Dy. Commissioner of Income Tax , Central Circle-2(1), Hyderabad V. KNR Constructions Limited, Hyderabad

ITA 190/Hyd/2018

• Counselvise Citation: [2021] 108 COUNSELVISE.COM (IT) 5606 (ITAT-HYDERABAD)
• Duration Of Justice: 3 year(s) 2 month(s) 24 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 23-04-2021
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB-A
• Next Hearing Date: 04-02-2021
• Assessment Year: 2013-2014
• Appeal Filed On: 29-01-2018
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: NIVEDITA BISWAS; SUNIL KUMAR PANDEY D RS
• Assessee Lawyers: S RAMA RAO
• Keywords: Question of law
• Section: 143(3); 80IA; 201; 191; 6

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD. BEFORE SHRI S.S. GODARA, JUDICIAL MEMBER AND SHRI LAXMI PRASAD SAHU, ACCOUNTANT MEMBER (THROUGH VIRTUAL HEARING) ITA NO S . 190 & 191 /HYD/2018 (ASSESSMENT YEAR S : 201 3 - 14 & 2014 - 15 ) DY. COMMISSIONER OF INCOME TAX, CENTRAL CIRCLE 2(1), HYDERABAD. VS. M/S. KNR CONSTRUCTIONS LIMITED, PLOT NOS.113 & 114, PHASE I, KNR HOUSE, KAVURI HILLS, HYDERABAD. PAN AAACK 8316L APPELLANT RESPONDENT APPELLANT BY : SMT. NIVEDITA BISWAS & SHRI SUNIL KUMAR PANDEY (D.RS) RESPONDENT BY : SHRI S. RAMA RAO. DATE OF HEARING : 24.02. 2021. DATE OF PRONOUNCEMENT : 23.04 .2021. O R D E R PER SHRI S.S. GODARA, J.M. : TH E S E REVENUE S APPEAL S FOR ASST. YEAR S 2013 - 14 & 2014 - 15 ARISE FROM THE COMMISSIONER OF INCOME TAX (APPEALS) - 12, HYDERABAD S ORDER BOTH DT. 2 0. 11 .201 7 , PASSED IN THE CASE NO S . 0011 & 0015 /2016 - 17 IN THE PROCEEDINGS UNDER SECTION 143(3) OF INCOME TAX ACT, 1961 (THE ACT) ; RESPECT IVELY . HEARD BOTH THE PARTIES . C ASE FILE S PERUSED. 2 ITA NO S . 190 & 191/HYD/2018 2. THE R EVENUES IDENTICAL SOLE GRIEVANCE IN BOTH THESE APPEALS CHALLENGES CORRECTNESS OF THE CIT(APPEALS) LOWER APPELLATE ORDER REVERSING THE ASSESSING OFFICERS ACTION DISALLOWING THE ASSESSEE'S SEC . 80IA DEDUCTION CLAIM IS OF RS.160,09,903 AND RS.6,75,11,310; ASSESSMENT YEAR WISE , RESPECTIVELY BY PLEADING THE FOLLOWING SUBSTANTIVE GROUNDS : 1) WHETHER ON THE FACTS AND CIRCUM STANCES OF THE CASE, AND IN LAW, THE LD. CIT(A) ERRED IN A HOLDING THAT THE PROVISION OF DEDUCTION U/ S 80IA(4) IS APPLICABLE TO CONSTITUENT OF THE JVI CONSORTIA WITHOUT APPRECIATING THAT THE ASSESSEE HAS NOT ENTERED INTO AN AGREEMENT WITH THE CENTRAL GOVE RNMENT OR A STATE GOVERNMENT OR A LOCAL AUTHORITY OR ANY OTHER STATUTORY BODY. 2) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD. CIT(A) ERRED IN NOT APPRECIATING THAT THE ASSESSEE HEREIN IS NOT A DEVELOPER BUT MERELY A CONTRACTOR IN RESPECT OF THE PROJECT NOT DIRECTLY AWARDED TO IT? 3) WHETHER ON THE FACTS AND CIRCUMSTANCES OF THE CASE, AND IN LAW, THE LD. CIT(A) ERRED IN NOT APPRECIATING THAT THE FACTS OF THE CASE ARE NOT IN CONFORMITY WITH CLARIFICATORY AMENDMENT TO SECTION 80 IA OF IT ACT (EXPLANATION 2 TO SECTION 80 LA VIDE FINANCE ACT 2007) WHICH WAS INTRODUCED TO UNAMBIGUOUSLY EXPLAIN THAT ONLY THOSE ENTERPRISES THAT HAVE ENTERED DEVELOPMENT AGREEMENT WITH CENTRAL OR STATE OR LOCAL AUTHORITIES AND INVEST THEIR OWN FUNDS TO D EVELOP SUCH FACILITIES WILL ONLY BE ELIGIBLE FOR BENEFIT OF DEDUCTION. 4) THE APPELLANT CRAVES LEAVE TO AMEND OR ALTER ANY GROUND OR ADD ANY OTHER GROUNDS WHICH MAY BE NECESSARY. 3 ITA NO S . 190 & 191/HYD/2018 3. BOTH THE LEARNED REPRESENTATIVES TOOK US TO CIT(APPEALS) IDENTICAL LOWER APPELLATE DETAILED DISCUSSION DEALING THE IMPUGNED 80IA DISALLOWANCE AS UNDE R: 5.0 DISALLOWANCE OF DEDUCTION U!S.80 I A(4), ON THE PROFITS RELATED TO JVS RS, 1,60,09 ,903/ - : 5.1 DURING THE COURSE OF THE ASSESSMENT PROCEEDINGS, THE A O LOOKED INTO THE DETAILED ACTIVITY OF THE ASSESSEE COMPANY AND EXAMINED THE CLAIM OF DEDUCTION MADE U/S. 80 IA(4) OF I.T.ACT. FOR THE PURPOSE, THE A O CALLED FOR THE DETAILS OF PROJECTS/WORKS CARRIED OUT BY THE ASSESSEE DURING THE YEAR, INCLUDING THE PROJECT S THAT ARE ELIGIBLE FOR THE DEDUCTION U/S.80IA(4). THE A O EXAMINED THE AGREEMENT COPIES FOR EACH PROJECT, IN LIGHT OF THE CONDITIONS LAID DOWN BY THE PROVISIONS OF SEC. 80 IA(4) AND THE OBSERVATIONS MADE BY VARIOUS JUDICIAL AUTHORITIES, INCLUDING THE DECISI ON OF HON'BLE ITAT, HYDERABAD IN THE CASE OF M/S.SUSHEE HITECH CONSTRUCTIONS & M/S.RAMKY INFRASTRUCTURE LTD, ETC., WHEREIN, THE CRITERIA ENUMERATED FOR CLAIMING DEDUCTION U/S.80IA(4) OF I.T.ACT ARE AS UNDER : A. THE PROJECT AGREEMENT HAS TO BE ENTERED WITH EITHER A DEPARTMENT OR A STATUTORY BODY. B. THE SCOPE OF THE CONTRACT SHOULD BE FOR EITHER DEVELOPMENT OR OPERATION & M AINTENANCE OR BOTH IN RESPECT OF AN INFRASTRUCTURE FACILITY. C. THE CONTRACTOR SHOULD BE LIABLE FOR ANY DEFECTS ARISING IN THE CA SE OF THE PROJECT FOR A SPECIFIC. D. THE CONTRACTOR HAS TO BEAR ALL THE RISKS INVOLVED WITH THE PROJECT. E. THE PROJECT WORK SHOULD BE CARRIED ON BY THE CONTRACTOR WITHOUT HINDRANCE TO THE NORMAL PUBLIC ACTIVITY. THE ASSESSEE SHALL FACILITATE THE PEOPL E 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 OF THE ASSESSEE. F. MATERIAL IS NOT SUPPLIED BY THE GOVERNMENT. THE ASSESSEE ITSELF HA S TO INCUR THE EXPENDITURE FOR PURCHASE OF MATERIALS REQUIRED TO EXECUTION OF THE PROJECT. G. THE ASSESSEE IS RESPONSIBLE FOR DOING ALL THE ACTS TILL THE INFRASTRUCTURE FACILITY IS HANDED OVER BACK TO THE GOVERNMENT. H. THE AGREEMENT SHOULD NOT BE FOR A SPECIFIC WORK. IT SHOULD BE FOR DEVELOPMENT OF FACILITY AS A WHOLE. 4 ITA NO S . 190 & 191/HYD/2018 I. THEREAFTER, THE ASSESSEE HAS TO UNDERTAKE MAINTENANCE OF THE SAID INFRASTRUCTURE F O R A PERIOD OF 12 TO 24 MONTHS. J. THE ASSESSEE IS FREE TO RAISE LOANS FROM OUTSIDERS OR EXECUTION OF PROJECT AS THERE ARE NO PROVISIONS IN THE SEC 8 OIA RESTRICTING THE SAME. 5.1.1 BASED ON THE EXAMINATION OF THE APPLICABILITY OF THE SAID CONDITIONS, THE NUMBER OF SUCH ELIGIBLE PROJECTS FOR THE YEAR UNDER REFERENCE WERE IDENTIFIED TO BE 9 PROJECTS , THE NET PROFITS OF WHICH WERE WORKED OUT AT RS.22,29,91,198/ - , WHICH WAS TALLYING WITH THE AMOUNTS CLAIMED AS DEDUCTION U/S.80IA(4) BY THE ASSESSEE. HOWEVER, IT WAS NOTICED AND OBSERVED BY THE AO, THAT OUT OF THE ABOVE, IN A FEW OF THE PROJECTS, THE WORK S WERE AWARDED TO JOINT VENTURES/CONSORTIA, WHEREIN THE ASSESSEE COMPANY IS ONE OF THE CONSTITUENT MEMBERS, WHEREBY THE WORKS ARE CARRIED OUT BY ASSESSEE - COMPANY, IN PROPORTION TO ITS SHARE IN THE JV/CONSORTIUM AGREEMENT. BASED ON THE SAID FACTS, THE AO OB SERVED THAT DEDUCTION U/S.80IA(4) IS AVAILABLE ONLY TO THE ENTERPRISE WHICH ENTERS INTO AN AGREEMENT WITH GOVERNMENT/STATUTORY BODY. IN THE CASES OF JOINT VENTURES, THE AGREEMENTS HAVE BEEN ENTERED BY JOINT VENTURES/CONSORTIA, AS SUCH THE JVS ARE ELIGIBLE TO CLAIM DEDUCTION, WHEREAS IN THE PRESENT CASE, THE ASSESSEE COMPANY BEING A CONSTITUENT OF CONSORTIUM HAD CLAIMED DEDUCTION, WHICH, AS PER THE AO, WAS IN VIOLATION OF SECTION 80IA(4). ON THIS ISSUE, THE ASSESSEE COMPANY WAS ASKED TO EXPLAIN 'AS TO WHY TH E DEDUCTION CLAIMED ON AMOUNTS RELATABLE TO PROFITS EARNED BY PROJECTS AWARDED TO JVS/CONSORTIA, SHOULD NOT BE DISALLOWED, FOR WHICH THE APPELLANT FURNISHED A REPLY, STATING THAT ALTHOUGH THE CONTRACTS WERE AWARDED TO JV /CONSORTIA, THE WORKS WERE ACTUALLY EXECUTED BY THE ASSESSEE COMPANY AS A CONSTITUENT, WHICH ARE PROPORTIONATE TO THEIR SHARE IN JV/CONSORTIA AND THE PROFITS FROM THESE PROJECTS WERE NEITHER FORMING PART OF TOTAL INCOME OF JV, NOR ANY DEDUCTIONS HAVE BEEN CLAIMED BY JVS/CONSORTIA. IN SUPPOR T OF THEIR CLAIM, THE ASSESSEE EXPLAINED THE ASSESSABILITY OF JV(AOPL AS TO THE FACT THAT A JOINT VENTURE IS ONLY A PASS THROUGH ENTRY AND IS NOMINAL IN ITS EXISTENCE, BY RELYING ON JUDICIAL DECISIONS. AS TO THE SPECIFIC ISSUE OF ELIGIBILITY OF CONSTITU ENT OF JV FOR DEDUCTIONS U/S.80IA(4), THE ASSESSEE COMPANY RELIED ON THE DECISION OF ITAT, VISAKHAPATNAM, IN THE CASE OF M/S.TRANSTROY (INDIA) LTD VS ITO (IN ITA NO.540 OF 2009), WHERE IN THE HON'BLE ITAT HAD HELD THAT FOR ALL PRACTICAL PURPOSES, THE WORKS AWARDED TO THE JVS/CONSORTIA ARE EXECUTED BY THE CONSTITUENTS, AS SUCH THE CONSTITUENTS ARE ELIGIBLE FOR DEDUCTION U/S.80IA(4). HOWEVER, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF DEDUCTION U/S.80IA{4} TO THE EXTENT OF RS.L,60,09,903/ - REPRESENTING THE PROFITS ATTRIBUTABLE TO THE PROJECTS AWARDED TO JVS/CONSORTIA. THE DISALLOWANCE WAS 5 ITA NO S . 190 & 191/HYD/2018 MADE ON THE GROUND THAT THE DECISION OF ITAT, VISAKHAPATNAM, AS RELIED UPON BY THE ASSESSEE, HAD NOT BEEN ACCEPTED BY THE DEPARTMENT. 5.2 THE APPELLANT HAS CONTESTED THE SAID DISALLOWANCE, AND IT HAS BEEN SUBMITTED THAT IN COURSE OF ASSESSMENT PROCEEDING, THE APPELLANT FILED COMPREHENSIVE EXPLANATION ABOUT THE ELIGIBILITY OF ITS CLAIM BASING ON VARIOUS FACETS OF THE WORK EXECUTED BY IT SO AS TO ENTITLE IT FOR THE DEDU CTION UNDER SECTION 80 I A(4 ) , WHICH ARE ALSO DULY SUPPORTED BY VARIOUS PRINCIPLES EVOLVED BY DECISIONS OF COURTS. THE SALIENT ASPECTS OF THE APPELLANT'S SUBMISSIONS RUN AS UNDER: '1.2 IN THE ASSESSMENT ORDER U/ S. 143(3L THE AO ALLOWED DEDUCTION U/S.80IA( 4) TO THE EXTENT OF RS. 20,69,81,295/ - RELATING TO 7 PROJECTS AS SHOWN IN THE 'FIRST TABLE IN PAGE NO. 9 OF THE ASSESSMENT ORDER AND DISALLOWED THE DEDUCTION OF RS. 1,60,09,903/ - RELATING TO 2 PROJECTS AS SHOWN IN THE SECOND TABLE IN THE SAME PAGE, BY OBSE RVING THAT, THIS DEDUCTION OF RS. 1,60,09,903/PERTAINS TO PROFIT RELATING TO THE SHARE OF THE ASSESSEE'S TURNOVER OF THE WORK OF THE JOINT VENTURE (JV), IN WHICH THE ASSESSEE IS A CONSTITUENT MEMBER AND AS PER PROVISIONS OF SECTION 80 - IA, ONLY THE ENTERPRI SE WHICH ENTERS INTO AN AGREEMENT WITH THE GOVT. OR STATUTORY BODY IS ELIGIBLE FOR DEDUCTION U/S. 80 - IA AND IN THE INSTANT CASE THE AGREEMENT WAS ENTERED INTO BY THE JOINT VENTURE WHEREAS THE DEDUCTION U/S. 80 - IA WAS CLAIMED BY ITS CONSTITUENT MEMBER WHICH IS IN CONTRAVENTION OF THE PROVISION OF THE SECTION 80 - IA. 2.0 INVALID ADDITION THE ABOVE ADDITION OF RS. 1,60,09,903/ - TO THE RETURNED INCOME ON ACCOUNT OF DISALLOWANCE OF CLAIM U/S. 80 - IA IS INVALID FOR THE FOLLOWING REASONS. 2.1 IT IS AN ADMITTED FACT WHICH IS EVIDENT FROM THE ASSESSMENT ORDER ITSELF THAT, THE ASSESSEE HAS FURN ISHED ALL THE INFORMATION REQUIRED TO SUBSTANTIATE THE CLAIM OF THE ASSESSEE FOR DEDUCTION U/ S. 80 - IA(4) FOR AN AMOUNT OF RS. 22,29,91,198/ - . THIS INFORMATION FILED BY THE ASSESSEE WAS PUT IN THE FORM OF TWO TABLES IN PAGE NO. 9 OF THE ASSESSMENT ORDER IT SELF. BENEATH THE FIRST TABLE, THE AD MADE THE FOLLOWING OBSERVATIONS. 6 ITA NO S . 190 & 191/HYD/2018 'LN ADDITION TO THE ABOVE PROJECTS, THE ASSESSEE A/SO EXECUTED THE FOLLOWING PROJECTS WHEREIN, EXCEPT FOR THE SPECIFIC DISCREPANCIES NOTICED IN SUBSEQUENT PARAS, THE OTHER CRITERIA ARE SATISFIED'. 2.2 BENEATH THE SECOND TABLE, THE A O OBSERVED THAT, 'ON VERIFICATION OF THE AGREEMENT IN RESPECT OF THE ABOVE TWO PROJECTS, IT IS SEEN THAT THE PROJECTS WERE, IN FACT, AWARDED TO JVS AND CONSORTIUMS, WHEREIN ASSESSEE WAS ONE OF THE CONSTI TUENT MEMBERS AND THE WORKS WERE CARRIED OUT BY THE ASSESSEE IN PROPORTION TO ITS SHARE AS PER THE JV I CONSORTIUM AGREEMENT. HOWEVER, AS PER THE PROVISIONS OF THE SECTION 80 - 1A, ONLY THE ENTERPRISE WHICH ENTERS INTO AN AGREEMENT WITH THE GOVT. OR STATUTOR Y BODY IS ELIGIBLE FOR DEDUCTION VI S. 80 - I A. IN THE CASE OF JV 'CONSORTIUM, THE AGREEMENT WAS ENTERED INTO BY THE JV, WHEREAS THE DEDUCTION U/ S. 8 O - IA WAS CLAIMED BY ITS CONSTITUENT MEMBER, WHICH IS IN VIOLATION TO THE PROVISIONS O F THE SECTION 80 - LA. IN THIS REGARD, THE ASSESSEE WAS ASKED TO FURNISH EXPLANATION AS TO WHY THE DEDUCTION U/S.8 O - IA IN RESPECT OF THE PROJECTS AWARDED TO JVS, SHOULD NOT BE DISALLOWED. IN RESPONSE THERETO THE ASSESSEE VIDE ITS WRITTEN SUBMISSIONS STATED A S UNDER'. 2.3 THE ABOVE QUERY OF THE A O RAISED A QUESTION OF LAW, WHETHER THE CONSTITUENT JV PARTNER CAN CLAIM DEDUCTION U/ S. 80 - IA(4) IN RESPECT OF PROFITS FROM THE WORK TAKEN FROM THE JV, WHEN THE ASSESSEE DID NOT DIRECTLY ENTER INTO AGREEMENT WITH GO VT. THE ASSESSEE SUBMITTED A DETAILED WRITTEN SUBMISSION ALONG WITH DECISIONS OF VARIOUS TRIBUNALS AND HIGH COURTS IN FAVOUR OF THE ASSESSEE ON THE ALLOWABILITY OF DEDUCTION U/ S. 80 - IA(4) IN RESPECT OF PROJECTS OF JV EXECUTED BY THE ASSESSEE, WHICH IS SEL F EXPLANATORY FROM PARA NO. 1 TO 4 ON PAGE NO. 10 TO 11 OF THE ASSESSMENT ORDER'. 5.2.1 IT WAS FURTHER SUBMITTED BY THE APPELLANT THAT THE ABOVE ASPECTS WERE CONSIDERED BY THE ASSESSING OFFICER AND THERE IS NO DISPUTE THAT THE APPELLANT ACTED AS A DEVELOP ER. IT WAS EXPLAINED THAT IF ALL THE ASPECTS ARE EVALUATED, THE APPELLANT IS COMPLIANT TO ALL THESE ASPECTS TO CLAIM DEDUCTION AND THEY WERE ALSO FOUND TO BE IN ORDER BY THE ASSESSING OFFICER. IT WAS ALSO SUBMITTED THAT THE ASSESSING OFFICER, AFTER CAREFUL EXAMINATION OF APPELLANT'S SUBMISSION WITH REFERENCE TO BOOKS OF ACCOUNT, SCOPE OF WORK AS REFLECTED IN THE CONTRACT DOCUMENTS VIS - A - VIS THE 7 ITA NO S . 190 & 191/HYD/2018 CONDITIONS LAID DOWN IN THE ACT AND ABOVE FACTORS, ACCEPTED THE CLAIM OF ELIGIBILITY OF THE APPELLANT. HOWEVER/ WH ILE ACCEPTING THE ELIGIBILITY AS PER THE STATUTORY NORMS/ THE ASSESSING OFFICER DENIED THE CLAIM IN RESPECT OF SOME WORKS, WHICH H A D BEEN EXECUTED BY THE APPELLANT AS A JV CONSTITUENT BUT NOT DIRECTLY. IN OTHER WORDS, A O WAS OF THE VIEW THAT ONLY DIRECT C ONTRACT WORK UNDERTAKEN BY ON ENTITY FROM SPECIFIED AUTHORITIES IS ELIGIBLE FOR DEDUCTION SUBJECT TO FULFILLMENT OF THE CONDITIONS, BUT NOT THE WORK EXECUTED AS THE CONSTITUENT OF JV/CONSORTIUM . THIS RESULTED IN REFUSAL OF THE CLAIM TO THE TUNE OF RS.L,60, 09,903/ - . 5.2.2 AS REGARDS THE ASSESSABILIT Y OF J V/AO P , IT WAS SUBMITTED THAT PLETHORA OF DECISIONS WERE FURNISHED BEFORE THE AO TO SUBSTANTIATE THAT IV IS ONLY A PASS THROUGH ENTITY AND IS NOMINAL IN EXISTENCE. THE ASSESSEE RELIED ON THE DECISION OF VI Z A G BENCH OF ITAT ON SIMILAR FACTS IN THE CASE OF M/S. TRANSTROY INDIA V ITO (ITA NO.S . 40 OF 2009) TO THE EFFECT THAT A CONSTITUENT IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80 IA(4) . IT WAS SUBMITTED THAT THE SAID DECISION BEING THAT OF JURISDICTIONAL ITAT I S BINDING ON THE AO. 5.3 I HAVE CAREFULLY PERUSED THE SUBMISSIONS OF THE APPELLANT AS WELL AS THE ORDER OF THE ASSESSING OFFICER. AS COULD BE SEEN FROM THE FACTS/INFORMATION BROUGHT ON RECORD, THE ASSESSEE COMPANY IS ENGAGED IN INFRASTRUCTURAL ACTIV ITY OF VARIO US KIND, AS ENUMERATED IN THIS ORDER AND AMONG THE WORKS THE COMPANY WAS AWARDED, SOME ARE SHOWN TO BE AWARDED DIRECTLY AS A MAIN CONTRACTOR/BUILDER, WHILE SOME WERE AWARDED TO J VS/CONSORTIA, BUT EXECUTED BY ASSESSEE COMPANY AS CONSTITUENT OF THE SAID J V, IN PROPORTION TO THEIR SHARE. ON THESE LINES, THE ASSESSEE CLAIMED DEDUCTION OF RS.22,29,91,198/ - U/S.80IA(4), STATING TO REPRESENT THE PROFITS FROM THE ELIGIBLE PROJECTS FOR THE YEAR UNDER REFERENCE. THE AO EXAMINED THESE PROJECTS AS REGARD T O THEIR ELIGIBILITY FOR DEDUCTION 80 IA(4) , WITH REFERENCE TO THE CONDITIONS AS STIPULATED IN PROVISIONS OF SECTION 80 IA(4) AND THE OBSERVATIONS OF JUDICIAL DECISIONS. THOUGH SATISFIED WITH THE ELIGIBILITY OF PROFITS OF 7 OF SUCH PROJECTS REPRESENTING PRO FITS OF RS.20.69 CRORES, FOR THE YEAR UNDER REFERENCE, THE AO RESTRICTED THE BENEFIT OF DEDUCTION U/S. 80 IA(4) , TO THE PROFITS RELATED TO DIRECT PROJECTS. TH US , THE AO DISALLOWED THE DEDUCTION CLAIMED ON PROFITS OF RS.L,60,09,903/ - , ON THE GROUND THAT THE SAID AMOUNTS REPRESENT THE PROFIT S ATTRIBUTABLE TO TWO PROJECTS/WORK AWARDED TO JVS, WHERE THE ASSESSEE CONSTITUENT AND THE CLAIM OF DEDUCTION ON SUCH PROFITS IS VIOLATION OF PROVISIONS 0: 80IA(4}, AS 8 ITA NO S . 190 & 191/HYD/2018 THE CONTRACTS HAVE BEEN AWARDED BY GOVT'/STATUTORY AU THORITIES ONLY TO SUCH JOINT VENTURES/CONSORTIA. IN THIS REGARD, THE AD DISREGARDED THE SUBMISSIONS O F THE ASSESSEE, THAT THE PROFITS SO EARNED BY ASSESSEE COMPANY THROUGH JVS/CONSORTIA NEITHER FORMED PART OF TOTAL INCOME OF JVS NOR ANY DEDUCTIONS U/S.80IA (4) WERE CLAIMED BY JV S, ON SUCH INCOMES. THE RELIANCE OF THE ASSESSEE ON THE DECISION OF ITAT, VISAKHAPATNAM IN CASE OF M/S.TRANSTROY INDIA LTD VS LT O (SUPRA), AS REGARD TO ALLOWANCE OF DEDUCTION U/S.80IA(4) ON THE PROFITS OF JVS AND ASSESSABILITY TO TAX, WAS NOT ACCEPTED BY THE A O , ON THE GROUND THAT THE DECISION OF HON'BLE ITAT WAS NOT ACCEPTED BY THE DEPARTMENT. 5.3.1 THE APPELLANT'S OBJECTION ON THIS ISSUE IS THAT THE AD HAS NOT DISPUTED THE ELIGIBILITY OF PROFITS FOR DEDUCTION U/S.80IA(4), AS CL AIMED BY THE ASSESSEE, AND THE ISSUE ON ASSESSABILITY OF INCOMES OF JV OR ITS CONSTITUENTS, HAS ALREADY BEEN SETTLED BY JUDICIAL DECISIONS. THE FURTHER OBJECTION OF THE APPELLANT TO THE DECISION OF THE AD FOR NOT ALLOWING DEDUCTION U/S.80IA(4), ON THE GROU ND OF DECISION OF ITAT NOT HAVING BEEN ACCEPTED BY DEPARTMENT, IS THAT THIS IS NOT ON ANY LEGAL BASIS. IT IS ALSO CONTENDED BY THE APPELLANT THAT A O DID NOT DISTINGUISH OR DISPUTE THE FACTS AS UPHELD BY ITAT VISAKHAPATNAM, WHICH HAS BEEN FURTHER SUPPORTED BY THE DECISION OF ITAT, LUCKNOW, IN THE CASE OF PNC CONSTRUCTIONS CO PVT LTD VS DCLT (37 TAXMANN.COM 361), AND FURTHER UPHELD BY ALLAHABAD HIGH COURT (55 TAXMANN.COM 21). IT WAS ALSO RIGHTLY CONTENDED BY THE ASSESSEE/APPELLANT THAT A O PREFERRED NOT TO ALL OW DEDUCTION MERELY BECAUSE THE ORDER OF ITAT, VISHAKHAPATNAM BENCH, WAS NOT ACCEPTED BY THE DEPARTMENT, AND A FURTHER APPEAL WAS PREFERRED BEFORE HIGH COURT. AS REGARD TO THE BINDING NATURE OF DECISION OF ITAT, THE APPELLANT FILED COMPREHENSIVE EXPLANATIO NS BEFORE THE AD. APPELLANT ALSO FILED ITS SUBMISSION DRAWING ATTENTION OF THE AD THAT THE DECISION OF ITAT IS BINDING ON LOWER AUTHORITIES AS PER JUDICIAL PRECEDENTS LAID DOWN BY APEX COURT, VARIOUS HIGH COURTS AND TRIBUNALS. IT WAS POINTED OUT THAT TILL AN ORDER OF I TAT IS STAYED OR REVERSED AT APPROPRIATE JUDICIAL FORUM, THE SAME IS BINDING. IT WAS FURTHER CONTENDED THAT WHILE NOT DISPUTING THE SUBMISSION ON THE ISSUE OF BINDING PRECEDENT OF THE ORDER OF THE TRIBUNAL AS ALSO THE MERITS OF APPELLANT'S CL AIM AS TO ITS ELIGIBILITY, THE AO DID NOT ALLOW THE DEDUCTION FOR THE REASON THAT AN APPEAL HAS BEEN PREFERRED AGAINST THE ORDER OF THE I TAT. THERE IS NO FURTHER DISCUSSION ON MERIT / ELIGIBILITY. TURNING TO THE FACTS OF THE PRESENT CASE, THE AO, HAVING EXAMINED THE NATURE OF INCOME THAT ARE ATTRIBUTABLE TO THE PROJECTS AWARDED TO JVS BUT EXECUTED BY THE ASSESSEE, AS CONSTITUENT, WORKED OUT THE AMOUNT OF PROFIT ATTRIBUTABLE TO SUCH PR OJECTS AT 9 ITA NO S . 190 & 191/HYD/2018 RS.L,60,09,903! - . CLAIM OF DEDUCTION U / S. 80 IA(4) TO THIS EXTENT WAS HELD TO BE NOT ALLOWABLE AS DEDUCTION IN THE HANDS OF THE CONSTITUENT, WHICH IS CONTRARY TO THE DECISION GIVEN BY HON'BLE I TAT, VISAK H APATNAM IN THE CASE OF M/S.TRANSTROY INDI A LTD VS ITO (SUPRA). AS PER THE SAID DECISION, THE ASSESSEE, BEING THE CONSTITUENT OF THE JVS / CONSORTIA, HAVING EXECUTED THE CONTRACTS, WAS C LEARLY HELD TO BE JUSTIFIED IN CLAIMING THE DEDUCTION U!S.80IA(4). THUS, THE FACTS OF THE PRESENT CASE, BEING AK IN TO THE FACTS OF CASE IN M / S.TRANSTROY INDIA LTD., THE ASSESSEE IS CONSIDERED ELIGIBLE FOR DEDUCTION U!S. 80 IA(4) ON PROFITS ATTRIBUTABLE TO THE PROJECTS EXECUTED AS A CONSTITUENT AS WELL, WHICH IS TO THE TUNE OF RS.L.60 CRORES. 5.3.2 ON THE ISSUE OF BINDING NATURE OF ITAT DECISION, THE CASE LAWS IN THE FOLLOWING CASES SUPPORT THE CAUSE AND STAND OF THE ASSESSEE. (I) UNION OF INDIA VS KAMALAKSHI FINANCE COR WHERE IN THE HON'BLE APEX COURT HELD THAT 'THE MERE FACT THAT THE ORDER OF THE APPELLATE AUTH ORITY 'IS NOT ACCEPTABLE' TO THE DEP A RTMENT - IN I TSE L F IS AN OBJECTIONABLE PHR A SE - AND IS THE SUBJECT MATTER OF ON APPEAL, CAN FURNISH NO GROUND FOR NOT FOLLOWING IT , UNLESS IT'S OPERATION HAS BEEN SUSPENDED BY A COMPETENT COURT.' (II) CIT VS RAISON INDUST RIES LTD 158 TAXMAN 160 SC : WHERE IN THE HON'BLE APEX COURT HELD THAT 'WHEN ON ORDER IS PASSED BY A HIGHER AUTHORITY THE LOWER AUTHORITY IS BOUND THEREBY, KEEPING IN VIEW OF THE PRINCIPLES OF JUDICIAL DISCI PLINE. THIS VIEW WAS ALSO ENDORSED BY THE HON'BLE APEX COURT IN THE CASE OF BHOPAL SUGAR INDUSTRIES LTD VS ITO (AIR 1961 SC 182). (III) AGGARWAL WAREHOUSING & LEASING LTD VS CIT (257 ITR 235 (MP): WHERE IN THE HON'BLE HIGH COURT HAS HELD THAT 'NEEDLESS TO SAY, THAT THE ORDERS PASSED BY THE TRIBUNAL ARE BINDING ON ALL THE REVENUE AUTHORITIES FUNCTIONING UNDER THE JURISDICTION OF THE TRIBUNAL. 10 ITA NO S . 190 & 191/HYD/2018 ALL THE ABOVE DECISIONS UNANIMOUSLY HOLD THE VIEW THAT ORDERS OF ITAT ARE BINDING ON THE REVENUE AUTHORITIES UNDE R ITS JURISDICTION AND IN THIS CASE, THE DECISION OF THE ITAT, VISHAKAPATNAM, IS HELD TO BE BINDING ON THE A O UNDER REFERENCE, UNLESS THE SAID ORDER IS STAYED OR SUSPENDED BY A SUPERIOR COURT OR A DIFFERENT VIEW IS TAKEN BY THE ANOTHER TRIBUNAL IN THE SAID JURISDICTION. IN THIS CASE, IT WAS NOT THE CASE OF THE A O TO SHOW THAT THE DECISION OF I TAT, VISHAKAPATNAM, IN THE CASE OF TRANSTROY INDIA LTD (SUPRA), AS RELIED BY THE ASSESSEE, IS NOT BINDING ON HIM. APART FROM RELYING ON THE ORDER OF ITAT, VISAKHAPATN AM IN CASE OF TRANSTROY (INDIA) LTD, (SUPRA), WHOSE DECISION IS VERY MUCH BINDING ON THE A O , THE ASSESSEE MADE CITATION OF THE DECISION OF ITAT, AGRA, IN THE CASE OF PNC CONSTRUCTIONS CO. LTD VS OCIT REPORTED IN 144 ITO 577, WHERE THE ASSESSEE WAS CONSTITU ENT IN JV WITH M/S.NCC AND PROJECT AGREEMENTS WERE BETWEEN THE STATE GOVERNMENT AND JV /CONSORTIA, THE DEDUCTION CLAIMED BY ASSESSEE AS CONSTITUENT OF JV /CONSORTIA, WAS HELD TO BE ALLOWABLE. 5.3.3 THUS, BASED ON THE RATIO OF THE JUDICIAL DECISIONS CITED, IT IS REASONABLE TO HOLD THAT THE A O IS NOT JUSTIFIED IN DENYING THE DEDUCTION U/S.80IA(4) ON THE PROFITS OF JVS TO THE ASSESSEE, AS A CONSTITUENT OF THE SAID JVS, DISREGARDING THE DECISION OF ITAT, VISHAKAPATNAM, WHICH WAS NOT STAYED IN I TS OPERATION AND AS SUCH IS BINDING ON THE A O . IT IS NOT CORRECT ON THE PART OF THE A O TO NOT IMPLEMENT THE SAID ORDER, MERELY ON THE GROUND THAT SUCH DECISION WAS NOT ACCEPTED BY DEPARTMENT. FURTHER, THE ORDER OF ALLAHABAD HIGH COURT UPHELD THE ALLOWANCE OF CLAIM OF DEDUCTION U/S.80IA(4), ON THE PROFITS FROM THE JOINT VENTURES, IN THE HANDS OF THE CONSTITUENTS. THUS, ON SIMILARITY OF FACTS, THE A O IS DIRECTED TO ALLOW THE TOTAL AMOUNT OF RS.22,29,91,198/ - , CLAIMED AS DEDUCTION U/S.80IA(4) FOR THE YEAR, I NCLUDING THE DEDUCTION OF RS.L,60,09,903/ - , CLAIMED ON PROFITS OF JVS, AS A CONSTITUENT, AS CLAIMED IN RETURN OF INCOME. ACCORDINGLY, THIS GROUND OF APPEAL IS TREATED AS ALLOWED. 4. LEARNED CIT - DR VEHEMENTLY CONTENDED DURING THE COURSE OF HEARING THAT THE ASSESSING OFFICER HAS RIGHTLY DISALLOWED THE ASSESSEE'S CLAIM OF DEDUCTION ON THE GROUND THAT THE SAME IS NOT ELIGIBLE FOR AS PER THE PROVISIONS OF 11 ITA NO S . 190 & 191/HYD/2018 SECTION 80 - IA SINCE ONLY THE ENTERPRISE WHICH ENTERS THE CORRESPONDING AGREEMENT WITH THE GOVT./ S TATUTOR Y B ODY IS ELIGIBLE FOR THE IMPUGNED DEDUCTION . A ND ALSO THAT SECTION 80IA EXPLANATION ALSO APPLIES IN FACTS OF THE INSTANT CASE SINCE THE ASSESSEE IS ONLY A WORKS CONTRACTOR NOT ENTITLED THE IMPUGNED DEDUCTION. LEARNED AUTHORIZED REPRESENTATIVE VEHEMEN TLY SUPPORTED THE ORDERS OF CIT(A) S ABOVE FINDINGS. 5. WE HAVE GIVEN OUR THOUGHTFUL CONSIDERATION TO RIVAL PLEADINGS. COMING TO REVENUES FIRST AND FOREMOST ARGUMENT REGARDING CONS ORTIUMS AND JV S ENTITLEMENT TO CLAIM 80IA DEDUCTION RELIEF, WE MAKE IT CLEAR THAT THE T RIBUNALS CO - ORDINATE BENCH ORDER IN M/S. TRANST R OY INDIA LIMITED (SUPRA) HAS ALREADY DECIDED THE SAME ISSUE IN ASSESSEE'S FAVOUR AND AGAINST THE DEPARTMENT. NO CONTRARY JUDICIAL PREC EDEN T HAS BEEN QUOTED AT THE R EVENUES BEHEST TO REBUT THE SAME. WE THUS, UPHOLD THE CIT(APPEALS) FINDINGS QUA THIS FORMER GRIEVANCE CANVASSED FROM THE REVENUES SIDE. 6. NEXT COMES EQUALLY IMPORTANT ASPECT OF ASSESSEE'S STATUS AS A DEVELOPER OR A MERE WO RKS CONTRACTOR U/S. 80IA(4) AND 80IA E X PLANATION ; RESPECTIVELY. WE NOTE THAT THE ASSESSING OFFICER DETAILED DISCUSSION IN PAGE NO.9 OF THE ASSESSMENT ORDER HAS MADE IT CLEAR THAT THE ASSESSEE ITSELF SATISFIES ALL THE THREE COMPONENTS OF DEVELOPMENT, OPERA TION, AND MAINTENANCE THEREOF ALONG WITH FINANCIAL INVOLVEMENT AND RISK FACTOR INVOLVED IN THE CORRESPONDING INFRASTRUCTURE PROJECTS. THE R EVENUES ARGUMENT RAISED BEFORE US GOES CONTRARY TO THE ASSESSMENT FINDINGS THEREFORE. WE THUS ARE OF THE OPINION T HAT THERE IS N EITHER ANY IRREGULARITY 12 ITA NO S . 190 & 191/HYD/2018 NOR ILLEGALITY IN THE OR DER OF THE CIT(APPEALS) S IDENTICAL FINDINGS ALLOWING THE ASSESSEE'S SEC.80 - IA DEDUCTION CLAIM. BOTH TH E S E LOWER APPELLATE ORDERS ARE UPHELD THEREFORE . 7. THESE R EVENUES APPEALS ARE DISMISSED. A COPY OF THIS COMMON ORDER BE PLACED IN THE RESPECTIVE CASE FILES. ORDER PRONOUNCED IN THE OPEN COURT ON 23RD APRIL, 2021. SD / - SD/ - (LAXMI PRASAD SAHU) (S.S. GODARA) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DT. 23 .04 .2021. * REDDY GP COPY TO : 1. M/S. KNR CONSTRUCTIONS LIMITED, PLOT NOS.113 & 114, PHASE I, KNR HOUSE, KAVURI HILLS, HYDERABAD. 2. DCIT, CENTRAL CIRCLE 2(1), HYDERABAD. 3. PR. C I T (CENTRAL) , HYDERABAD. 4. CIT(APPEALS) - 12, HYDERABAD. 5. DR, ITAT, HYDERABAD. 6. GUARD FILE. BY ORDER SR. PVT. SECRETARY, ITAT, HYDERABAD.