXPRESS ANY OPINION ON THE NATURE OF ACTIVITIES CARRIED ON BY T HE ASSESSEE. THE LOWER AUTHORITIES HAD NO OCCASION TO EXAMINE THE NA TURE OF ACTIVITIES CARRIED ON BY THE ASSESSEE. BEING SO, IN OUR OPINI ON, IT IS APPROPRIATE TO REMIT THE ISSUE BACK TO THE FILE OF ASSESSING OFFICER FOR FRESH CONSIDERATION. WHILE DOING SO, THE ASSESSING OFFICER HAS TO SEE WHETHER THE ASSESSEE CARRIED ON CONTRACT FOR SALE O R CONTRACT FOR WORK AND THE APPLICABILITY OF EXPLANATION BELOW SEC TION 80IA(13) OF THE ACT. THE ASSESSING OFFICER IS DIRECTED TO EXAM INE THE TERMS OF CONTRACT INCLUDING THE NATURE OF OBLIGATION TO BE D ISCHARGED BY THE ASSESSEE WHILE EXECUTING THE CONTRACT. FOR CLAIMIN G DEDUCTION U/S. 80IA(4) THE ASSESSEE SHALL SATISFY THE TWO CONDITIO NS VIZ., INVESTMENT IN ELIGIBLE PROJECTS AND (2) EXECUTION OF PROJECT B Y ITSELF. IF THE ASSESSEE SATISFIES THE ABOVE CONDITIONS AND THE ABO VE EXPLANATION IF NOT APPLICABLE THEN ONLY THE ASSESSEE IS ENTITLED F OR DEDUCTION U/S. 80IA(4) OF THE ACT. WITH THIS OBSERVATION, WE REMI T THE ENTIRE ISSUE BACK TO THE FILE OF THE ASSESSING OFFICER FOR FRESH CONSIDERATION AND TO DECIDE IN ACCORDANCE WITH LAW.' 7. IN VIEW OF THE ABOVE ORDER OF THE TRIBUNAL, WE ARE INCLINED TO REMIT THE ISSUE BACK TO THE FILE OF THE ASSESSING O FFICER WITH A DIRECTION TO EXAMINE THE ISSUE AFRESH AND TO SEE WHETHER THE ASSESSEE CARRIED ON THE DEVELOPMENT OF INFRASTRUCTURE FACILITIES CUMULA TIVELY WITH THE ACTIVITIES OF DESIGN, DEVELOPMENT, OPERATION, MAINT ENANCE, FINANCIAL INVOLVEMENT, DEFECT CORRECTION OF THE CONTRACT EXEC UTED BY THE ASSESSEE ITSELF. IN THE EVENT, THE ASSESSEE ITSELF CARRIED ON THE DEVELOPMENT OF INFRASTRUCTURE FACILITIES/CONTRACT ALONG WITH DESIG N, DEVELOPMENT, OPERATION, MAINTENANCE, FINANCIAL INVOLVEMENT, DEFE CT CORRECTION OF THE CONTRACT DURING THE WARRANTY PERIOD, THEN SUCH CONT RACT TO BE CONSIDERED AS A DEVELOPMENT OF INFRASTRUCTURE FACIL ITY EXECUTED BY THE ASSESSEE AND THEREBY ELIGIBLE FOR DEDUCTION U/S. 80 IA OF THE ACT. 8. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED FO R STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 31 ST OCTOBER, 2012. SD/ - (SAKTIJIT DEY) JUDICIAL MEMBER SD/ - (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED 31 ST OCTOBER, 2012 10 ITA NO. 1875/HYD/2011 M/S. MAYTAS-NCC (JV) ================= COPY FORWARDED TO: 1. M/S. MAYTAS - NCC (JV), C/O. SRI SAMUEL NAGADESI, CHARTERED ACCOUNTANT, 408, SRI RAMAKRISHNA TOWERS, AMEERPET, HYDERABAD-500 073. 2. THE ADDL. COMMISSIONER OF INCOME - TAX, RANGE - 6, 7 TH FLOOR, I.T. TOWERS, MASAB TANK, HYDERABAD-500 028. 3. THE CIT(A) - I V, HYDERABAD. 4 . THE CIT - III , HYDERABAD. 5 . THE DR A BENCH, ITAT, HYDERABAD TPRAO