M/S- SBEP-GRIL(Joint Venture), Jharsuguda V. Principal CIT, Sambalpur

ITA 194/CTK/2019

• Counselvise Citation: [2021] 104 COUNSELVISE.COM (IT) 5667 (ITAT-CUTTACK)
• Duration Of Justice: 2 year(s) 6 month(s) 4 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 22-12-2021
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: DB
• Assessment Year: 2014-2015
• Appeal Filed On: 17-06-2019
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Keywords: Revision of order; Transfer pricing; Business expenditure; Earning of tax free income; Retrospective amendment; Question of law; Fair market value; Assessment record; Commercial expediency; Rule 8D; Set aside
• Section: 147; 68; 263; 2; 143(3); 142(1); 14A; 194C; 80IA; 274; 264; 64; 113; 43; 2(A); 72; 13; 119; 22

Judgement Text

आयकर अपीऱीय अधिकरण, कटक न्यायपीठ, कटक IN THE INCOME TAX APPELLATE TRIBUNAL CUTTACK BENCH, CUTTACK BEFORE SHRI C.M. GARG, JM & SHRI MANISH BORAD, AM आयकर अपीऱ सं./ITA Nos.193/CTK/2019 (नििाारण वषा / Assessment Year :2014-2015) M/s Rawats-Balaji(JV), At/Po-Belpahar(RS), Dist : Jharsuguda Vs Pr.CIT, Sambalpur PAN No. : AABAR 9061 J TAN No. : BBNR01647 C AND आयकर अपीऱ सं./ITA Nos.194/CTK/2019 (नििाारण वषा / Assessment Year :2014-2015) M/s SBEPL-GRIL(JV), At/Po-Belpahar(RS), Dist : Jharsuguda Vs Pr.CIT, Sambalpur PAN No. : AAFAS 2639 R TAN No. : BBNS04348 B AND आयकर अपीऱ सं./ITA Nos.195/CTK/2019 (नििाारण वषा / Assessment Year :2014-2015) Shree Balaji Engicons Pvt Ltd At/Po-Belpahar(RS), Dist : Jharsuguda Vs Pr.CIT, Sambalpur PAN No. : AAGCS 4292 P TAN No. : BBNS00091 A (अऩीलाथी /Appellant) .. (प्रत्यथी / Respondent) ननधाारिती की ओर से /Assessee by : Shri Satyanarayan Agarwal, AR िाजस्व की ओर से /Revenue by : Shri M.K.Gautam, CITDR स ु नवाई की तािीख / Date of Hearing : 26/10/2021 घोषणा की तािीख/Date of Pronouncement : 23/12/2021 आदेश / O R D E R Per Bench: These three appeals have been filed by three different assessees against the order passed by the Pr.CIT, Sambalpur, u/s.263 of the Act, all dated 30.03.2019 for the assessment year 2014-2015. ITA Nos.193-195/CTK/2019 2 2. At the outset, we found that these three appeals are barred by limitation of 20 days. Separate Condonation applications along with affidavits have been filed by the assessee in all the three appeals. The ld. Counsel of the assessee submitted that that the delay may be condoned and all the three appeals be taken up for adjudication. Ld CIT DR did not object to the contention of ld. AR of the assessee. 3. After hearing the rival submissions and perusing the condonation application and affidavit furnished by the assessee in all the three appeals, we are satisfied that the assessee was prevented by sufficient cause for not filing these appeals within the stipulated period causing delay of 20 days. We, therefore, condone the delay and admit all the three appeals for adjudication. 4. Since similar and identical issues involved in all the three appeals of the assessees, therefore they are heard altogether and disposed off by this consolidated order en masse. 5. Ld. Assessee‟s Representative (AR) drew our attention towards two paper books of the assessee spread over 475 pages and written submissions/synopsis spread over Pages 181 to 281 of Paper Book No.2. Ld. AR submitted that ITA No.195/CTK/2019 may be taken as lead case for adjudication of all the three appeals. Ld. CIT-DR also consented to take up the said case as lead case for arguments. Now, with the consent of both the parties, we shall take the appeal of the assessee in ITA No.195/CTK/2019 in the case of M/s Shree Balaji Engicons Pvt. Ltd. as a ITA Nos.193-195/CTK/2019 3 lead case, wherein the assessee has raised the following grounds of appeal :- 1. In the facts & in the circumstances of the case & in law, Ld. Pr. CIT erred in holding that the assessment order passed by AO is erroneous & prejudicial to the interest of Revenue. The assessment order is neither erroneous nor prejudicial to the interest of Revenue. Provisions of Sec. 263 have been wrongly invoked by Ld. Pr. CIT & order passed by Ld. Pr. CIT is illegal & not sustainable. 2. Ld. Pr. CIT erred in holding that an amount of Rs.14,76,976/- is disallowable u/s 14A. He erred in directing the AO to disallow the same. No disallowance u/s 14A is warranted in the facts of the case. 3. Ld. Pr. CIT erred in holding that the assessee is not eligible to claim deduction u/s 80IA( 4) and that the AO wrongly allowed the deduction of Rs.5,53,35,272/-. He erred in directing the AO to disallow the deduction of Rs.5,53,35,272/- u/s 80IA( 4). The assessee is eligible for deduction u/s 80IA( 4) & it could not have been disallowed u/s 263. 4. The appellant craves to leave, add, amend, alter or modify any of the grounds of appeal either before or at the time of hearing of the case. 6. Facts in brief are that the assessee is a private limited company engaged in the business of construction of roads, buildings, civil structural works, other works contract services and allied activities under various Government and Non-Government departments and filed its return of income for A.Y.2014-2015 on 27.11.2014 disclosing total income at Rs.8,54,76,430/-. The case of the assessee for the Assessment Year under consideration was thereafter selected for scrutiny under CASS. Thereafter statutory notices u/s.143(3) & 142(1) of the Act along with questionnaire were issued and served on the assessee company for its compliance. Ld. AR further submitted that the claim of deduction pertaining u/s.80IA(4) of the Act was allowed by the AO after due verification and examination. ITA Nos.193-195/CTK/2019 4 7. Subsequently, the ld Pr. CIT invoking the powers conferred on him u/s.263 of the Act called for the assessment record and after examination of the same, found that the AO has not considered the Explanation inserted below to Section 80-IA(13) of the Act while framing the assessment, therefore, the Pr.CIT held that the assessment order passed by the AO is erroneous and prejudicial to the interest of revenue. Accordingly, the Pr.CIT directed the AO to modify the assessment order by making disallowance of claimed deduction u/s.80-IA(4) of the Act read with Explanation inserted below to Section 80-IA(13) of the Act. 8. Against the said revisionary order, the assessee is in appeal before the Tribunal. 9. The ld. Assessee‟s Representative (AR) drew our attention towards written submissions of the assessee filed on 13.10.2021 in the form of Paper Book-II and especially took us to Part-I of the written submissions placed at pages 183 to 240 of said paper book. For the sake of brevity and completeness of this order, we find it appropriate to reproduce the relevant submissions, which read as follows :- 1.1] The appellant in this ground of appeal has challenged the action of the Ld. PCIT in directing the Ld. AO to make disallowance of Rs.5,53,35,272/- u/s 80-IA(4) read with explanation inserted below section 80-IA(13) of the Act. 1.2.1] The Ld. PCIT in Para 15 to 17 of the show cause notice issued xx] s 263 of the Act dealt with the issue of disallowance ix] s 80-IA of the Act and gist of his observations was as under: (a) The company executed works contract with different organizations including South Eastern Railways, East Coast Railway, South-East Central Railway, Roads and Buildings Department of Govt. of Odisha, BSNL and other corporates etc. ITA Nos.193-195/CTK/2019 5 (b) The company is not a 'developer' but a 'contractor' as per Explanation below section 80-IA(13) of the Act since the company executed works for various principals on a contractual basis such as for Indian Railways, Roads and Buildings Dept., Govt. of Odisha. To get the benefit of section, the assessee should execute the works itself devoting its own resources and bearing all the business risks involved under BOT model rather than doing the work on somebody's behalf merely on a contractual basis. (c) The A.O. disallowed the assessee's claim of deduction u/s 80-IA of the Act even in A.Y. 2012- 13 & 2013-14 and following the principle of precedence, the A.O. should have disallowed such claim even in the assessment year under consideration. 1.2.2] It was on the basis of the above-stated observations that the Ld. PCIT opined that the amount of Rs. 5,53,35,272/- claimed as deduction u/s 80-IA of the Act was required to be disallowed and that the Ld. AO failed to examine this issue during the course of assessment proceedings which rendered the assessment order prima-facie erroneous in so far as it is prejudicial to the interest of revenue. 1.3] The appellant duly furnished its submission along with the requisite explanations and supporting documentary evidences before the Ld. PC IT in response to the show cause notice issued u/s 263 of the Act wherein it was categorically submitted that the appellant was a 'developer' and it also fulfilled other prescribed conditions thereby entitling it to claim the benefit of deduction u/s 80-IA of the Act and it was not merely engaged in the business of works contract as alleged by the Ld. PCIT. The gist of the submission made by the appellant before the Ld. PCIT has also been discussed in Para 63 on inner Page No. 42-50 of the order passed by the Ld. PCIT. l.4] However, the Ld. PCIT did not accept the contentions put forth by the appellant citing various reasons for his disagreement and he accordingly directed the Ld. AO to modify his order and make disallowance of Rs.5,53,35,272/- u/s 80-IA(4) read with Explanation inserted below section 80-IA(13) of the Act. The various reasons cited by the Ld. PClT in his order for directing the Ld. AO to disallow the claim of deduction -a] s 80-IA of the Act along with the corresponding explanation/ justification of the appellant with respect to each such reason are discussed hereunder for the ready reference of the Hon'ble Bench: (i) The assessee company disclosed gross turnover of Rs. 187,85,83,854/ - from its "Contracts Division" in its return of income. It was found on perusal of the submissions made before the Assessing Officer that the company had executed works contract with different organizations including South Eastern Railways, East- Coast Railway, South-East Central Railway, NHAI, Roads and Buildings (R & B) Department, Rural Works Dept. (RWD) of Govt. of ITA Nos.193-195/CTK/2019 6 Odisha, BSNL and other corporates etc. As found from the assessment record, the assessee was not a "developer" but merely a "contractor" which disentitles it from obtaining the benefit of deduction u/s 80IA(4) in view of the Explanation substituted below section 80IA(13) by Finance (No. 2) Act, 2009. (Refer Para 65 & 66 on Page No. 50-51 of the Ld. PCIT's order) Corresponding explanations/justification: • The moot question which arises for consideration is whether the appellant is a "developer" as envisaged under section 80-IA of the Act or is it merely a "contractor engaged in works contract". • At the outset, it would be relevant to go through the provisions of section 80-IA of the Act, so far as it is relevant to the issue in hand which is reproduced hereunder: "Deductions in respect of profits and gains from industrial undertakings or enterprises engaged in infrastructure development, etc . 80-lA. (1) Where the gross total income of an assessee includes any profits and gains derived by an undertaking or an enterprise from any business referred to in sub-section (4) (such business being hereinafter referred to as the eligible business/ there shall, in accordance with and subject to the provisions of this section, be allowed, in computing the total income of the assessee, a deduction of an amount equal to hundred per cent of the profits and gains derived from such business for ten consecutive assessment years. (4) This section applies to- (i) any enterprise carrying on the business of (i) developing or (ii) operating and maintaining or (ill) developing operating and maintaining any infrastructure facility which fulfils all the following conditions, nameIy:- (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 [iii] 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: ITA Nos.193-195/CTK/2019 7 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: Provided further that nothing contained in this section shall apply to any enterprise which starts the development or operation and maintenance of the infrastructure facility on or after the 1st day of April, 2017 Explanation.-For the purposes of this clause, "infrastructure facility" means- (a) a road including toll road, a bridge or a rail system,' (b) a highway project including housing or other activities being an integral part of the highway project (c) a water supply project, water treatment system, irrigation project, sanitation and sewerage system or solid waste management system,' (d) a port, airport, inland waterway, inland port or navigational channel in the sea,' 13) Nothing contained in this section shall apply to any Special Economic Zones notified on or after the 1st day of April, 2005 in accordance with the scheme referred to in sub-clause (iii) of clause (c) of sub-section (4). 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 sub-section (4) which is in the nature ofa 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). [Emphasis Supplied] • On perusal of the order passed by the Ld. PClT, it becomes crystal clear that there was no adverse finding of the Ld. PCIT regarding the non-compliance of any of the conditions specified in sub-section (4) of section 80-IA of the Act. The sole grievance of the Ld. PClT while disallowing the claim of deduction u/s 80-lA of ITA Nos.193-195/CTK/2019 8 the Act was with reference to the Explanation inserted below sub- section (3) of section 80-lA of the Act wherein a business which is in the nature of works contract is debarred from claiming any benefit under the said section. Hence, the entire discussion in the subsequent paragraphs shall be confined to whether the appellant is a "developer" entitling it to claim the benefit of deduction u/s 80- IA of the Act or a "contractor engaged in works contract" thereby getting debarred from claiming the benefit under this section by virtue of the Explanation inserted below sub-section (13) of section 80-lA of the Act. • At this juncture, it becomes significantly important to understand the legislative intent behind insertion of the said Explanation below section 80-IA(13) of the Act in order to understand the need and true spirit behind introducing the said Explanation. • In 2007, an explanation was inserted with retrospective effect from April 1, 2000, which' read as follows: "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." • The relevant extract from the Memorandum explaining the provisions in the Finance Bill 2007 dealing with the issue in hand, read as under: ((Clarification regarding developer with reference to infrastructure facility, industrial park, etc. for the purposes of section 80-IA Section 80-lA, 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 work or any other works contract. Accordingly, it is proposed to clarity that the provisions of section 80-IA 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 a person makes the investment and himself executes the development work i.e., carries out the civil construction work, he will be eligible for tax benefit under section ITA Nos.193-195/CTK/2019 9 80-IA. In contrast to this, a person who enters into a contract with another person {i.e., undertaking or enterprise referred to in section 80-IA for executing works contract, will not be eligible for the tax benefit under section 80-IA. This amendment will take retrospective effect from 1st April, 2000 and will, accordingly, apply in relation to the assessment year 2000- 01 and subsequent years. (Clause22j" (Emphasis Supplied] • The Explanatory Memorandum clearly laid out that purpose of extending tax benefit u/s 80-lA of the Act was to encourage investments from the private sector and hence work contracts, i.e. contracts involving merely labour (or mere execution of construction without making investments) were kept outside the purview of the provisions of section 80-lA of the Act. The Explanatory Memorandum clearly stated that the deduction u/s 80IA of the Act would be available to developers who undertake entrepreneurial and investment risk and not for the contractors, who undertakes only business risk. • A new Explanation was thereafter inserted by the Finance (No. 2) Bill of 2009 with retrospective effect from April 1, 2000 substituting the explanation inserted earlier and it read as under: "Explanation or the removal of doubts, it is hereby declared that nothing contained in this section shall apply in relation to a business referred to in sub-section (4) which is in the nature ofa 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)." (Emphasis Supplied] • The relevant extract from the Memorandum explaining the provisions in the Finance (No. 2) Bill of 2009 dealing with the issue in hand, read as under: "Further, with a view to preventing the misuse 'of the tax holiday under section 80-lA 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 undertaking or enterprise referred to in sub-section (1) thereof" (Emphasis Supplied) • On a conjoint reading of the Explanatory Memorandum to the Finance Bill 2007 and Finance (No. 2) Bill of 2009, it appears that section 80-IA of the Act was an instrument of legislative policy conceived with a view to provide an impetus to private sector participation in the infrastructural projects. Consistent with the legislative object of encouraging private sector participation in the development of infrastructure, section 80-lA was enacted. The ITA Nos.193-195/CTK/2019 10 purpose of the tax benefit had all along been for encouraging private sector participation by way of investment in development of the infrastructure sector. The Explanation was inserted subsequently with retrospective effect to prevent the misuse of tax holiday u/s 80-lA of the Act in respect of persons engaged solely in work contracts, i.e. contracts involving merely labour (or mere execution of construction without making investments) and to restrict the benefit of tax holidays only in respect of those cases where the person made investment and himself executed the development work i.e., carried out the civil construction work. Hence, after insertion of the said Explanation below section 80- IA(13) of the Act, understanding of the term 'works contract' assumed significant importance to adjudge the allowability of deduction u / s 80- IA of the Act. The term 'works contract' has not been defined u/s 80-lA of the Act. Hence, the natural meaning of the word shall apply. As per the Oxford Dictionary, the term 'work' means application of effort to a purpose or use of energy. Thus, going by the dictionary meaning, 'works contract' means a contract which involves effort or in other words labour of the contractor. Further, as per the Black's Law Dictionary, the term 'work' means labour or in other words physical and mental exertion to attain an end especially as controlled by and for the benefit of the employer. Thus, as per Black's Law also, a 'works contract' is a labour contract under which the contractor merely employs his labour as per the directions of the contractee. On perusal of these definitions, it can be safely concluded that a works contract constitutes a contract under which the contractor is merely employing his efforts or labour. Under such a contract, the contractee provides the material and other requisites (a complete infrastructure) needed to carry out the desired work to the contractor who by applying his labour to the said material turns the material into a desired product. The Hon'ble Bombay High Court in the case of CIT v. Glenmark Pharmaceuticals Ltd. reported in [2010]324 ITR 199/191 Taxman 455 has held that in 'works contract', the contractor would be provided materials and all other requirements in the process of manufacture and production. The contractor merely carries the work with the materials supplied by the contractee and knowledge supplied by the contractee. At this juncture, it is also imperative to appreciate the difference between a "developer" and a "contractor". These terms have neither been defined in the Act nor in the General Clauses Act and therefore, we need to go through the dictionary meaning of these words. As per Oxford Advanced Learner's Dictionary, "developer" is a person or company that designs and creates new products, whereas "contractor" is a person or a company that has a contract to do work or provides services or goods to another. The New ITA Nos.193-195/CTK/2019 11 Shorter Oxford Dictionary defines the word "contractor" as person who enters into a contract or agreement. Now chiefly spec. a person or firm that undertakes work by contract, esp. for building to specified plans". • In the light of the meaning ascribed to these words by the dictionaries, it is observed that the developer is a person who creates new products. He may execute the entire project himself or assign some parts of it to others. On the contrary, the contractor is the one who is assigned a particular job to be accomplished on the behalf of the developer. There may, in certain circumstances, be overlapping in the work of developer and contractor, but the line of demarcation between the two is thick and unbreachable. When the person acting as developer also executes the construction work, he works in the capacity of contractor too. But when he assigns the job of construction to someone else, he remains the developer simpliciter, whereas the person to whom the job of construction is assigned, becomes the contractor. The role of developer is much larger than that of the contractor. It is no doubt true that in certain circumstances, a developer may also do the work of a contractor but a mere contractor per se can never be called as a developer, who undertakes to do work according to the pre-decided plan. • It is an undisputed fact that the word "contractor" is used to denote a person entering into an agreement for undertaking the development of infrastructure facility. Every agreement entered into is a contract. The word "contractor" is used to denote the person who enters into such contract. Even a person who enters into a contract for development of infrastructure facility is a contractor. Therefore, ~contractor and a developer cannot be viewed differently. Every contractor may not be a developer but every developer developing infrastructure facility on behalf of the Government is a contractor. • However, with due respect, it is pertinent to note that the Ld. PClT utterly failed to appreciate the thick and unbreachable line of demarcation between the terms, 'contractor' and 'developer' as discussed supra. Rather, the Ld. PCIT kept on re-iterating this fact in the order passed u / s 263 of the Act that the appellant was not a "developer" but merely a "contractor". In light of the contentions discussed supra, the findings of the Ld. PCIT do not hold water for the below mentioned reasons: Every person who enters into an agreement with Central Government and State Government Departments, local authorities, other corporates etc. for development of an infrastructural facility envisaged in section 80-lA of the Act would necessarily be a contractor since the word "contractor" is used to denote the person who enters into any contract which also takes within its purview the contracts for development of infrastructural facility. Hence, the fact that the appellant showed turnover from "Contracts Division" in its income-tax return cannot in any way lead to an inference that the appellant was engaged in works contract only. ITA Nos.193-195/CTK/2019 12 Once it is established that a person is a contractor, the next question which arises for consideration is whether that person is a developer cum contractor or a mere contractor engaged in works contract. Hence, the observations of the Ld. PCIT in the order passed u/s. 263 of the Act treating the appellant as merely a "contractor" but not a "developer", were ill- founded and perverse since every contractor may not be a developer but every developer developing infrastructure facility on behalf of the Government is necessarily a contractor. Accordingly, the contractors performing the work in the nature of a developer-cum-contractor and assuming risks and responsibilities shall be eligible for deduction under section SO-lA of the Act in respect of the eligible infrastructural facilities as in the present case of the appellant. • There have also been a few landmark judicial precedents which have elaborately discussed and laid down broad guidelines/ parameters to ascertain whether the contract entered into by an assessee for development of infrastructural facility would be in the capacity of a "contractor-cum-developer" or "contractor engaged in works contract" On perusal of the above table, it could be well understood that the appellant not only carried business risk but also undertook entrepreneurial risk, financial risk and investment risk which are the well-settled parameters to distinguish a contractor- cum-developer from a mere contractor engaged in works contract. On perusal of the relevant extract of these documents furnished at the time of applying for tender, it becomes quite evident that the appellant was required to furnish various details such as qualification and experience of key personnel who shall be looking after the administration and execution of the project, list of machineries/equipments deployed for execution of the projects, experience of similar work undertaken in the past and performance record etc. which clearly establish that the appellant worked as a developer-cum-contractor during the execution of these projects . • In view of the parameters laid down in the judicial precedents (supra), on perusal of the relevant clauses of the agreements entered into by the appellant with these employers and on perusal of the documents furnished at the time of applying for tender, there remains absolutely no doubt that the appellant was a contractor performing the work in the nature of a developer-cum-contractor and was assuming risks and responsibilities which made it eligible for deduction under section 80-lA of the Act in respect of the eligible infrastructural facilities for the below-mentioned reasons: (i) The appellant was assigned full responsibility to do all acts for execution and completion of work right from the beginning till handing over of the project to the employer. The contract was not ITA Nos.193-195/CTK/2019 13 for a specific work but for development of the infrastructural facility as a whole. The contract also bound the appellant for change of scope of work in respect of any deviation! modification! extra work as envisaged during the execution of the project. (ii) The appellant shouldered out investment and technical risk in respect of the work executed by it. It was merely provided with the site which it had to develop into an infrastructural facility by undertaking huge risks in terms of deployment of technical personnel, plant and machinery, technical knowhow, expertise and financial resources. (iii) The material required for the project was purchased by the appellant from third party which had to undergo through quality assurance procedure proposed by the employer. The employer did not provide any material to the appellant. (iv) The appellant was required to bring in plant and machineries to be used in the project. The appellant invested a huge amount of Rs. 49 crores (gross block) in its plant and machineries for carrying out various projects. (v) The appellant executed managerial responsibility by engaging the requisite qualified! skilled! semi-skilled staff and labourers including the other supporting staff. The appellant undertook complete responsibility of the manpower to be used in developing the infrastructure facility including for their payment, housing, feeding and transport. (vi) The appellant had to utilize its expertise, experience including its technical know- how in the development of the project. (vii) The appellant provided all the necessary superintendence required during the execution of project (viii) The assessee was required to bear all the risk of loss of or damage to physical property and of personal injury and death which arose during the and in consequence of the performance of the contract thereby taking all the entrepreneurial risks involved. (ix) The appellant undertook financial risk as it was required to invest a minimum of 25% of the value of the contract during the implementation of contract. The appellant was also required to deposit EMD at the time of filing bid. The appellant also furnished irrevocable and unconditional bank guarantee against performance security of the project which in itself goes on to show that the appellant took all the financial risks involved. Thus, it is evident that the appellant undertook entrepreneurial and financial/ investment risk besides business risk. (x) The appellant had undertaken to complete the work and remedy any defects arising therein thereby taking the liability for correction of defects. ITA Nos.193-195/CTK/2019 14 (xi) The appellant was also liable to pay liquidated damages to the employer in the event of breach of any of the conditions stipulated in the contract. The above-mentioned reasons clearly exhibit that the present case was not a case wherein the appellant was provided with the establishment and materials required to execute the work, which happens in case of works contract where the contractor gets the material and other requisites from the client and all he has to do is to employ labour. Rather, in the facts of the present case, the appellant was assigned with the responsibility of development of the infrastructural facility as a whole and the fact that the appellant deployed its resources (material, machinery, labour etc.) in the construction work and that the appellant was liable to indemnify the employer for any losses/ damage caused to any property/life in the course of execution of work, clearly exhibited the risks undertaken by the appellant. The various risks undertaken by the appellant have also been clearly demonstrated vide the various clauses contained in the agreements executed by the appellant. • In view of the above discussion, it is humbly submitted that the observation of the Ld. PCIT that the appellant was not a "developer" but merely a "contractor" engaged in works contract, is devoid of any merits. It has been comprehensively explained that the appellant was a contractor performing work in nature of a developer-cum-contractor and was also assuming risks and responsibilities akin to that of a developer and henceforth, the appellant was eligible for claiming deduction uj s 80-IA of the Act in respect of infrastructural facilities developed by it. Hence, the aforesaid reasoning of the Ld. PCIT for disallowing the claim of deduction uj s 80-IA of the Act was untenable. (ii) The assessee-company was not a "developer" nor was it engaged in the "operation and maintenance" of any "infrastructure facility", but had only executed works for various principals on contractual basis. As such, it was not eligible for deduction ujs 80- IA(4) of the Act but the assessee's auditor issued certificates in Form No. 10CCB, certifying the assessee as a "developer" eligible for deduction under the said section in contravention of the express provisions of the Act. In fact, even in previous two assessment years i.e. A.Y. 2012-13 & 2013-14, the A.O. had disallowed the assessee's similar claim of deduction u/s SO-IA(4). Following the "principle of consistency", even in assessment year under consideration i.e. A.Y. 2014-15, the A.O. should have disallowed such claim. (Refer Para 69 on Page No. 52-53 of the Ld. PCIT's order) Corresponding explanations/ justification: • As elaborately dealt with in the preceding paragraphs of this submission, the appellant was a contractor who was performing work in nature of a developer-cum-contractor and was also ITA Nos.193-195/CTK/2019 15 assuming risks and responsibilities akin to that of a developer thereby entitling it to claim the benefit of deduction under section SO-lA of the Act. Therefore, the auditor of the appellant rightly issued certificates in Form No. 10CCB certifying the appellant as a "developer" eligible for deduction under the said section . • It is a well settled proposition of law under income-tax that each year is a different year and each assessment is therefore different based on facts and documents and prevalent law on year-to-year basis. The fact that the erstwhile AO disallowed the appellant's similar claim of deduction u/s 80-1A(4) of the Act for A.Y. 2012-13 &A.Y. 2013- 14 does not in any way preclude the Ld. AO to consider the issue of allowability of claim of deduction u/s 80-1A(4) of the Act on merits of the case for A.Y. 2014-15. The Ld. AO accepted the appellant's claim of deduction u/s 80-IA(4) of the Act for the A.Y. 2014-15 after going through all the relevant material placed on record and after considering the submissions made during the course of assessment proceedings. It is worth mentioning that the deduction claimed by the appellant u/s 80-IA(4) of the Act was legal and within the four corners of law and the appellant cannot be deprived the benefit of deduction under this section merely for the reason that the erstwhile Aa failed to properly appreciate and understand the facts of the case on its merits. Even otherwise, it is worth noting that the disallowance of the appellant's similar claim of deduction u/s 80-IA(4) of the Act for A.Y. 2012-13 & A.Y. 2013-14 by the erstwhile AO was not accepted by the appellant and the disallowance of deduction claimed u!s80-IA(4) of the Act was challenged in appeal before the Ld. CIT (A) which is still pending for disposal. Hence, no adverse inference can be drawn against the appellant on this count and therefore, this reasoning of the Ld. PCIT also does not hold water. (iii) As per the terms of the contract, the assessee was to execute the work as a "Contractor" only and the assessee had won the bids through tendering process only to execute the work. It was not a case where the assessee itself had undertaken the work in "Build" or "Build & Operate" or "Build Operate & Maintain" model. For example, where a stretch of highway is built by the assessee and with its own money without payment by government & then maintained through a revenue model like toll collection, it would be eligible for deduction u/s 80-IA(4). But in the instant case, the assessee neither (i) developed, nor (ii) operated and maintained, nor did it (iii) develop, operate and maintain any infrastructure facility within the meaning of section 80-lA(4)(i) of the Act. (Refer Para 75 on Page No. 58 of the Ld. PClT’s order) Corresponding explanations/justification: The reasonings given by the Ld. PCIT in Para 75 of his order clearly go on to show that the understanding of the Ld. PCIT regarding the allowability of deduction u/s 80-IA of the Act was not scrupulous and it was based on the erstwhile law which was not even in the statute book since several years'. ITA Nos.193-195/CTK/2019 16 The Ld. PCIT time and again emphasized on the fact that the appellant was a "contractor" and was not eligible to claim deduction u/s 80-IA(4) of the Act being completely ignorant of the fact that every person who enters into an agreement with Government for development of infrastructural facility will necessarily be a contractor. It is an undisputed fact that even a person who enters into a contract for development of infrastructure facility is termed as a "contractor". Therefore, contractor and a developer cannot be viewed differently. Every contractor may not be a developer but every developer developing infrastructure facility on behalf of the Government is a contractor. Hence, the fact that the appellant was to execute the work as a "contractor" as per the terms of the contract does not in any way debar the appellant from claiming the benefit of deduction u/ s 80-IA(4) of the Act since those contractors who perform work in nature of a developer-cum-contractor and also assume risks and responsibilities akin to that of a developer, are eligible for claiming deduction u/s 80-IA of the Act. As discussed in the preceding paragraphs of this submission, the appellant assumed entrepreneurial and financial/ investment risks other than business risks which per se entitled the appellant to claim the benefit of deduction under this section since the appellant performed work in nature of a developer-cum-contractor. • In respect of the next reasoning given by the Ld. PClT coupled with the example of eligibility of deduction u/s 80-IA(4) of the Act in respect of building of a stretch of highway with own money without payment by government & then maintaining it through a revenue model like toll collection; it is pertinent to mention that the said reasoning and example was based upon the law which prevailed prior to the changes brought in the Finance Act 2001 w.e.f. 1st April 2002 where the requirement for developing and operating & maintaining of infrastructure facility simultaneously was done away with. The effect of such a change brought in the Finance Act 2001 was that the deduction u/s 80-IA(4)(i) of the Act was now also available to assessee who was engaged only in development of infrastructure facility "or" engaged only in operation & maintenance of infrastructure facility "or" engaged in both developing, operating and maintaining any infrastructure facility. The word 'or' has to be read as disjunctively and that each of the enterprise, i.e. (i) developing 'or' (ii) operating and maintaining 'or' (iii) developing, operating and maintaining of a new infrastructure facility should be read independently and if the assessee fulfils one of the above conditions, it will be entitled to benefit of Section 80-IA(4) of the Act. Relevant extracts from few of the judicial precedents which have enunciated the above-mentioned principles are reproduced hereunder for the ready reference of the Hon'ble Bench: • The Hon'ble Bombay High Court in its landmark judgment in the case of CIT, Central- II v. ABG Heavy Industries Ltd. reported in [2010] 322 ITR 323 (Bombay) has held that: ITA Nos.193-195/CTK/2019 17 "22. Another submission which was urged on behalf of the revenue is that under clause [iii] of sub-section(4A) of section 80-lA, 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 fulfill 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 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-lA was amended by the Finance Act of 2001, the section applies to an enterprise carrying on the business of (i) developing; or {H! operating and maintaining; or (ii) 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,' and [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 of2001 would be defeated. A harmonious reading of the provision in its entirety 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 (ii) 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 ITA Nos.193-195/CTK/2019 18 stipulating that the three conditions for development. operation and maintenance were not intended to be cumulative in nature." (Emphasis Supplied] • The Hon'ble ITAT Rajkot Bench in the case of Katira Construction Ltd. v. ACIT reported in [2020] 119 taxmann.com 489 (Rajkot - Trib.) vide order dated 30.07.2020held that: "12.4 Further w.e.f 1st Apn12000 the sub-section-4A was re- numbered as sub- section- 4 of section 80lA of the Act. Subsequently, the major changes were brought in the Finance Act 2001 w.e.f. 1st April 2002. where the requirement for developing and operating & maintaining of infrastructure facility simultaneously was done away. Now the deduction under section 80-IA(4)(i) is also available to assessee who is engaged only in development of infrastructure facility or only engaged in operation & maintenance of infrastructure facility or engaged in both developing, operating and maintaining any infrastructure facility. 12.5 A plain reading of the above provision reveals that under the amended provisions of section 80-IA(4) of the Act. the assessee is entitled for such benefit. even if it is-engaged only in developing the infrastructure facilities. Thus if the contention of the AO is believed to be true that the deduction is available to the assessee only after infrastructure started or starts operating then the assessee who only develop the infrastructure facility will not be entitled for the deduction under section 80-lA (4) of the Act as he will never operate and maintain such infrastructure facility. Furthermore, the assessee who will start operating and maintaining such infrastructure facility after its development by developer would be eligible for such deduction and not the developer. It is because the assessee who has developed and the assessee who is operating & maintaining the infrastructure facility cannot claim the deduction simultaneously for the same project. 12.7 Thus the interpretation that the deduction shall be allowed only with respect to the infrastructure facility upon the commencement of operation and maintenance, does not hold good, particularly in a situation where the assessee is engaged only in the development of infrastructure facility." (Emphasis Supplied) The Hon'ble ITAT Indore Bench in the case of Sanee Infrastructure (P.) Ltd. v. ACIT,3(1), Bhopal reported in [2012] 23 taxmann.com 345 (Indore) held that: "10 Thus, as per the amended law, development of infrastructure facility is sufficient for claim of deduction u/s 80IA(4) w.e.f. assessment year 2002-03. The relevant assessment year under consideration is also assessment year 2002-03 for which amended provisions of law is applicable. " (Emphasis Supplied) ITA Nos.193-195/CTK/2019 19 The Hon'ble ITAT Kolkata Bench in the case of DCIT vs SPML Infra Ltd reported in TS-6009-ITAT-2016(Kolkata)-O clearly lays down that it is obvious for an assessee engaged only in development of infrastructural facility to receive payment from Government since otherwise the entire cost of development would be a loss in the hands of the developer as it is not operating the infrastructure facility. The Hon'ble ITAT while adjudicating the issue observed that: "S.5 If a person who only develops the infrastructure facility was not paid by the Government, the entire cost of development would be a loss in the hands of the developer as he was not operating the infrastructure facility. Merely because the assessee was paid by the Government for development work it could not be denied deduction under section 80-IA(4). The Chennai Bench' of Tribunal in case of R.R. Constructions, Chennai vs. Department of Income tax held that when an assessee is only developing an infrastructure facility project and is not maintaining nor operating it, obviously such an assessee will be paid for the cost incurred by it; otherwise, how will the person, who develops the infrastructure facility project realize its cost? If the infrastructure facility just after its development. is transferred to the Government, naturally the cost would be paid by the Government. Therefore, merely because the transferee had paid for the development of infrastructure facility carried out by the assessee, it cannot be said that the assessee did not develop the infrastructure facility. If the interpretation done by the Assessing Officer is accepted. no enterprise carrying on the business of only developing he infrastructure facility would be entitled to deduction under section 80IA(4) which is not the intention of the law. An enterprise which develops the infrastructure facility is not paid by the Government, the entire cost of development would be a loss in the hands of the developer as he is not operating the infrastructure facility. 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 development infrastructure facility. Ostensibly. a developer would have income only if he is paid for the development of infrastructure facility, for the simple reason that he is not having the right/authorization to operate the infrastructure facility and to collect toll there from, has no other source of recoupment of his cost of development. » [Emphasis Supplied] • The Hon'ble Jurisdictional Bench of lTAT in the case of ARSS Infrastructure Projects Ltd. Vs. ACIT, Circle-2(1), Bhubaneswar [ITA Nos. 142 & 143/CTK/2010] has categorically held as under: "10. Now coming to the merits of the deduction u/s. 80IA(4) of the Act. A perusal of the provisions of section 80IA(4) of the Act shows that in the explanation ~infrastructure facility' has been specified to mean a road including a toll road, a bridge or a rail system. Admittedly- the assessee is doing the business of development of railway tracks and bridges thereof as also roads. If, we are to ITA Nos.193-195/CTK/2019 20 accept the contention of the Ld. CIT that the provisions of section 80IA(4) of the Act after the substitution of the explanation to section 80IA of the Act was introduced was only for the purpose of giving the. benefit to BOT contracts then the explanation to section 80IA(4) of the Act becomes otiose. This is as explanation to section 80IA(4) of the Act specifically provides for the road to include a toll road, a bridge or a rail system. BOT contract in respect of the railway system can never exist. (Emphasis Supplied) • On perusal of the findings laid down in the judicial precedents cited supra, it becomes crystal clear that an assessee w.e.f. A.Y. 2002-03 became entitled for claiming benefit under this section even if it was engaged only in developing the infrastructure facilities. However, the example cited by the Ld. PCIT regarding building of a stretch of highway with own money without payment by government and then maintaining it through a revenue model like toll collection is an example which would have hold good if the case of the appellant pertained to the period prior to A.Y. 2002-03 wherein an assessee was required to develop, operate and maintain an infrastructure facility simultaneously in order to be eligible for claiming deduction u/s 80-IA of the Act i.e. only the contracts awarded as per the Build-Operate, Transfer (BOT) Model were eligible for deduction under this section for the period prior to A.Y. 2002-03. • It is an uncontroverted fact that case of the appellant pertains to A.Y. 2014-15 wherein an assessee is eligible to claim the benefit of deduction under this section even if it is engaged only in development of infrastructure facilities. Therefore, the finding that the appellant received payment from Government instead of maintaining the infrastructural facility through a revenue model like toll collection is totally extraneous since such law was not even in the statute book since several years'. • The above-discussed reasonings of the Ld. PCIT while disallowing the claim of deduction u/s.80-IA of the Act clearly exhibit that the Ld. PClT failed to appreciate and understand the correct position of law as on the date of his order which goes to the very root of the matter and undermines the validity of the disallowance directed to be made ii]« 80-IA of the Act. In view of the discussion in the preceding paragraphs of this submission, it is quite clear that the appellant was engaged in development of infrastructural facilities against which it also received payments from Government which does not disentitle it in any way from claiming the benefit of deduction u/s 80-IA(4) of the Act. (iv) It is evident that the assessee company was only a "contractor" since the Auditor has also treated the assessee as a "Civil Contractor" in auditor's report in Form No. 3CD and not as an entity engaged in any of the activities mentioned in section 80-1A(4)(i) of the Act. (Refer Para 76 on Page No. 58-59 of the Ld. PCIT's order) Corresponding explanations/justification: ITA Nos.193-195/CTK/2019 21 • The appellant concurs with the finding that it was a "contractor". However, it was a contractor performing work in the nature of developer-cum-contractor and was engaged in development of infrastructural facilities. It was not merely a contractor engaged in works contract supplying only labour as per the specifications of the employer. Any person engaged in development of infrastructural facilities on behalf of Government would necessarily be a contractor in the first place. Thereafter, it has to looked into as to whether the person is engaged in contract for development or merely in works contract. Hence, the fact that the appellant was a "contractor" does not in any way debar it from claiming the benefit of deduction uj s 80-lA of the Act since the appellant performed work in the nature of developer-cum-contractor. • The fact that the auditor reported the nature of business of the appellant in the tax audit report as that of a "civil contractor" was due to the reason that an auditor is required to choose the nature of business! profession in the tax audit report on the basis of limited options available to choose from in the list which is not at all exhaustive. The auditor chose the type of business in the tax audit report which closely resembled the nature of work undertaken by the appellant. In common parlance, a" civil contractor" is used to mean a business entity which is engaged in the business of building roads, bridges, docks and other infrastructural development. Hence, the reasoning that the auditor himself reported the nature of business of the appellant in the tax audit report as that of a "civil contractor" does not lead to any negative inference regarding the eligibility of the appellant to claim the benefits of deduction ujs 80-IA of the Act. (v) Under section 80-IA(4)(i)(b), the benefit was sought to be extended only to those companies, which were engaged in "Build and Operate" (BO), "Build, Operate and Maintain" (BOM) or "Build, Operate, Maintain and Transfer" (BOT) of infrastructural facilities by entering into agreement with Central/ State Govt./ Local Authority/Any other Statutory Body. However, in this case, the assessee company had not entered into any agreement for building, operating or maintaining any infrastructure facility, but has only executed contract awarded by various Govt. Departments, as per works contract agreements. Agreements for executing normal "works contract" entered into with Govt. departments cannot be equated with the "agreements" for the purpose of the section 80- IA(4)(i)(b) of the Act, which are limited only to (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructural facility. Otherwise, the whole purpose of having the Explanation below section 80-IA( 13) of the Act would be defeated. (Refer Para 77 on Page No. 59 of the Ld. PClTs order) Corresponding explanations/justification: ITA Nos.193-195/CTK/2019 22 • As also discussed in the previous paragraphs of this submission, the Ld. PC IT based on wrong interpretation and understanding of law observed that "benefit was sought to be extended only to those companies, which were engaged in "Build and Operate" (BOI, "Build, Operate and Maintain" (BOM) or "Build, Operate, Maintain and Transfer" (BOT) of infrastructural facilities'. Accordingly, the Ld. PC IT observed that since the assessee company did not enter into any agreement for simultaneously building, operating or maintaining any infrastructure facility"; it was not eligible to claim the benefit of deduction u/s 80IA( 4) of the Act. • In this respect, the appellant vehemently objects to the above- mentioned observations of the Ld. PCIT since these observations were based on the position of law which was changed by the Finance Act 2001 w.e.f. 1st April 2002 and such law did not even exist in the statute book since several years'. The Ld. PCIT passed order u/s 263 of the Act based on a "mistake of law" as on the date of passing of order which made the order passed by the Ld. PCIT completely erroneous and prejudicial to the interest of the appellant who rightly claimed deduction u/s 80-IA(4l of the Act based on the correct interpretation and understanding of law applicable for the A.Y. 2014-15 i.e. for the year under consideration. It is pertinent to mention that the Finance Act 2001 w.e.f. 1st April 2002 brought changes in the said section wherein the requirement for developing and operating & maintaining of infrastructure facility simultaneously was done away with. The effect of such a change brought in the Finance Act 2001 was that the deduction u/s 80- IA(4)(i) of the Act was now also available to an assessee who was engaged only in development of infrastructure facility or only engaged in operation & maintenance of infrastructure facility or engaged in both developing, operating and maintaining any infrastructure facility. It is an uncontroverted fact that case of the appellant pertained to A.Y. 2014-15 wherein an assessee was eligible to claim the benefit of deduction even if it was engaged only in development of infrastructure facilities. Thus, if the contention of the Ld. PCIT is accepted that the deduction is available only to the assessee engaged in "Build and Operate" (BO), "Build, Operate and Maintain" (BOM) or "Build, Operate, Maintain and Transfer" (BOT) of infrastructural facilities; then, the assessee who only develop the infrastructure facility will never be entitled to claim the benefit of deduction u/s 80-IA(4) of the Act which is not the intention of the legislature. The interpretation that the deduction shall be allowed only with respect to the infrastructure facility upon the commencement of operation and maintenance, does not hold good, particularly in a situation where the assessee is engaged only in the development of infrastructure facility since it would otherwise defeat the intent behind introducing sub-section (4) of section 80-IA of the Act. In view of the above discussion, it is humbly submitted that deduction u/s 80-IA(4) of the Act was rightly claimed by the appellant even though it was ITA Nos.193-195/CTK/2019 23 engaged solely in development of infrastructural facilities and the reasoning of the Ld. PClT on this count is also devoid of any merits. The claim made by the A.R. that the assessee was undertaking several risks by referring to some of the clauses of the agreement is devoid of merit for the simple reason that these standard clauses appear in all Govt. contracts. When work is awarded by Govt. Departments and payment is made out of exchequer, it is but natural that the Principal i.e. the Govt. would secure the quality of the work and adherence to time schedule by imposing certain conditions on the contractor with regard to the quality of material to be utilized, the quality of personnel to be engaged to oversee the work, the liability for damages during the period of .execution of the work etc. These conditions are imposed on every contractor by the Govt. Departments. The A.R. has not been able to differentiate as to how the conditions imposed on the assessee are different from the conditions imposed on other contractors who are not eligible for deduction u/s 80-IA(4) of the Act. The whole attempt on the part of the A.R. has been to somehow make a normal "works contract", appear as falling within the parameter of section 80-IA(4) of the Act. (Refer Para 78 on Page No. 60 of the Ld. PClT's order) Corresponding explanations! justification: • At the outset, it is pertinent to mention that the mere fact that all the Government contracts contain some standard clauses does not in any way affect the eligibility of the appellant to claim the benefit of deduction u/s 80-IA(4) of the Act. Further, the fact that all the Government contracts contain these standard clauses neither relieves the contractor of its liability in case of breach of conditions prescribed therein nor does it allow the contractor to avoid the risks and responsibilities assigned to the contractor in those clauses. All the clauses mentioned in these Government contracts are enforceable and henceforth. a contractor assuming all these risks and responsibilities while executing the work assigned by the Government and performing work in the nature of developer-cum- contractor would be eligible to claim the benefit of deduction u!s 80- IA(4) of the Act. • The appellant elaborately justified in the previous paragraphs of this submission that it undertook entrepreneurial as well as investment financial risks apart from business risk in executing the contracts assigned to it for development of infra structural facility. The appellant was assigned the responsibility for development of infrastructural facility as a whole and was not merely assigned a works contract. Hence, there remains absolutely no doubt that the appellant was eligible to claim the benefit of deduction under this section. ITA Nos.193-195/CTK/2019 24 • Further, the allegation of the Ld. PCIT that the whole attempt on the part of the A.R. was to somehow make a normal "works contract", appear as falling within the parameter of section 80-IA(4) of the Act is totally unacceptable for the simple reason that the Ld. PCIT was himself not aware about the correct position of law in respect of allowability of deduction u/s 80-IA of the Act. Moreover, the A.R. of the appellant during the course of revisionary proceedings clearly demonstrated that the appellant took entrepreneurial as well as investment/financial risks apart from business risk while executing the projects for development of infrastructure facility through various clauses contained in the agreement entered into by the appellant with its employers. It was none of the business of the A.R. to demonstrate how those conditions were different from the conditions imposed on other contractors who were not eligible for deduction u/ s 80-IA(4) of the Act. The A.R. duly justified the deduction claimed by the appellant u/s 80IA(4) of the Act with the requisite supporting documentary evidences thereby discharging the primary onus cast upon him. Hence, the reasoning of the Ld. PCIT behind rejecting the claim of deduction of the appellant u/s 80-IA of the Act merely for the reason all the Government contracts contained these standard clauses is totally perverse and bad in law more so when the appellant duly satisfied all the conditions prescribed therein for claiming the benefit of deduction under section 80-IA of the Act. (vii) The contention of the A.R. that the works carried out by the assessee did not fall in the category of "work" defined in Explanation (iv) to section 194C of the Act and therefore, the assessee would not get hit by the provisions of Explanation appearing below 80-IA(13) of the Act, has no merit. It is evident that the definition of "work" appearing in Explanation (iv) to section 194C of the Act is an "inclusive" definition, meaning thereby that the above definition is not "exhaustive". In other words, the word "work" would take in its ambit whatever falls within the natural, grammatical and ordinary meaning of "work" and in addition to that, other activities, which in the normal course would not mean "work", would also be treated as such by virtue of this "inclusive" definition. As a result, there is no merit in the A.R. 's claim that the works executed by the assessee did not fall within the meaning of "works contract" and hence it was not debarred from the benefit of deduction u/s 80- IA(4) in view of Explanation appearing below section 80-IA(13). (Refer Para 81, 82 & 83 on Page No. 61-63 of the Ld. PCITs order) Corresponding explanations! justification: • It was argued before the Ld. PCIT that the term, "works contract" was not been defined u/s 80-IA of the Act and therefore, meaning of the said term was interpreted using its dictionary meaning as well as definition of "work" provided in section 194C of the Act. Relying on the definition of "work" provided in section 194C of the Act, it was contended that the term, "work" does not include ITA Nos.193-195/CTK/2019 25 "manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from a person, other than such customer". It was submitted that no material was supplied by the employer to the appellant and that the appellant was solely responsible to mobilize and procure all the material and other resources as per the specification of the employer and accordingly, it was contended that the appellant was not a works contractor as defined ix] s 194C of the Act. • Reliance was also placed on the judgment of the Hon'ble ITAT Kolkata Bench "C" in the case of Adhunik Infrastructure (P) Ltd. vs. J.C.LT., Range-IO, Kolkata [LT.A. No. 1281/Kol/2015] wherein it was held that: "9.3.2. Thus as per section 194C of the Act also, "works contract" does not include a contract wherein, the contractor in addition to employing labour, procures material from a third party. Thus, contracts involving mere labour of the contractor are included in the purview of "works contract". We find that the Hon'ble Supreme Court in case of Associated Cement Co. Ltd. vs. CIT reported in 201 ITR 435 while interpreting the term 'work' u/s 194C of the Act had held that words any work' in section 194C{l) of the Act means any work including supply of labour to carry out work and is not intended to be confined to or restricted to works contract, therefore, a person who credits to the account of or pays to a contractor any sum payable on behalf of organizations specified in section 194C(1) of the Act for carrying out any work (including supply of labour for carrying out any work) is liable to deduct income-tax as required under that sub-section. The words in the sub-section (1) of 194C of the Act on income comprised therein' appearing immediately after the words 'deduct an amount equal to two per cent of such sum as income-tax' from their purport, cannot be understood as the percentage amount deductible from the income of the contractor out of the sum credited to his account or paid to him in pursuance of the contract, but deduction is to be made out of payments made to the contractor, We see no reason to curtail or to cut down the meaning of the plain words used in the section. 'Any work" means any work and not a "works contract", which has a special connotation in the tax law, Indeed in the subsection, the "work" referred to therein expressly includes supply of labour to carry out a work. It is a clear indication of the Legislature that the "work" in the sub-section is not intended to be confined to or restricted to "works contract". The issue before the Hon 'ble Supreme Court in the aforesaid case was whether the term "work" used in section 194C needs to be restricted to "works contract". The Hon’ble Apex Court laid out that the term "work" used in section 194C need not be restricted to "works contracts" (i.e. labour contracts) because the subsection expressly includes supply of labour to carry out work. In other words, it is implied that 'works contract means supply of labour' to carry out work. Thus from the above we may say that a works contract constitutes a contract under which the contractor is merely employing his efforts or labour. Under such a contract, the ITA Nos.193-195/CTK/2019 26 contractee provides the material and other requisites fa complete infrastructure) needed to carry out the desired work to the contractor who by applying his labour to the said material turns the material into a desired product. " (Emphasis Supplied) • The Hon'ble Jurisdictional Bench of IT AT in the case of ARSS Infrastructure Projects Ltd. Vs. ACIT, Circle-2(1), Bhubaneswar [ITA Nos. 142 & 143/CTK/2010] has categorically held as under: "10. Now coming to the merits of the deduction u/ s. 80lA(4) of the Act. A perusal of the provisions of section 80lA(4) of the Act shows that in the explanation 'infrastructure facility' has been specified to mean a road including a toll road, a bridge or a rail system. Admittedly, the assessee is doing the business of development of railway tracks and bridges thereof as also roads. If, we are to accept the contention of the Ld. CIT that the provisions of section 80IA(4) of the Act after the substitution of the explanation to section 80lA of the Act was introduced was only for the purpose of giving the benefit to BOT contracts then, the explanation to section 80lA(4) of the Act becomes otiose. This is as explanation to section 80lA(4) of the Act specifically provides for the road to include a toll road, a bridge or a reil system. BOT contract in respect of the railway system can never exist. Further, a perusal of the provisions of section 80IA of the Act shows that the term works contract is not defined in the said section. However, the terms works' and 'contract 'is defined in the provisions of section 194C of the Act. If a particular word or term is not defined in the specific section then, one could go to other sections in the said Act where the definition would be available to draw a meaning to the said terms. In the provisions of section 194C of the Act, work has been given an inclusive definition but in the subsequent portion it has excluded the manufacturing or supplying a product according to requirement or specification of a customer by using material purchased from a person other than such customer. As has been specified by the Ld. AR, the assessee is doing contract work but that work is according to the requirement and specification of the customer and the same has been done by using materials purchase from third parties other than the customers. Thus, though the assessee is doing a works contract the same would not fall within the meaning of the word works contract' for the purpose of the Act due to the exclusion provided in the meaning of work' in section 194C of the Act. The issue raised by the Ld. CIT that the assessee is not doing the development work but is only doing the contract also does not stand to test as the assessee admittedly is developing the roads and railway lines and the bridges thereof. Development encompasses within itself contract work. The agreement between the assessee and the customer being the government is for the development of the infrastructure facility being roads and rail systems and bridges by participating in the tenders. Under these circumstances, we are of the view that the AD was right in law in granting the assessee the benefit of deduction uls. 80IA(4} of the Act. On this ground also, we ITA Nos.193-195/CTK/2019 27 are of the view that the Ld. CIT’s order passed u/s.263 of the Act is unsustainable and is liable to be quashed and we do so. Here, we may specifically mention that in view of the fact that the explanation to section 80IA(4) of the Act which has been substituted by the Finance, Act, 2009 with retrospective effect of 01.04.2000 is attempting to take away the statutory benefit granted to the assessee uls. 80IA(4} of the Act without making any amendment to the explanation to section 80IA(4} of the Act, the said explanation substituted by the Finance Act, 2009 w.e.f 01.04.2000 being an hindrance to the statutory deduction available to the assessee under the provisions of section 80IA(4) the said explanation would have to stand down in view of the decision of the Hon'ble Supreme Court in the case of S. Sundaram Pillai, referred to supra. Consequently, on this ground also the order passed ii/». 263 of the Act by the Ld. CIT for AY 2006-07 and 2007-08 stands quashed. Appeals of the assessee are allowed." [Emphasis Supplied} • In view of the above discussion and findings re-iterated in the judicial precedents cited supra, it becomes quite clear that even though the definition of "work" provided in 'section 194C of the Act is "inclusive" and not "exhaustive"; yet, it specifically excludes from its purview, "manufacturing or supplying a product according to the requirement or specification of a customer by using material purchased from a person, other than such customer". Therefore, it is evident that a works contract constitutes a contract under which the contractor is merely employing his efforts or labour and under such contract, the contractee provides the material and other requisites a complete infrastructure) needed to carry out the desired work to the contractor who by applying his labour to the said material turns the material into a desired product. • However, in the facts of the present case, the appellant was assigned the responsibility for development of infrastructural facility as a whole and the appellant was solely responsible to mobilize and procure all the material and other resources as per the specification of the employers. The appellant also undertook entrepreneurial and investment/ financial risk besides business risk in executing the development project which was akin to performing work in the nature of developer-cum-contractor. The appellant did not merely employ its labour while executing the project nor was it provided with the material and other requisites fa complete infrastructure) needed to carry out the desired work. Hence, it can be conclusively held that work related to development of infrastructural facility undertaken by the appellant did not partake the nature of "works contract" by any stretch. of imagination. Hence, these reasonings of the LD .PCIT also do not hold good. (viii) The Ld. PClT thereafter 'distinguished the reliance placed by the A.R. on Bombay High Court's decision in the case of Commissioner of Income tax v. ABG Heavy Industries Limited (2010) 322 ITR 323 (Bom), Allahabad High Court's decision in the case of Pr. CIT v. Vijay Infrastructure Ltd. (2018) 402 ITR 363 (All) ITA Nos.193-195/CTK/2019 28 and Mumbai ITAT's decision in the case of ACIT v. Bharat Udyog Ltd (2009) 118 ITD 0336 (Mumbai). (Refer Para 84, 85 & 86 on Page No. 63-64 of the Ld. PCIT's order) Corresponding explanations I justification: • With due respect, it is worth noting that the ld. PClT did not properly appreciate the reliance placed by the A.R. of the appellant on various judicial precedents during the course of revisionary proceedings. The A.R. of the appellant relied on those judicial precedents to substantiate his contention that the appellant, though engaged only in development of infra structural facility, was eligible to claim the benefit of deduction u/s. 80-IA(4) of the Act. However, the ld. PCIT tried to distinguish those judicial precedents by merely stating that the appellant was only a contractor and not a developer and that the decision was rendered prior to Explanation substituted by' Finance (No. 2) Act, 2009 and accordingly, the Ld. PCIT observed that the ratio of those decisions was not be applicable to the present case. • However, as already discussed in the previous paragraphs of this submission, the Ld. PCIT himself was under an absolutely wrong impression about the correct position of law relating to allowability of deduction u/s.80-IA of the Act as a result of which even the genuine claim of deduction of the appellant u/s 80-IA of the Act was directed to be disallowed. The judicial precedents relied upon before the Ld. PClT were squarely applicable to the facts of the present case and the crux of all those decisions in a nutshell was that "an assessee engaged solely in development of infrastructural facility would also be eligible for deduction u/s 80-IA(4) of the ACT • The appellant has comprehensively demonstrated that it assumed all the risks and responsibilities relating to the projects assigned to it by the employers including entrepreneurial risk as well as investment/ financial risk associated with these projects. The appellant was assigned the responsibility for development of infrastructural facility as a whole and it performed the work in the capacity of a developer-cum-contractor which made it eligible for claiming the benefit of deduction u/s 80-IA of the Act. The Ld. PCIT on the other hand opined as per his own sweet will that only those contractors who undertook contracts in the nature of "Build- Operate-Transfer (BOT)" model would be eligible for claiming deduction under this section. It was based on this "incorrect application of law" that the Ld. PCIT time and again stated that the appellant was not a "developer" as envisaged in section 80-IA of the Act. Hence, the action of the Ld.PCIT in distinguishing the judicial precedents relied upon by the appellant which were squarely applicable to the facts of the present case and that too on the basis of "incorrect application of law" is totally unacceptable to the appellant. ITA Nos.193-195/CTK/2019 29 (ix) It has been held in various decisions by the Hon'ble Supreme Court that a person seeking exemption from tax liability on account of any deduction etc. must clearly establish that it is covered by the said provision. Even though liberal interpretation has to be given to a provision grating incentive, the interpretation has to be as per the wording of the section. If the words of the section are clear, then benefits, which are not available under the section, cannot be conferred by ignoring or misinterpreting words in the section. In light of the above discussion and keeping in view the factual and legal matrix of the case, it is held that the A.O. had wrongly allowed the benefit of deduction u/s 80-IA(4) to the assessee in clear violation of the express provisions of the Act and by overlooking Explanation substituted by Finance (No. 2) Act, 2009 below section 80-IA(13) and the contents of circular No. 5/2010 dated 03.06.2010 cited supra. (Refer Para 87 & 88 on Page No. 64 of the Ld. PCITs order) Corresponding explanations/justification: • The appellant rightly claimed deduction u/s 80-1A(4) of the Act as per the wording of the said section since it was engaged in development of infrastructural facilities by performing work in the nature of a developer-cum-contractor. The Explanation substituted by Finance (No. 2) Act, 2009 below section 80-1A(13) of the Act and the contents of circular No. 5/2010 dated 03.06.2010 debarred an assessee carrying out business in the nature of "works contract" from claiming benefit under this section. However, the development work undertaken by the appellant was outside the purview of term "works contract" as illustratively explained in the previous paragraphs of this submission. Hence, there was no violation of the Explanation substituted by Finance (No. 2) Act, 2009 below section 80- lA(13) and the contents of circular No. 5/2010 dated 03.06.2010. In fact, it was the Ld. PCIT who ignored! misinterpreted the clear wordings of the section and opined that only the contractors executing work under the "Build-Operate-Transfer (BOT)" model would be eligible for deduction u/s 80-IA(4) of the Act. • Further, it is a well settled proposition of law that beneficial provision, as in the instant case, should be given liberal interpretation so as to benefit the assessee. The cardinal rule for interpretation of any provision relating to exemption, allowance, deduction, rebate or relief is that they should be interpreted liberally and broadly so as to advance the object sought to be achieved and not frustrate it. The Ld. PCIT himself acknowledged the fact that liberal interpretation has to be given to a provision grating incentive. Thus, even on this count, the appellant performing function of a developer was eligible to claim the benefit of deduction under section 80-1A(4) of the Act. 1.5] The appellant also places reliance on the following judicial precedents wherein similar claim of deduction u/s 80-IA of the Act ITA Nos.193-195/CTK/2019 30 was examined and allowed by the Hon'ble High Court and Hon 'ble Coordinate Benches: CIT v. TRG Industries (P) Ltd reported in [2016j 76 taxmann.com 105 (Jammu & Kashmir) Harish Chandra ARSSPL JVv. ACIT, CircJe-2(l} [IT.A. Nos. 116 to 119 /CTK/2013j ITO} Ward-4(3} v. Backbone ARSS JV [ITA No. 274 & 275/CTK/2016j DCIT, Circle 4(1} v. M/s. ARSS Triveni JV [ITA No. 271/CTK/2016j DCIT, Corporate Circle 1(1} v. ARSS Infrastructure Projects Ltd. [ITA No. 247/CTK/2017j HCIL Adbikerye ARSS JV v. DCIT, Circ1e-4( 1) (ITA No. 81/ CTK/20 18} Sushee Hi Tech Constructions (P) Ltd. v. DCIT, Circ1e-3(2), Hyderabad reported in (2013} 58 SOT 111 (Hyderabad -Trib.) (URO) KMC Constructions Ltd. v. ACIT, Circ1e-2(2) reported in (2012} 21 taxmann.com 138 (Hyd.) Somdutt Builders - NCC (JV) v. ACIT reported in (TS-5050-ITAT- 2017(Hyderabad)-O} ITO, Ward -1(2) v. M/s Ayyappa Infra Projects Pvt Ltd (ITA No. 1323/Hyd/2018} Ayush Ajay Construction Ltd v. ITO reported in (TS-5240-ITAT- 2000(Indore)-O} Tantia Constructions Limited v. DCIT reported in (TS-6372-ITAT- 2016(Kolkata)-O} Simplex Som Datt Builders J V v. ITO reported in (TS-7085-ITAT-20 13(Kolkata)-O} ACIT (CC) -45 v. Pretibbe Industries Ltd reported in (2012j 28 taxmann.com 246 (Mumbai - Trib.] 1.6] In view of the detailed explanations/ justification discussed supra with respect to each reasoning given by the Ld. PCIT for directing the Ld. AO to disallow the claim of deduction of the appellant u/s 80-IA of the Act; it becomes crystal clear that the appellant satisfied all the conditions prescribed ii]» 80-IA(4) of the Act for claiming benefit of deduction therein. The deduction claimed by the appellant u/s 80-IA of the Act was within the four corners of law in light of the facts involved in the present case which were duly supported with the findings re- iterated in the numerous judicial precedents cited during the course of revisionary proceedings and appellate proceedings before the Hon'ble Bench. Rather, it seems that the order passed by the Ld. PClT was itself based on "incorrect application of law" which made the order erroneous and liable to be set-aside on this count itself. Hence, it is hereby pleaded that the Hon'ble Bench may kindly consider the contentions put forth by the appellant and may kindly set-aside the order of the Ld, PCIT on this count. " ITA Nos.193-195/CTK/2019 31 10. Briefly reiterating the above written submissions, the ld. AR further drew our attention towards impugned assessment order for A.Y.2014- 2015 and submitted that the AO has passed order u/s.143(3) of the Act by considering all the issues. Ld. AR further pointed out that the clarification No.22 issued regarding developer with reference to infrastructure facility, industrial park, etc. for the purposes of section 80-IA of the Act issued by the Income Tax Department clarifying the purpose of amendment by Finance Act, 2007 and subsequently Finance Act, 2009, it is clear that in a case where a person makes the investment and himself executes the development work i.e. carries out the civil construction work in the capacity of developer-cum-contractor, he will be eligible for tax benefit under section 80-IA of the Act. The ld. AR submitted that the purpose behind the amendment inserted by Finance Act, 2007 & 2009 was to debar the works contractors from the benefit of section 80IA of the Act, who merely executes work contracts and simultaneously it was also an intention of the legislature to encourage private investors for making investment in the infrastructure development of country, therefore, the benefit was continued to be allowed for the assessees, who are in the business of development of infrastructure facility in the capacity of developer-cum-contractor. 10.1 Ld. AR also submitted that the ITAT Cuttack Bench in the case of ARSS Infrastructure Projects Ltd. Vs. ACIT, ITA Nos.142 & 143/CTK/2010 and other connected appeals, order dated 13.06.2013 in para 10, has categorically held that when the assessee is doing contract work but that ITA Nos.193-195/CTK/2019 32 work is according to the requirement and specification of the customer and the same has been done by using materials purchase from third parties other than the customers/contractee, then the same would not fall within the meaning of the word 'works contract' for the purpose of section 80IA(4) the Act due to the exclusion provided in the meaning of 'work' in section 194C of the Act. Ld. AR further pointed out that in para 10 the Tribunal also held that the issues raised by the ld. Pr.CIT that the assessee is not doing development work but is only doing the contract also does not stand to test as the assessee admittedly is developing the roads and railway lines and the bridges thereof. Development encompasses within itself contract work. The agreement between the assessee and the customer/contractee being the government is for the development of the infrastructure facility being roads and rail systems and bridges by participating in the tenders, therefore, in view of the clarificatory note to clause 22, the assessee is a developer because in a case where the person makes the investment and himself executes the development work i.e. carries out the civil construction work, he will be eligible for tax benefit under section 80-IA(4) of the Act. 11. It was further submitted by the ld. AR that the AO during assessment proceedings issued a show cause notice along with questionnaire to the assessee wherein question No.17, the AO specifically asked about the claim of deduction of assessee u/s.80-IA(4) clause (i) of the Act which was dated 29.11.2016, which was duly replied by the assessee. Thereafter the AO allowed the claim of deduction ITA Nos.193-195/CTK/2019 33 u/s.80IA(4) of the Act, after due verification, examination and proper consideration of facts and circumstances of the case pertaining to the said claim of the assessee. Therefore, the above inquiry conducted by the AO was adequate and sufficient inquiry by way of proper examination and verification of the facts pertaining to the claim of the assessee for deduction u/s.80IA(4) of the Act, thus, it cannot be alleged that the AO has not made any enquiry in this regard. 12. Ld. AR further drawing our attention towards written submissions made before the ld. Pr.CIT in response to notice u/s.263 of the Act, which have been reproduced by the ld. Pr.CIT in para 63 of his order and submitted that as per the order of ITAT Kolkata Bench in the case of Adhunik Infrastructure (P) Ltd. Vs. JCIT, ITA No.1281/Kol/2015, order dated 23.05.2018, wherein it was held that the deduction u/s.80-IA(4) of the Act cannot be denied merely because assessee was paid by Government for development work. Ld. AR also relied on the decision of Hon‟ble Bombay High Court in the case of CIT Vs. ABG Heavy Industries Limited (2010) 322 ITR 323 (Bom). The ld. AR submitted that the assessee is not a mere contractor for execution of work but a “developer” within the meaning of the provisions of Section 80-IA of the Act. The term “contractor” is not essentially contradictory to the term “developer” and s.80-IA(4) itself provides that assessee should develop the infrastructure facility as per agreement with the Central Government, State Government, Railways department or a local authority and, therefore, entering into a lawful agreement and thereby becoming a contractor should, in no way, ITA Nos.193-195/CTK/2019 34 be debarred from claiming deduction being a developer. Ld. AR vehemently pointed out that merely because in the agreement for development of infrastructure facility, the assessee is referred to as contractor or because some basic specifications are laid down or the work has been done in accordance with pure commercial terms, it does not detract the assessee from the position of being a developer; nor will it debar the assessee from claiming deduction under section 80-IA(4) of the Act. For this purpose, ld. AR relied on the decision of ITAT Mumbai Bench in the case of ACIT Vs. Bharat Udyog Ltd (2009) 118 ITD 0336 (Mumbai). Ld. AR also pointed out that going against the “principle of precedence” and “consistency”, the claim of the assessee under similar facts of the case, cannot be denied for present assessment year i.e. A.Y.2014-2015. 13. Ld. AR also pointed out that the assessee company had disclosed gross turnover of Rs.187,85,83,854/- from its contracts division in the return of income and out of this turnover the assessee has only claimed deduction u/s.80IA(4) of the Act pertaining to the contract receipts/partial turnover of Rs.58,82,34,829. The company had executed works contract with different organizations including South Eastern Railways, East-Coast Railway, South-East Central Railway, NHAI, Roads and Buildings (R&B) Department, Rural Works Deptt. (RWD) of Govt. of Odisha, BSNL and other Corporates etc., which includes contract works done by the assessee out of which impugned exempt income u/s.80-IA(4) of the Act was accrued to the assessee. Ld. AR pointed out that the assessee is a developer-cum-contractor, therefore, the ld. Pr.CIT was not right in ITA Nos.193-195/CTK/2019 35 observing that the AO was not correct in allowing the claim deduction u/s.80-IA(4) of the Act and the AO did not enquire or verify the admissibility of the claim under the provision of Section 80-IA(4) of the Act in the light of the Explanation inserted below to Section 80-IA(13) of the Act. 14. Drawing our attention towards balance sheet as on 31.03.2014, ld. AR submitted that the assessee has undertaken investment risk, financial risk, entrepreneur risk and business risk while discharging function in the capacity of developer and contractor, which is clearly discernible from the balance sheet wherein the financial assets of more than 42 crores have been utilized by the assessee for its business of developer –cum- contractor. Further drawing our attention towards profit and loss account as on 31.03.2014, ld. AR submitted that as per Schedule 25 to the audited books of accounts, the cost of material consumed during the relevant financial period comes to Rs.102,48,61,659/- and the assessee has purchased material during the relevant period of Rs.106,25,62,108/- for the purpose of its business on functioning as developer-cum-contractor, therefore, the assessee cannot be put in the category mere works contractor, who discharges/functions as per directions of the contractee by providing labour and other supports without taking any investment risk, financial risk, entrepreneur risk or any other business risk. This fact has never been disputed by the department or there is no adverse observations by the ld. Pr.CIT in the impugned order in this regard. Ld. AR also pointed out that the assessee has submitted project operation ITA Nos.193-195/CTK/2019 36 report in the form 10CB, which clearly shows that the assessee has used high cost machines/equipments for development of infrastructural facilities and has also used material of huge cost which were purchased and consumed during the relevant financial year for completing the work of development of infrastructural facility, therefore, the assessee is very well entitled to be claimed as developer-cum-contractor and, thus, entitled for deduction u/s.80IA(4) of the Act. 15. Referring to clause No.(a) of clause (i) of sub-section (4) of Section 80IA of the Act, ld. AR submitted that this section applies to any enterprises carrying out business of (i) developing or (ii) operating (ii) operating and maintaining or (ill) developing operating and maintaining any infrastructure facility which fulfils all the following conditions, i.e.(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," Ld. AR submitted that this provisions provides any other body established or constitute under any Central Government or a State Government or a local authority or any other statutory provisions of any Act or law enacted by Central Government or State Government such as joint venture entity, then it is also entitled for deduction u/s.80IA(4) of the Act and same situation is in other two cases i.e. ITA Nos.193&194/CTK/2019, wherein under joint venture agreements these entities have been created by group of companies, and they received their share from respective joint venture entity, therefore, on the strength of allegation of sub-contract given by ITA Nos.193-195/CTK/2019 37 them or executed by them, they cannot be debarred by availing benefit u/s.80IA(4) of the Act. Ld. AR also submitted that no outsider sub- contractor has been assigned the development work by the company and developing of infrastructural facility has been assigned to the members of the consortium only and, thus, the assessee in lieu of requirement for qualifying the position of a developer left aside the position of work contract, therefore, it is eligible for deduction u/s.80IA(4) of the Act, and, thus, the ld. Pr.CIT was not correct in revising the assessment order by invoking provisions of Section 263 of the Act on the strength of Explanation below section 80IA(13) of the Act. 15.1 The ld. AR also pointed out that the ld. Pr.CIT has placed heavy reliance on the decision of Hon‟ble Bombay High Court in the case of AVG Industries ltd. (supra) for levelling the assessee as works contractor but this reliance is misplaced as in this order itself the Hon‟ble High Court in paras 22 & 23, after analyzing the legal position held that the amendment made by the Parliament to Section 80IA(4) of the Act by Finance Act, 2001 said the matter beyond any controversy by stipulating that the three conditions for development, operation and maintenance were intended to be cumulative in nature and assessee is doing work of development of infrastructure, which is wider than the term of works contract, thus, the assessee is very well entitled to be held the position of developer-cum-contractor and entitled for deduction u/s.80IA(4) of the Act, therefore, orders of ld. Pr.CIT may kindly be set aside being unsustainable. ITA Nos.193-195/CTK/2019 38 16. The ld. AR drew our attention towards pages 183 to 240 of assessee‟s paper book and submitted on merits by way of judgments of Hon‟ble Supreme Court, Hon‟ble various High Courts and the orders of the coordinate bench of the Tribunal, it is amply clear that the assessee was very well entitled deduction u/s.80IA(4) of the Act, being a developer- cum-contractor and it cannot be leveled as a contractor only executing the work contract in view of the factual matrix of the case. Ld. AR submitted that the developer is a person who designs and creates new products. He is the one who conceives the project. He may execute the entire project himself or assign some parts of it to others to be executed under his guidance for development of infrastructure facility. On the contrary. the works contractor is the one who is assigned a particular job to be accomplished on the behalf of the developer by way of supplying labour and other site-supports without any investment or financial or entrepreneur risk. There may in certain circumstances be overlapping in the work of developer and works-contractor, but the line of demarcation between the two is thick and unbreachable. When the person acting as developer, who designs the project, also executes the construction work, he works in the capacity of contractor too. But when he assigns the job of construction to someone else, he remains the developer simpliciter, whereas the person to whom the job of construction is assigned, becomes the contractor. The role of developer is much larger than that of the works contractor. As every developer-cum-contractor is first a contractor, who carries out work of development of infrastructural facility but every works ITA Nos.193-195/CTK/2019 39 contractor is not a developer cum-contractor. Ld. AR also submitted that the contractor in certain circumstances, a developer may also do the work of a contractor but a mere work contractor per se can never be called as a developer, who undertakes to do work according to the pre-decided plan and bearing all kind of business risks. 17. Ld. AR also submitted that before the ld. Pr.CIT during the course of revisionary proceedings u/s.263 of the Act, it was submitted that the assessee brought in his own material according to the specification of the employer, skilled man power, technical expertise for the execution and timely completion of the work, responsibility of development, to rectify and/or indemnify against damages and had undertaken entrepreneurial and investment risks while carrying out the infrastructure development facilities. It was further submitted that all the agreements entered into by the assessee carried such clauses which proved that the appellant was taking all sorts of risk whether it be entrepreneurial risk, investment risk or business risk. The appellant also submitted a detail risk analysis table in respect of one of these agreements entered into with the employer which is also reproduced hereinabove so as to prove that the appellant complied with all the conditions of being a developer and was not a mere works contractor. 18. Ld. AR further submitted that the assessee company as per detailed risk analysis placed at pages 212 to 215 of the assessee‟s paper book, it is clear that that the assessee not only undertakes the entrepreneur risk, financial risk and investment risk, which are the well ITA Nos.193-195/CTK/2019 40 settled parameters to distinguish a contractor- cum-developer from a mere contractor engaged in works contract. Ld. AR further submitted that the assessee was required to furnish details of technical personnel, plant and machinery, past experience of similar work, financial strength etc. at the time of applying for tender in the form of technical bid, which further prove beyond doubt that the appellant not only carried business risk but also undertook entrepreneurial risk, financial risk and investment risk. Ld. AR also submitted that the assessee was required to furnish various details such as qualification and experience of key personnel who shall be looking after the administration and execution of the project, list of machineries/equipment deployed for execution of the projects, experience of similar work undertaken in the past and performance record etc. which clearly establish that the assessee worked as a developer-cum-contractor during the execution of these projects out of exempt income accrue to the assessee. Ld.AR submitted that in view of the parameters laid down in the judicial precedents (supra) and on perusal of the relevant clauses of the agreements entered into by the appellant with these employers/contractees and on perusal of the documents furnished at the time of applying for tender, there remains absolutely no doubt that the assessee was a contractor performing the work in the nature of a developer-cum-contractor and was assuming all risks and responsibilities which made it eligible for deduction under section 80-IA(4) of the Act in respect of the development of eligible infrastructural facilities. ITA Nos.193-195/CTK/2019 41 19. Ld. AR also pointed out that the assessee was assigned full responsibility to do all acts for execution and completion of work right from the beginning till handing over of the project to the contractee. The contract was not for a specific work but for development of the infrastructural facility as a whole. The contract also bound the assessee for change of scope of work in respect of any deviation/modification/extra work as envisaged during the execution of the project. It was also submitted by ld. AR that the assessee was assigned with the responsibility of development of the infrastructural facility as a whole and the fact that the assessee deployed its resources (material, machinery, labour etc.) in the construction work and that the assessee was liable to indemnify the employer/contractee for any losses/ damage caused to any property/life in the course of execution of work, which clearly shows the various risks undertaken by the assessee, which is also amply demonstrated vide the various clauses contained in the agreements executed by the assessee. 20. Ld. AR also vehemently submitted that the ld. Pr.CIT, at pages 52 & 53 in para 69, wrongly noted that assessee's auditor issued certificates in Form No. 10CCB, certifying the assessee as a "developer" eligible for deduction under the said section in contravention of the express provisions of the Act. In fact, even in previous two assessment years i.e. A.Y. 2012-13 & 2013-14, the A.O. had disallowed the assessee's similar claim of deduction u/s 80-IA(4) of the Act, and, thus, the AO should have disallowed the similar claim for present A.Y.2014-2015 also. On these ITA Nos.193-195/CTK/2019 42 observations of the ld. Pr.CIT, ld. AR vehemently pointed out that the facts of the case clearly shows that the assessee was a contractor who was performing work in nature of a developer-cum-contractor and was also assuming risks and responsibilities akin to that of a developer thereby entitling it to claim the benefit of deduction under section 80-lA(4) of the Act. Therefore, the auditor of the assessee rightly issued certificates in Form No. 10CCB certifying the assessee as a "developer" eligible for deduction under the said section in contravention of the express provisions of the Act. The ld. AR submitted that the appeals of the assessee against said orders is pending before the ld. CIT(A) and the assessee has not accepted the position by way of agitating the assessment orders before first appellate authority, therefore, the issue of allowability deduction u/s.80IA(4) of the Act has not attained finality against the assessee. Furthermore, the principle of res judicata does not apply to the tax proceedings and the AO is not debarred from considering the entire facts and circumstances of the assessment year under consideration before him for adjudicating and allowing any claim of the assessee. 21. Ld. AR also submitted that under the Income Tax Act, each assessment year is a different year and each assessment is separate and independent, therefore, the AO is duty bound to consider the allowability of claim of assessee in the assessment year under consideration before him based on facts and circumstances and prevalent law on year-to-year basis. The fact that the erstwhile AO disallowed the appellant's similar ITA Nos.193-195/CTK/2019 43 claim of deduction u/s 80-IA(4) of the Act for A.Y. 2012-13 & A.Y. 2013-14 does not in any way preclude the Ld. AO to consider the issue of allowability of claim of deduction u/s 80-IA(4) of the Act on merits of the case for A.Y. 2014-15. The Ld. AO accepted the appellant's claim of deduction u/s 80-IA(4) of the Act for the A.Y. 2014-15 after going through all the relevant material placed on record and after considering the submissions made during the course of assessment proceedings. He also submitted, that it is worth mentioning that the deduction claimed by the appellant u/s 80-IA(4) of the Act was legal and within the four corners of law and the appellant cannot be deprived the benefit of deduction under this section merely for the reason that the erstwhile AO failed to properly appreciate and understand the facts of the case on its merits. Even otherwise, it is worth noting that the disallowance of the assessee‟s similar claim of deduction u/s 80-IA(4) of the Act for A.Y. 2012-13 & A.Y. 2013-14 by the erstwhile AO was not accepted by the assessee and the disallowance of deduction claimed u/s 80-IA(4) of the Act was challenged in appeal before the Ld. CIT (A) which is still pending for disposal. Hence, no adverse inference can be drawn against the assessee on the strength of said two assessment years‟ orders, which have not attained finality. 22. Ld. AR further submitted that observations at para 75 page 58 of the ld. Pr.CIT‟s order u/s.263 of the Act are perverse and unsustainable, being completely ignorant of the fact that every person who enters into an agreement with Government for development of infrastructural facility will necessarily be a contractor. It is an undisputed fact that even a person ITA Nos.193-195/CTK/2019 44 who enters into a contract for development of infrastructure facility is termed as a "contractor". Therefore, contractor and a developer cannot be viewed differently. Every contractor may not be a developer but every developer developing infrastructure facility on behalf of the Government, is a contractor. Hence, the fact that the assessee was to execute the work as a "contractor" as per the terms of the contract does not in any way debar the assessee from claiming the benefit of deduction u/s. 80-IA(4) of the Act since those contractors who perform work in nature of a developer-cum-contractor and also assume risks and responsibilities akin to that of a developer, are eligible for claiming deduction u/s 80-IA of the Act. The ld. AR drawing our attention towards relevant parts of written submission and risk analysis table/chart submitted that the assessee assumed entrepreneurial and financial/investment risks other than business risks which per se entitled the assessee to claim the benefit of deduction under this section since the assessee performed work in nature of a developer-cum-contractor. In respect of the next reasoning given by the ld. Pr.CIT coupled with the example of eligibility of deduction u/s 80IA(4) of the Act in respect of building of a stretch of highway with own money without payment by government & then maintaining it through a revenue model like toll collection; ld. AR submitted that the said reasoning and example was based upon the law which prevailed prior to the changes brought in the Finance Act 2001 w.e.f. 1st April 2002 where the requirement for developing and operating & maintaining of infrastructure facility simultaneously was done away with. The effect of such a change ITA Nos.193-195/CTK/2019 45 brought in the Finance Act 2001 was that the deduction u/s 80-IA(4)(i) of the Act was now also available to assessee who was engaged only in development of infrastructure facility "or" engaged only in operation & maintenance of infrastructure facility "or" engaged in both developing, operating and maintaining any infrastructure facility. The word 'or' has to be read as disjunctively and that each of the enterprise, i.e. (i) developing 'or' (ii) operating and maintaining 'or' (iii) developing, operating and maintaining of a new infrastructure facility should be read independently and if the assessee fulfils one of the above conditions, it will be entitled to benefit of Section 80-IA(4) of the Act. This issue has no more res integra after the judgment of Hon‟ble Bombay High Court in the case of ABG Industries Ltd. (supra). 23. Ld. AR also placed reliance on various decisions including the decision of Hon‟ble Bombay High Court in the case of ABG Heavy Industries Ltd. [2010] 322 ITR 323 (Bombay), order of the ITAT Rajkot Bench in the case of Katira Construction Ltd., [2019] 119 taxmann.com 489 (Rajkot-Trib), order dated 30.07.2020, order of the Indore Bench of the Tribunal in the case of Sanee Infrastructure (P.) Ltd. [2012] 23 taxmann.com 345 (Indore), order of the ITAT Kolkata Bench of the Tribunal in the case of SPML Infra Ltd., TS-6009-ITAT-2016 (Kolkata)-O and the order of the Cuttack Bench of the Tribunal in the case of ARSS Infrastructure Projects Ltd., ITA Nos.142&143/CTK/2020. Ld. AR further submitted that on the strength of the above noted judicial precedence, it is crystal clear that the assessee an assessee w.e.f. A.Y. 2002-03 became ITA Nos.193-195/CTK/2019 46 entitled for claiming benefit under this section even if it was engaged only in developing the infrastructure facilities. However, the example cited by the Ld. Pr.CIT regarding building of a stretch of highway with own money without payment by government and then maintaining it through a revenue model like toll collection is an example which would have hold good if the case of the appellant pertained to the period prior to A.Y. 2002-03 wherein an assessee was required to develop, operate and maintain an infrastructure facility simultaneously in order to be eligible for claiming deduction u/s.80-IA of the Act i.e. only the contracts awarded as per the Build-Operate & Transfer (BOT) Model were eligible for deduction under this section for the period prior to A.Y. 2002-03. Ld. AR submitted that after amendment w.e.f. A. Y 2002-2003, even if a person is engaged in the business of development of infrastructure facilities is eligible for claim of deduction u/s.80IA(4) of the Act. Therefore, the observations made by the ld. Pr.CIT in this regard in para 75 of the impugned order are contrary to the legislative intent and amendments brought from A.Y.2002- 03 akin to the present case which is pertaining to A.Y.2014-2015. 24. Ld. AR further pointed out towards para 76 of the impugned order of ld. Pr.CIT wherein it has been observed by the ld. Pr.CIT that the Auditor of the assessee has treated the assessee as a "Civil Contractor" in auditor's report in Form No. 3CD and not as an entity engaged in any of the activities mentioned in section 80-1A(4)(i) of the Act. Ld. AR further submitted that the assessee concurs with the finding that it was a "contractor". However, it was a contractor performing work in the nature of ITA Nos.193-195/CTK/2019 47 developer-cum-contractor and was engaged in development of infrastructural facilities. It was not merely a contractor engaged in works contract supplying only labour as per the specifications of the employer. Any person engaged in development of infrastructural facilities on behalf of Government would necessarily be a contractor in the first place. Thereafter, it has to look into as to whether the person is engaged in contract for development or merely in works contract. The auditor‟s report describes the assessee as a "contractor" does not in any way debar it from claiming the benefit of deduction u/s 80-lA of the Act since the assessee performed work in the nature of developer-cum-contractor, which is amply clear from the terms of the contract agreement and books of accounts of the assessee, which clearly shows that the assessee was not merely a contractor but also a developer by taking entrepreneur financial risk, business risk by way of making huge investments in machines/equipments and by incurring huge cost on material, labour and technical experts for development of a infrastructure facility, which qualifies the assessee as a developer-cum-contractor and keep the assessee out of the basket of works contract. Ld. AR also submitted that an auditor is required to choose the nature of business! profession in the tax audit report on the basis of limited options available to choose from in the list which is not at all exhaustive. The auditor chose the type of business in the tax audit report which closely resembled the nature of work undertaken by the assessee. In common parlance, a "civil contractor" is used to mean a business entity which is engaged in the ITA Nos.193-195/CTK/2019 48 business of building roads, bridges, docks and other infrastructural development. Hence, the reasoning that the auditor himself reported the nature of business of the assessee in the tax audit report as that of a "civil contractor" does not lead to any negative inference regarding the eligibility of the appellant to claim the benefits of deduction u/s 80-IA(4) of the Act. An auditor‟s report is not only a parameter but other facts of the case are more relevant which clearly reveals that the assessee is not a civil contractor but a developer-cum-contractor. 25. Drawing our attention towards para 77 of the impugned order of ld. Pr.CIT, ld. AR submitted that the observation of the ld. Pr.CIT are based on wrong interpretation and understanding of law. Agreements for executing normal "works contract" entered into with Govt. departments cannot be equated with the "agreements" for the purpose of the section 80-IA(4)(i)(b) of the Act, which are limited only to (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructural facility. Otherwise, the whole purpose of having the Explanation below section 80-IA(13) of the Act would be defeated. It was also observed by the ld. Pr.CIT that since the assessee company did not enter into any agreement for simultaneously building, operating or maintaining any infrastructure facility"; it was not eligible to claim the benefit of deduction u/s 80- IA(4) of the Act. 26. In this respect, the ld. AR vehemently objected to the above- mentioned observations of the Ld. PCIT and submitted that this requirement was law which was changed by the Finance Act 2001 w.e.f. ITA Nos.193-195/CTK/2019 49 1st April 2002 and such law did not even exist in the statute book since several years'. The Ld. PCIT passed order u/s 263 of the Act based on a "mistake of law" as on the date of passing of assessment order by the AO, the assessee who rightly claimed deduction u/s 80-IA(4) of the Act based on the correct interpretation and understanding of law applicable for the A.Y. 2014-15 i.e. for the year under consideration. Therefore, the assessment order cannot be alleged and erroneous and prejudicial to the interest of revenue on all four corners of merits. Therefore, the contention of ld. Pr.CIT in para 77 and other paras are based on wrong interpretation and understanding of law, thus, not sustainable. 27. Ld. AR further drew our attention towards para 78 of the impugned order and submitted that the Pr.CIT also observed that the assessee was undertaking several risks by referring to some of the clauses of the agreement is devoid of merit for the simple reason that these standard clauses appear in all Govt. contracts. When work is awarded by Govt. Departments and payment is made out of exchequer, it is but natural that the Principal i.e. the Govt. would secure the quality of the work and adherence to time schedule by imposing certain conditions on the contractor with regard to the quality of material to be utilized, the quality of personnel to be engaged to oversee the work, the liability for damages during the period of execution of the work etc. These conditions are imposed on every contractor by the Govt. Departments. Ld. AR pointed out that the reasoning recorded by the Pr.CIT rejecting the claim of deduction u/s.80IA(4) of the Act merely for the reason all the Government ITA Nos.193-195/CTK/2019 50 contracts contained these standard clauses is totally perverse and bad in law more so when the appellant duly satisfied all the conditions prescribed therein for claiming the benefit of deduction under section 80-IA(4) of the Act. 28. Referring to para 81 to 83 of the impugned order, ld. AR submitted that the ld. Pr.CIT wrongly observed that the assessee did not fall in the category of "work" defined in Explanation (iv) to section 194C of the Act and therefore, the assessee would not get hit by the provisions of Explanation appearing below 80-IA(13) of the Act, has no merit. It is evident that the definition of "work" appearing in Explanation (iv) to section 194C of the Act is an "inclusive" definition, meaning thereby that the above definition is not "exhaustive". In other words, the word "work" would take in its ambit whatever falls within the natural, grammatical and ordinary meaning of "work" and in addition to that, other activities, which in the normal course would not mean "work", would also be treated as such by virtue of this "inclusive" definition. It was also submitted by ld. AR that no material was supplied by the employer to the appellant and that the appellant was solely responsible to mobilize and procure all the material and other resources as per the specification of the employer and accordingly, it was contended that the assessee was not a works contractor as defined u/s 194C of the Act. Ld. AR has placed reliance on the order of the ITAT Kolkata Bench “C” in the case of Adhunik Infrastructure (P) Ltd., ITA No.1281/Kol/2018 and the decision of the Cuttack Bench of the Tribunal in the case of ARSS Infrastructure Ltd. ITA Nos.193-195/CTK/2019 51 (supra) and submitted that the work contract means supply of labour to carry out work and a work contract constitutes a contract under which the contractor is merely employing his efforts or labour and under such contract, the contractee provides the material and other requisites (complete infrastructure) needed to carry out the desired work to the contractor who by applying his labour to the said material turns the material into a desired product. But in the present case, the assessee did not merely employed the labour, but while executing the contract it provided with the material and other requisites machinery/equipment etc. by way of huge investments in purchase of said items, which ( complete infrastructure) needed to carry out the desired work. Hence, it can be conclusively held that work related to development of infrastructural facility undertaken by the appellant did not partake merely the nature of "works contract" by any stretch of imagination but the same was in the capacity of developer-cum-contractor. Hence, these reasonings of the ld.Pr.ClT also do not hold good. 29. Also drawing our attention towards para 84 to 86 of the impugned order, ld. AR submitted that the ld. Pr.CIT did not properly appreciate the case laws and judgment cited by ld. AR during the course of revisionary proceedings and tried to distinguish those judicial precedents by merely stating that the assessee was only a contractor and not a developer and that the decision was rendered prior to Explanation substituted by Finance (No. 2) Act, 2009 and accordingly, the Ld. Pr.CIT observed that the ratio of those decisions was not be applicable to the present case. Ld. AR ITA Nos.193-195/CTK/2019 52 vehemently pointed out that the assessee has successfully demonstrated before the Pr.CIT that it has assumed all the risks and responsibilities relating to the projects assigned to it by the employers including entrepreneurial risk as well as investment/ financial risk associated with these projects. The appellant was assigned the responsibility for development of infrastructural facility as a whole and it performed the work in the capacity of a developer-cum-contractor which made it eligible for claiming the benefit of deduction u/s 80-IA of the Act. These observations of ld. Pr.CIT are baseless. 30. Ld. AR lastly drawing our attention towards para 87 & 88 of the order of the Pr.CIT submitted that keeping in view the factual and legal matrix of the case, ld. Pr.CIT was wrong in observing that the AO had wrongly allowed the benefit of Section 80IA(4) of the Act, which is clear violation of the Explanation substituted by Finance (No.2) Act, 2009 below section 80IA(13) and the contents of Circular No.5/2010 dated 03.06.2010. Ld. AR also submitted that these observations of the Pr.CIT are not correct, justified and sustainable because the assessee has rightly claimed deduction u/s.80IA(4) as per the amendment to the said Section since it was engaged in development of infrastructural facilities performing the work in the nature of a developer-cum-contractor. Ld. AR submitted that the Explanation substituted by Finance (No.2) Act, 2009 below Section 80IA(13) of the Act containing the Circular No.5/2010 dated 03.06.2010 debarred an assessee/entity carrying out the nature of the “work contract” from claiming benefit under this section. In fact, it was the ITA Nos.193-195/CTK/2019 53 Ld. PCIT who ignored and misinterpreted the clear wordings of the section and opined that only the contractors executing work under the "Build-Operate-Transfer (BOT)" model would be eligible for deduction u/s 80-IA(4) of the Act. Ld. AR also submitted that the cardinal rule relating to exemption, allowance, deduction, rebate or relief is that they should be interpreted liberally and broadly so as to advance the object sought to be achieved and not frustrate it. Ld. AR submitted that unfortunately the ld. PCIT himself acknowledged the fact that liberal interpretation has to be given to a provision grating incentive. Thus, even on this count, the appellant performing function of a developer was eligible to claim the benefit of deduction under section 80-IA(4) of the Act. Therefore, on merits, the order passed by the Pr.CIT is not sustainable and, thus, bad in law. Thus, the deduction claimed by the assessee was within the four corners of law in light of the facts involved in the present case which were duly supported with the findings reiterated in the numerous judicial precedents cited during the course of revisionary proceedings and appellate proceedings before the Tribunal. Therefore, the order passed by the ld. Pr.CIT based on incorrect application of law which made the order erroneous and liable to be set-aside on this count itself. 31. The ld. AR of the assessee also placed reliance on the following judicial precedents in support of its contention: i) The Pr. CIT, Surat-2 v. Sbreeji Prints (P) Ltd reported in [2021] 130 taxmann.com 294 (SC); ii) CIT (Central) v. Max India Ltd reported in [2008] 166 Taxman 188 (SC); iii) CIT, Gujarat-II v. Kwality Steel Suppliers Complex reported in [2017] 84 taxmann.com 234 (SC) ITA Nos.193-195/CTK/2019 54 iv) CIT, Central- III v. Nirav Modi reported in [2016] 71 taxmann.com 272 (Bombay) v) CIT v. Honda Siel Power Products Ltd reported in [2010] 194 Taxman 175 (Delhi) vi) CIT, Meerut v. Vam Resorts & Hotels (P) Ltd reported in [2019] 111 taxmann.com 62 (Allahabad) vii) CIT v. Rashid Exports Industries reported in [2016] 66 taxmann. com 38 (Allahabad) viii) CIT v. International Society For Krishtie Consciousness reported in [2020] 117 taxmann.com 799 (Karnataka) ix) CIT, Bangalore v. Chemsworth (P) Ltd reported in [2020] 119 taxmann.com 358 (Karna taka) x) The CIT, Chennai v. M/ s. A.R. Builders & Developers P Ltd. [T. CA. No. 7 of 2020] xi) Aakash Ganga Promoters & Developers v. Pr. CIT [ITA No. 164/CTK/2019] xii) Siddh International v. ClT reported in (2009/32 SOT 14 (Ahmedabad) (URO) xiii) Goa Bombay Roadlines v. CIT (ITA No. 3104/Del/2013/ xiv) M/s. Sunray Cotspin (P) Ltd. v. Pr.CIT, Gurgaon (ITA No. 5239/DEL/2019) xv) Synergy Waste Management (P) Ltd v. The ACIl'; Hiser reported in (2017/ 88 taxmann. com 405 (Delhi - Trib.] xvi) M/s Singhel Enterprises Pvt. Ltd v. DCIl'; CC-4(l), Kolkata (ITA Nos. 1071 &1072/Kol/2018) xvii) Khetawat Properties Ltd. v. Pr. CIT-4, Kolkata (f T.A. No. 578/Kol/2019) xviii) Unipro Techno Infrastructure (P) Ltd v. PCIT reported in (2017/88 taxmann.com 854 (Chandigarh - Trib.] xix) KR. Construction v. Pr. CIT-Central-3 (ITA No. 7615/Mum/2019) 32. It was also contended by the ld. AR that it is also worth noting that the reliance placed by the Ld. PCIT on the decision of the Hon'ble Jurisdictional Bench of ITAT in the case of Cuttack Development Authority Vs. CIT, Cuttack [ITA No. 361/CTK/2014] wherein action of the Pr. ClT u/s 263 of the Act was upheld, was totally misplaced since facts of that case and facts of the present case are clearly distinguishable. In that case of Cuttack Development Authority, the AO did not examine the issue and did not conduct any enquiries while framing the assessment order u/s 143(3) of the Act whereas in the facts of the present case, the Ld. AO raised a specific query by way of notice u/s.142(1) of the Act along with ITA Nos.193-195/CTK/2019 55 questionnaire requiring the assessee to furnish supporting documentary evidences so as to substantiate the deduction claimed by it u/s 80-IA(4) of the Act and the Ld. AO allowed the said claim of deduction, only after scrutinizing, examining and verifying all the relevant material placed on record including the documentary evidences/ books of accounts/reports in Form 10CCB and other papers produced during the course of assessment proceedings. Hence, findings of the Jurisdictional Bench of ITAT in the case of Cuttack Development Authority Vs. ClT, Cuttack shall not be applicable to the facts of the present case. 33. Further, the Ld. AR of the assessee submitted that Pr.CIT time and again re-iterated in his order that order passed by the Ld. AO shall be deemed to be erroneous and prejudicial to the interests of the revenue since" the order was passed without making inquiries or verification which should have been made as per Explanation-2 (a) to section 263(1) of the Act. In this respect, ld. AR submitted that the above-stated allegation of the Ld. PCIT does not hold water for the simple reason that the Ld. AO passed assessment order only after conducting detailed inquires with respect to the reasons for selection of the case for scrutiny including the impugned claim of the assessee. Even otherwise, Explanation 2 to section 263(1) of the Act was inserted w.e.f. 01.06.2015 and it should apply prospectively from A.Y. 2016-2017 onwards and not retrospectively i.e. Explanation 2 to section 263(1) of the Act shall not apply to the proceedings for the year under consideration i.e. for A.Y. 2014-15. The ITA Nos.193-195/CTK/2019 56 above-stated proposition has been affirmed in the following judicial precedents: i) M/s Indus Best Hospitality & Realtors Pvt. Ltd. Vs. Pr. CIT-6} Mumbai [ITA No. 3125/Mum/2017j ii) AV Industries v. ACIT [ITA No. 3469/Mum/2010j iii) Metacaps Engineering and Mahendra Constructions Co. (JV) v. CIT [ITA No.2895/Mum/2014j iv) Reliance Money Infrastructure Ltd. v. PCIT [ITA No. 3259/Mum/2017j v) Shantikrupa Estate Pvt. Ltd. [ITA No. 1252/Ahd/2015] vi) Amira Pure Foods Pvt. Ltd. v. PCIT [ITA No. 451/Del/2017] 34. Replying to the above, ld. Departmental Representative (CIT-DR) also drew our attention to the assessment order passed by the AO for A.Y.2014-2015 in the case of M/s SBEPL-GRIL (JV) in ITA No.194/CTK/2019 and submitted that the nature of business of the Joint Venture company has been stated to be “works contract”. He further drew our attention towards para 3,6 & 10 of the impugned order passed by ld. Pr.CIT in that case and submitted that it was clearly found that the assessee is a Joint Venture(JV) of Shree Balaji Engicon Pvt. Ltd. (SBEPL) and G.R.Infra Projects Ltd.(GRIL), having profit sharing ratio of 70% and 30% respectively. In Form No.3CD, at Sl.No.7(a) of Part-B, the Auditor had specifically mentioned the nature of business or profession carried out by the JV during the previous year was “works contract”. Further, in the said Audit Report in Form No.3CD (Sl.No.26 of Part-B), the Auditor had certified that section-wise details of deductions, if any, admissible under Chapter VIA of the Act at Nil. Ld. CITDR also submitted that in this case, the assessee had claimed entire amount of profit from works contract as deduction u/s.80-IA(4) of the Act which was not admissible as ITA Nos.193-195/CTK/2019 57 per Explanation inserted below Section 80-IA(13) of the Act, which has been reproduced by the ld. Pr.CIT in para 6 of the impugned order. Ld. CITDR further drew our attention towards para 10 & 11 of the order of the ld. Pr.CIT and submitted that the assessee is a joint venture and the actual work had been executed by the assessee‟s member company i.e. M/s Shree Balaji Engicons (P) Ltd. as a sub-contractor and the assessee is not a developer but Government of India, Railways department and Government of Odisha are developers of the infrastructure facility, therefore, the assessee cannot not be, by no means of imagination, could have claimed to be a developer of the project, thus, was not entitled deduction u/s.80-IA(4) of the Act. 35. Ld. CITDR further drew our attention towards audit report of M/s SBEPL Grill (Joint Venture) pertaining to ITA No.194/CTK/2019, available at pages 32 to 51 of assessee‟s Paper Book-1 and submitted that in this case, the assessee has not taken any financial risk and this company has granted sub-contract for execution of work to a group company, thus, there was no purchases of raw materials, no increasing of any expenses of labour, technical and other operation work, therefore, this company was executing merely work contract in a capacity of contractor and not a developer. Ld. CITDR also drew our attention towards column 28 at page 39 of audit report in the case of SBEPL Grill (Joint Venture) and submitted that the assessee himself writes its status as work contractors and came out of the obligation of day-to-day for the items utilized for the execution of work, hence, it was submitted that it is not possible to furnish the quantity ITA Nos.193-195/CTK/2019 58 details of individual case. Ld. CITDR vehemently pointed out that this assessee itself is accepting that he is doing contract work then how he can be treated as developer for the purpose of deduction u/s.80IA(4) of the Act. The ld. CITDR in ITA No.193/CTK/2019 for A.Y.2014-2015 i.e. in the case of Rawats-Balaji(JV) for A.Y.2014-2015 deduction u/s.80IA(4) of the Act was claimed amounting to Rs.12,49,491/- and as per copy of the joint venture agreement available at pages 47 to 54 of the assessee‟s paper book, it is amply clear that this assessee executed works contract by way of sub-contract to a group company i.e. SBEPL, and thus not entitled for deduction u/s.80-IA(4) of the Act. 36. Ld.CIT-DR also submitted that the tax audit report of Shree Balaji Engicons Pvt. Ltd. has not been filed in the paper book and separate books of accounts have not been maintained by the assessee. Ld. CITDR also drew our attention towards pages 77 to 180 of the assessee‟s paper book and submitted that the audit report u/s.80-IA dated 10.11.2014 was not filed along with paper book filed before the Tribunal. Ld. CITDR also submitted that when there is no drawing, design, no planning has been done by the assessee, simply contract work has been executed as per the direction of the contractee, therefore, the present assessee cannot be said to be developer-cum-contractor for the purpose of deduction u/s.80IA(4) of the Act. Ld. CITDR also placed reliance on the decisions of Hon‟ble Madras High Court in the case of Covanta Samaipatti Operating (P) Ltd., 93 taxmann.com 38 (Madras) & ITAT Mumbai in the case of M/s Marriot International Licensing Company BV, 35 taxmann.com 400 ITA Nos.193-195/CTK/2019 59 (Mumbai) and on the order of the ITAT Bangalore Bench in the case of Yojaka Marine (P) Ltd., 25 taxamnn.com 260 (Bangalore) to support his contentions. Ld. CIT-DR has also placed reliance on the decision of Madhya Pradesh High Court in the case of Deepak Kumar Garg 299 ITR 435 (MP) at para 4 and submitted that only a semblance of enquiry by taking papers/documents on record in a hasty manner without any further verification and explanation amounts to an act of no enquiry, and, therefore, the assessment order has to be held as erroneous and prejudicial to the interest of revenue. Therefore, order of ld. Pr.CIT based on clear facts and circumstances against the assessee, may kindly be confirmed dismissing the appeal of the assessee. The ld. CITDR did not make any other arguments on this issue of merits of the claim of the assessee. 37. Placing rejoinder to the above, the ld. AR submitted that the facts of business model followed by these assessees of ITA No.193 & 194/CTK/2019, upto some extent, are distinct and different from the facts of the case in ITA No.195/CTK/2019, therefore, the ld. CIT-DR ought to have argued the stand of revenue on the basis of facts of ITA No.195/CTK/2019 and not on the strength of other two appeals as the assessee in ITA No.195/CTK/2019 i.e. in the case of Shree Balaji Engicon Pvt. Ltd. is a company, who executed the work itself and earned the profit, therefore, it was entitled for deduction u/s.80IA(4) of the Act. Regarding another two appeals i.e. ITA Nos.193&194/CTK/2019, the assessee has claimed deduction u/s.80IA(4) of the Act with regard to the income earned ITA Nos.193-195/CTK/2019 60 from Joint Venture entity which was created by the respective assessees for the purpose of executing development-cum-contract work which is also entitled for deduction u/s.80IA(4) of the Act because these two companies earned income from the business of developer-cum-contractor work through special purpose vehicles/entity created for this special purpose under joint venture(JV) agreements for the similar kind of business of developer and not in the capacity of merely a works contractor. The creation of special purpose vehicle under Joint Venture agreement is also permissible as per provisions of 80IA(4)(i)(a) of the Act, therefore, the arguments of the ld. CIT-DR are not fully relevant to ITA No.195/CTK/2019 and, thus, misplaced consequently, not applicable to this case and the claim of assessee in other two appeals u/s.80IA(4) of the Act is also allowable in view of provision of 80IA(4)(i)(a) of the Act. The ld. AR on merits also submitted that the case laws cited and relied on by the ld. CITDR are not applicable to the present case having distinct and dissimilar facts and circumstances. On the other two appeals i.e. ITA Nos.193&194/CTK/2019, the ld. AR submitted that work was executed by the member of consortium, material was purchased by them, plant and machinery of member was used and investment and financial risk was also taken by the members and this work was not sublet or sub- contracted to any outside party or entity. 38. Ld. AR further submitted that the ld. Pr.CIT was not justified and correct in invoking the provisions of Section 263 of the Act and holding that the assessment order passed by the AO was erroneous and ITA Nos.193-195/CTK/2019 61 prejudicial to the interest of revenue. Ld. AR drew our attention towards written submissions dated 13.10.2021 of assessee at pages 257 to 281 of assessee‟s paper book No.2, which are as under :- 3] GROUND NO. 1 - CHALLENGING THE ACTION OF THE LD. PCIT IN INVOKING THE PROVISIONS OF SECTION 263 OF THE ACT AND HOLDING THAT THE ASSESSMENT ORDER PASSED BY THE LD. AO WAS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE 3.1] The appellant in this ground of appeal has challenged the action of the Ld. PCIT in invoking the provisions of section 263 of the Act and holding that the assessment order passed by the Ld. AO was erroneous and prejudicial to the interest of revenue more so when the assessment order was neither erroneous nor prejudicial to the interest of revenue. 3.2.1] A bare reading of section 263(1) of the Act makes it clear that the pre-requisite to exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the AO is erroneous insofar as it is prejudicial to the interests of the revenue. The Commissioner has to be satisfied of twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous; and (ii) it is prejudicial to the interests of the revenue. If one of them is absent - if the order of the AO is erroneous but is not prejudicial to the revenue or if it is not erroneous but is prejudicial to the revenue - recourse cannot be had to section 263(1) of the Act. 3.2.2] It is well settled that an order can be termed as 'erroneous' if the order is not in accordance with the law or if it has been passed by the AO without making any enquiry in undue haste. Further, an order can be termed as 'prejudicial to the interests of the revenue' if it is not in accordance with the law in consequence whereof the lawful revenue due to the State has not been realized or cannot be realized. 3.2.3] Accordingly, there must be material available on the record called for by the Commissioner to satisfy him prima facie that the aforesaid two requisites are present. The phrase 'prejudicial to the interests of the revenue' has to be read in conjunction with an. erroneous order passed by the AO. Every loss of revenue as a consequence of an order of the AO cannot be treated as prejudicial to the interests of the revenue, for example, when an AO adopts one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the Aa has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the AO is unsustainable in law. ITA Nos.193-195/CTK/2019 62 3.3] In this backdrop, adverting back to the facts of the present case, it is worth mentioning that the case of the appellant for the A.Y. 2014-15 was selected for complete scrutiny under CASS for the below-mentioned reasons: 1. Large deduction claimed under Chapter VI-A 2. Large share premium received during the year 3. Large other expenses claimed in the Profit & Loss a/c 4. Unsecured loans from persons who have not filed their return of income (Form 3CD) S. Higher turnover reported in Service Tax Return compared to ITR 6. Mismatch in amount paid to related persons u/s. 40A(2)(b) reported in Audit Report and ITR 7. Mismatch between income/ receipt credited to Profit & Loss account considered under other heads of income and Income from heads of income other than business/ profession etc. 3.4.1 As regards the issue of large deduction claimed under Chapter VI-A is concerned, it was one of the several issues for selection of case of the appellant for scrutiny since the appellant claimed deduction of Rs. 5,53,35,272/ - u/s 80-IA of the Act in its income-tax return for the A.Y. 2014-15. Accordingly, the Ld. AO during the course of assessment proceedings vide Query No. 17 of the notice dated 21.11.2016 specifically required the appellant to furnish supporting documentary evidences so as to substantiate the deduction claimed by it u/s 80-IA of the Act. The screenshot of the relevant extract of the notice issued by the Ld. AO during the course of assessment proceedings is reproduced hereunder for the ready reference of the Hon'ble Bench: 17. It is seen from the records that you have claimed deduction of Rs.5,53,35,272/- u/s.80-IA (under Chapter-VIA. In this connection, please refer to clause (i), sub-section (4) of section 80-IA which reads as under : Sub-section 4 : This section applies to- (i) any enterprise carrying on the business [of (i) developing or operating and maintaining or (iii) 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 (iii) developing, operating and maintaining a new infrastructure facility;] ITA Nos.193-195/CTK/2019 63 (c) it has started or starts operating and maintaining the infrastructure facility on or after the 1 st day of April, 1995. In view of the above, you are required to furnish documentary evidence to show that you have fulfilled all the above conditions for availing deduction under Chapter-VIA i.e. u/s.80-IA of the Income Tax act, 1961. 3.4.2] The appellant duly justified the deduction claimed by it ix] s 80-lA of the Act in its submission dated 29.11.2016 filed before the Ld. AO during the course of assessment proceedings. The appellant also produced copy of all the relevant agreements entered into by it with the employers before the Ld. AO so as to substantiate the fact that it was engaged in 'development' of infrastructural facilities and was eligible to claim the benefit of deduction u/s 80-lA of the Act. The screenshot of the relevant extract of the submission dated 29.11.2016 filed before the Ld. AO during the course of assessment proceedings is also reproduced hereunder for the ready reference of the Hon 'ble Bench: 17) That as regards to the claim of deduction of Rs.5,53,35,272/- u/s 80IA of chapter VI-A, the assessee confirms to fulfil all the required conditions prescribed under sub section 4 of section 80IA of Income Tax Act, 1961. The required certificate from the Chartered Accountant under sub section 7 of section 80IA. It is further clarified that the enterprise carrying on the business of developing the facility is owned by the Company since the assessee is a Company incorporated under the Companies Act, 1956, It has entered into the agreement with the govt. in all the cases details of which have been attached to the certificate of chartered accountant in form 10CCB filed onllne, it has started to operate the facilities in all the cases after 01.04.1995 as is evident from the certificate of chartered accountant furnished electronically in form no.10CCB. 3.4.3] The Ld. AO thereafter completed the assessment after scrutinizing all the relevant material placed on record including the documentary evidences/ books of accounts/ other papers produced during the course of assessment proceedings. This fact has been categorically brought out in Para 2 of the assessment order. The screenshot of the relevant extract of the assessment order passed u/s 143(3) of the Act is reproduced hereunder for the ready reference of the Hon'ble Bench: The assessee-company has filed return of its income for the assessment year under consideration electronically on 27.11.2014 showing a total income of Rs.8,54,76,430/-. The case was selected for complete scrutiny under CASS. The reason(s) for selection is/are; large deduction claimed under Chapter VI-A, large share premium received during the year, large other expenses claimed in the Profit & Loss etc., unsecured loans from persons who have not ITA Nos.193-195/CTK/2019 64 filed their Return of Income(Form 3CD), Higher turnover reported in Service Tax Return compared to ITR, mismatch in amount paid to related persons u/s. 40A(2)(b) reported in Audit Report and ITR, mismatch between income/receipt credited to Profit & Loss account considered under other heads of income and Income from heads of income other than business/profession etc. Accordingly, the case was fixed for hearing and notices u/s.143(2) & 142(1) of the Income tax Act, 1961 along with questionnaire were issued and served on the assessee-company for its compliance. 2. In response to the said notices, Sri Mahendra Kumar Kedia, FCA and the authorised representative (A/R) appeared and represented the case on behalf of the assessee. Relevant details/documents asked for during the course of assessment proceedings were furnished and verified with reference to the books of account and other relevant documents/papers produced and the case was heard and discussed. 3.4.4] The above-narrated sequence of events clearly demonstrate that the Ld. AO raised a specific query during the course of assessment proceedings regarding the eligibility of the appellant to claim deduction u/ s 80-IA of the Act and it was only after scrutinizing all the relevant placed on record including the documentary evidences/ books of accounts/ reports in Form 10CCB and other papers produced during the course of assessment proceedings, that the Ld. AO allowed the deduction claimed by the appellant u/s 80-IA of the Act. 3.4.5] Further, as elaborately discussed in the previous paragraphs of this submission, the appellant satisfied all the conditions prescribed u/s SO-IA(4) of the Act for claiming benefit of deduction therein. It was also categorically explained that the appellant was a 'contractor-cum-developer engaged in development of infrastructural facilities' and was not merely a 'contractor engaged in works contract' and henceforth, deduction claimed by the appellant u/s SO-lA of the Act was within the four corners of law in view of the facts involved in the present case duly corroborated with the findings re-iterated in the numerous judicial precedents cited during the course of revisionary proceedings and appellate proceedings before the Hon'ble Bench. Hence, it is well established that the view taken by the Ld. AO regarding the eligibility of deduction claimed by the appellant u/s 80-lA of the Act was a plausible view which is supported by existing and prevailing jurisprudence in similar and identical facts and such view which could not have been interfered with by the Ld. PClT by exercising his revisionary powers uls 263 of the Act. 3.4.6] Rather, it seems that the jurisdiction exercised by the Ld. PCIT u/s.263 of the Act was illegal and void-ab-initio for 'Various reasons discussed hereunder: ITA Nos.193-195/CTK/2019 65 • FIRSTLY, the Ld. PC IT superficially issued the show cause notice ufs 263 of the Act without even properly examining the case records of the appellant for the A.Y. 2014- 15 since the Ld. PCIT in Para 17 of the show cause notice stated that the Assessing Officer "failed" to examine the claim of deduction u/s SO-IA which rendered the assessment order prima-facie erroneous in so far as it is prejudicial to the interest of revenue. However, when it was categorically pointed out before the Ld. PCIT that the Ld. AO raised a specific query during the course of assessment proceedings regarding deduction claimed u/s 80-lA of the Act which was duly replied to by the appellant; the Ld. PCIT changed his stand and in order to justify the initiation of revisionary proceedings on this issue, he stated that the Ld. AO did not refer to the Explanation inserted below section 80-IA( 13) of the Act which made the assessment order erroneous and prejudicial to the interest of revenue. • At this juncture, it is pertinent to mention that the Ld. AO allowed the claim of deduction of the appellant ix] s 80-lA of the Act after duly examining all the relevant material placed on record in light of the provisions of section 80-lA of the Act contained in the statute book. The reference to the provisions of a section automatically include reference to the provisos' and explanations' contained therein which need not be mentioned separately either in the notice issued during assessment proceedings or in the assessment order. It is beyond the understanding of a rational mind as to how the mere non-reference to the Explanation below section 80-IA( 13) of the Act made the assessment order erroneous and prejudicial to the interest of revenue. This kind of approach adopted by the Ld. PClT clearly demonstrates that he was over-enthusiastic to exercise his revisionary powers u/s 263 of the Act without even appreciating the facts of the case which is illegal and unacceptable. • SECONDLY, the order passed by the Ld. PC IT was based on "incorrect application of law/mistake of law" which made the order completely erroneous and prejudicial to the interest of the appellant who rightly claimed deduction u/s 80-lA(4) of the Act based on the correct interpretation and understanding of law applicable for the A.Y. 2014-15 i.e. for the year under consideration. The Ld. PCIT time and again re-iterated the fact that deduction u/s 80-IA(4) is available only to the assessee engaged in "Build and Operate" (BO), "Build, Operate and Maintain" (BOM) or "Build, Operate, Maintain and Transfer" (BOT) of infrastructural facilities which tantamounts to a completely misleading interpretation of law since otherwise, the assessee who only develop the infrastructure facility will never be entitled to claim the benefit of deduction u/s 80-lA(4) of the Act which is not the intention of the legislature. The legislature vide Finance Act 2001 w.e.f. 1st April 2002 brought changes· in the said section wherein the requirement for developing and operating & maintaining of infrastructure facility simultaneously was done away with. The effect of such a change brought in the Finance Act 2001 was that the deduction u/s 80-IA(4)(i) of the Act was now also available to an assessee who was engaged only in development of ITA Nos.193-195/CTK/2019 66 infrastructure facility or engaged only in operation & maintenance of infrastructure facility or engaged in both developing, operating and maintaining any infrastructure facility. However, the order passed by the Ld. PClT revolved around the law which prevailed prior to 1st April 2002 and such law was not even in the statute book since several years'. Hence, it is quite clear that the order passed by the Ld. PClT u/s 263 of the Act was based on incorrect application of law which made the impugned order erroneous and liable to be set- aside on this count itself. 3.4.7] Hence, it is an uncontroverted finding of fact that the Ld. AO conducted 'adequate inquiry' during the course of assessment proceedings prior to allowing the claim of deduction of the appellant u/s 80-IA(4) of the Act. The Ld. PClT on the other hand arbitrarily exercised the powers vested upon him u/s 263 of the Act without due application of mind and without fully taking into consideration the submissions made and materials placed by the appellant before him. Therefore, order passed by the Ld. PClT directing the-Ld. AO to make disallowance u/s 80-lA of the Act deserves to be quashed and set-aside being illegal and void-ab-initio. 3.5.1] As regards the issue of disallowance u/s 14A of the Act is concerned, it is worth mentioning that the issue regarding disallowance u/s 14A of the Act comprised none of the seven reasons for which case of the appellant was selected for scrutiny. However, one of the reasons for which case of the appellant was selected for scrutiny was Large other expenses claimed in the Profit & Loss a/c. Accordingly, it ought to have been presumed that the Ld. AO verified all the expenses debited in the Statement of Profit & Loss and he per se did not find any valid reason for making any disallowance u/s 14A of the Act after being satisfied that no expenditure debited therein was related to income which did not form part of the total income of the appellant. '" 3.5.2] It is pertinent to note that the Ld. AO acted as a prudent, judicious and responsible public servant while completing the scrutiny assessment in the case of the appellant. This is being said so since the Ld. AO duly examined all those issues for which case of the appellant was selected for scrutiny and he also made additions amounting to Rs.7,82,072/- out of expenses debited in the Statement of Profit & Loss by opining that those' expenses were not correct and genuine. • SECONDLY, the order passed by the Ld. PC IT was based on "incorrect application of law f mistake of law" which made the order completely erroneous and prejudicial to the interest of the appellant who rightly claimed deduction u/s 80-lA(4) ofthe Act based on the correct interpretation and understanding oflaw applicable for the A.Y. 2014-15 i.e. for the year under consideration. The Ld. PCIT time and again re-iterated the fact that deduction ufs SO-IA(4) is available only to the assessee engaged in "Build and Operate" (BO), "Build, Operate and Maintain" (BOM) or "Build, Operate, ITA Nos.193-195/CTK/2019 67 Maintain and Transfer" (BOT) of infrastructural facilities which tantamounts to a completely misleading interpretation of law since otherwise, the assessee who only develop the infrastructure facility will never be entitled to claim the benefit of deduction u/s 80-lA(4) of the Act which is not the intention of the legislature. The legislature vide Finance Act 2001 w.e.f. 1st April 2002 brought changes· in the said section wherein the requirement for developing and operating & maintaining of infrastructure facility simultaneously was done away with. The effect of such a change brought in the Finance Act 2001 was that the deduction u/s 80-IA(4)(i) of the Act was now also available to an assessee who was engaged only in development of infrastructure facility or engaged only in operation & maintenance of infrastructure facility or engaged in both developing, operating and maintaining any infrastructure facility. However, the order passed by the Ld. PClT revolved around the law which prevailed prior to 1 st April 2002 and such law was not even in the statute book since several years'. Hence, it is quite clear that the order passed by the Ld. PClT u/s 263 of the Act was based on incorrect application of law which made the impugned order erroneous and liable to be set- aside on this count itself. 3.4.7] Hence, it is an uncontroverted finding of fact that the Ld. AO conducted 'adequate inquiry' during the course of assessment proceedings prior to allowing the claim of deduction of the appellant u/s 80-IA(4) of the Act. The Ld. PCIT on the other hand arbitrarily exercised the powers vested upon him u/s 263 of the Act without due application of mind and without fully taking into consideration the submissions made and materials placed by the appellant before him. Therefore, order passed by the Ld. PCIT directing the-Ld. Aa to make disallowance u/s 80-lA of the Act deserves to be quashed and set-aside being illegal and void-ab-initio. 3.5.1] As regards the issue of disallowance u/s 14A of the Act is concerned, it is worth mentioning that the issue regarding disallowance uls 14A of the Act comprised none of the seven reasons for which case of the appellant was selected for scrutiny. However, one of the reasons for which case of the appellant was selected for scrutiny was «Large other expenses claimed in the Profit & Loss alc. Accordingly, it ought to have been presumed that the Ld. AO verified all the expenses debited in the Statement of Profit & Loss and he per se did not find any valid reason for making any disallowance u/s 14A of the Act after being satisfied that no expenditure debited therein was related to income which did not form part of the total income of the appellant. 3.5.2] It is pertinent to note that the Ld. Aa acted as a prudent, judicious and responsible public servant while completing the scrutiny assessment in the case of the appellant. This is being said so since the Ld. AO duly examined all those issues for which case of the appellant was selected for scrutiny and he also made additions amounting to Rs. 7,82,072/ - out of expenses debited in ITA Nos.193-195/CTK/2019 68 he Statement of Profit & Loss by opining that those' expenses were not correct and genuine. 3.5.3] However, the Ld. PClT expected too much from the Ld. AO by observing that the Ld. AO ought to have examined the issue of disallowance u/ s 14A of the Act as well which was not even one of the reasons for selection of the case for scrutiny. This kind of approach adopted by the Ld. PCIT would result in a situation wherein the Commissioner could de facto exercise unfettered powers to subject any order to revision proceedings. As a corollary, it will be practically impossible to complete all the assessments allotted to AO within no matter how liberal a time limit is framed. In scrutiny assessment proceedings, all that is required to be done is to examine the income tax return and claims made therein as to whether these are prima facie in accordance with the law and where one has any reasons to doubt the correctness of a claim made in the income tax return, probe into the matter deeper in detail. The AO need not look at everything with suspicion and investigate each and every claim made in the income tax return. Therefore, order passed by the Ld. PCIT directing the Ld. AO to make disallowance u/s 14A of the Act deserves to be quashed and set-aside on this count also. 3.6.1] At this juncture, it also becomes significantly important to highlight the fact that the Ld.AO completed the assessment in the case of the appellant after thoroughly examining all the issues for which case was selected for scrutiny. However, the Ld. PCIT during the course of revisionary proceedings, issued show cause notice u/s 263 of the Act even in respect of those issues which were originally examined by the Ld. AO during the course of assessment proceedings. The various issues mentioned by the Ld. PCIT in the show cause notice in respect of which he initially opined that the order passed by the Ld. AO was erroneous and prejudicial to the interest of revenue are summarized hereunder: 1. Value of un quoted shares in excess of the FMV to be treated as income of the assessee u/s 56(2)(viib} of the Act 2. Share capital issued during the year to be taxed u/s 68 of the Act 3. Creditors for material supply at different sites 4. Disallowance u /s 14A of the Act 5. Disallowance of deduction u/ s 80-lA of the Act 3.6.2] The appellant duly furnished the requisite explanations/ justifications with respect to each such issue along with the supporting documentary evidences. The Ld. PClT after going through all the relevant material placed on record dropped the revisionary proceedings in respect of few of the issues and directed the Ld. AO to make disallowance in respect of the remaining issues ITA Nos.193-195/CTK/2019 69 which are summarized hereunder: 1. Value of unquoted shares in excess of the FMV to be treated as income of the assessee u/s 56(2)(viib) of the Act - Dropped by the Ld. PCIT during proceedings u/s 263 of the Act 2. Share capital issued during the year to be taxed u/s 6B of the Act - Dropped by the Ld. PCIT during proceedings u/s 263 of the Act .3. Creditors for material supply at different sites - Dropped by the Ld. PCIT during proceedings u/s 263 of the Act 4. Disallowance u/ s 14A of the Act - Direction given to the Ld. AO to make disallowance 5. Disallowance of deduction u/s 80-lA of the Act - Direction given to the Ld. AO to make disallowance 3.6.3] The above-narrated facts clearly establish that the Ld. PCIT traversed well beyond the jurisdiction vested upon him u/s 263 of the Act and he stepped into the shoes of the Ld. AO during the course of revisionary proceedings which is legally impermissible within the garb of section 263 of the Act since it is a trite law that the Pr. CIT being a revisional authority cannot step into the shoes of the AO and redo the assessment. Hence, the action of the Ld. PCIT in the facts of the present case was non-jurisdictional and legally unsustainable. 3.7] The propositions discussed (supra) have been time and again affirmed and enunciated in various landmark judicial precedents. Relevant extracts from few of the judicial precedents are reproduced hereunder for the ready reference of the Hon'ble Bench wherein revisionary order passed by the CIT u/s 263 of the Act in respect of similar deduction claimed u/s 80-lA of the Act was set- aside: • The Hon'ble Jurisdictional Bench of lTAT in the case of 4RSS Infrastructure Projects Ltd. Vs. ACIT, Circle-2(1), Bhubaneswar [ITA Nos. 142 & 143/CTK/2010] has categorically held as under: "9. Now, coming to the merits as also the submissions as made by the assessee. Admittedly, the AO in the course of original assessment proceedings u/s. 143(3) of the Act has called for the explanation of the assessee as also directed the assessee to prove its claim for deduction u/s. 80IA(4) of the Act. The assessee has responded to the AO. The AO after considering the explanation and the proofs as produced by the assessee found that the assessee was eligible for deduction u/s. 80IA(4} of the Act. A perusal of the order of the Ld. CIT u /s. 263 of the Act does not any where show as to what is the specific error that the AO has committed when granting the assessee the deduction u/s. 80IA(4} of the Act. It is true that the Ld. CIT has referred to the provisions of explanation ITA Nos.193-195/CTK/2019 70 substituted by the Finance Act, 2009 with retrospective effect from 01.04.2000. However, this explanation was available to the AD when the assessment for AY 2007-08 was being completed. Still the AD held that the assessee was entitled to the deduction u/s. 80IA(4} of the Act. The said explanation admittedly was not available when the assessment for AY 2006-07 was being completed u/s. 143(3} of the Act. For AY 2006-0~ the order passed ur s. 263 of the Act could not be used for making order treating an assessment order erroneous on account of a subsequent amendment or substitution done to the provision. Under this circumstances, as it is noticed that the AO has chosen one of the two views in respect of the claim of deduction u/s. 80IA(4) of the Act and in view of the decision of the Hon'ble Karnataka High Court in the case of Gokuldas Exports & Drs., referred to supra, we are of the considered view that the order passed u/s. 263 of the Act is not sustainable in law and consequently, the same stands annulled." [Emphasis Supplied) The Hon'ble ITAT Kolkata Bench ‘C' in the case of BMW Industries Ltd. v. DCIT, Circle-1(2), Kolkata reported in [2017] 162 ITD 650 (Kolkata - Trib.) has held that: "21. The CIT has also observed that the Assessee was only a contractor and not a developer because he was carrying out work as per the contracts awarded by the Executive Engineer. As rightly pointed out by the learned counsel for the Assessee, the question as to whether the Assessee as per the question as to whether the Assessee is 'developer' or 'contractor' has to be tested in the light of the subsequent decisions rendered on the issue by the Hon'ble Bombay High Court in the case of ABG Heavy Industries (supra) and the order of the Division Bench of ITAT giving effect to the larger bench (third member) decision in the case of B. T. Patil & Sons {supra}. According to these decisions what is to be seen is as to whether the assessee has shouldered out Investment & technical risk in respect of the work executed and it is liable for liquidated damages if it failed to fulfill the obligation laid down in the agreement. The liability that was assumed by the assessee under terms of the contract would be obligations involving the development of an infrastructure facility. The assessee has also' in its employment technically and administratively qualified team of persons. If the above conditions are satisfied then it would not be correct to say that assessee is merely a contractor and not a developer. Without giving adverse finding on the above tests, the CIT could not conclude that the order of the AO was erroneous and prejudicial to the interest of the revenue. 23. Proceedings were initiated u re. 263 of the Act for AY 2010- 2011 identical grounds but no order u/s. 263 of the Act was ultimately passed. The grounds on which the CIT sought to invoke jurisdiction ur». 263 of the Act are quiet vague. Considering all the above aspects of the case, we are of the view that the conclusions ITA Nos.193-195/CTK/2019 71 in the impugned order of the CIT that the order of the AO was erroneous and prejudicial to the interest of the Revenue for the reason that deduction uls. 80IA(4)(i) of the Act was wrongly allowed to the Assessee either for want of proper enquiry by the AD before concluding the assessment or for the reason that the Assessee did not satisfy the requirements of claiming deduction uls. 80IA(4)(i) of the Act, cannot be sustained. We therefore quash the order passed by the CIT uls. 263 of the Act and allow the appeal of the Assessee." [Emphasis Supplied] • The Hon'ble ITAT Agra Bench in the case of Shree Narayan Built Up (I)(P.) Ltd. v. CIT, Gwalior reported in [2014] 61 SOT 79 (Agra - Trib.) (URO) has held that: "13. The admitted facts of the case are that the A.O. while making original assessment has issued a query letter dated 01.11.2010 wherein Clause 6 of the letter asked assessee to justify the exemption claimed under Section80IA of the Act. The assessee furnished t4G reply to the letter the AO. in original assessment noted the contention which has been reproduced above in Id. A.R. submission the AO. noted that the assessee has engaged in road construction work during the year under consideration. The assessee has claimed under Section 80IA of the Act. The reply of the assessee placed on record. The A. O. found the assessee has fulfilled all conditions as per. prescribed under Section 80IA(4) of the Act for which the assessee is eligible for the deduction of its profit earned from the construction activities. The assessee received total contract receipt of Rs.Rs.5,15,41,796/- during the year. He further noted that these receipts includes a sum of Rs.21,54,000/-received from M/s Deep Vijay Builders on which deduction u/s 80lA of the Act was not allowable. Thus, A.O. further noted that the assessee did not furnish separate calculation of profit from this activity hence the AO. estimated the amount of profit applying 5% and calculated Rs.1,07,250/- and treated as income from the contract with M/s. Deep Jai Builders and deduction under Section 80lA was not allowed. Further, the A.O. while calculating interest income under Section 80lA disallowed the interest income of Rs.10,679,23/- as it is not eligible for deduction under section 80lA of the Act. The A. O. held that interest income was not considered by the A. 0. while allowing deduction under Section 80lA of the Act. The A.O. accordingly made computation of total income which is reproduced as above. 14. The CIT while exercising power under Section 263 of the Act has formed an opinion considering the explanation below to Section 8OlA and was of the opinion that the assessee is not eligible for deduction under Section 8OlA. It is also relevant to note that according to CIT, the A.D. did not carry out adequate enquiries for the purpose of invoking Section 263. ft is necessary to hold by the CI'T that the assessment order passed by the A. O. was erroneous ITA Nos.193-195/CTK/2019 72 and prejudice to the interest of the Revenue. Merely expressing opinion by the CIT does not amount to hold that the order of the A.O. is erroneous. In original assessment the A.O. has examined the issue by raising query letter and after recording clear facts in the order partly allowed the issue under Section 80lA. The A. O. disallowed and after applying mind found that the assessee was not eligible for deduction under Section 80lA in respect of income from the contract with M/s Deep Jai Builders and interest income. Conscious decision of the A.O. is a judicial decision. The action of the A.O. is in accordance with law while making the assessment and such action of the A.O. as in accordance with law cannot be provided as erroneous by the CIT simply because according to him the A.O. should made adequate inquiry and orders should have been written more legibly. The order of the AO. has been challenged before the CIT though only on the issue of whether interest income is allowable for deduction u/s 80lA or not. The CIT allowed the grounds of the assessee for other words. The CIT hence confirmed the order of the A. O. that the assessee was eligible for deduction u/ s 80IA of the Act except on interest income and which has also been decided in favour of the assessee. It is not simply the prima facie case 'that the assessee was not eligible for deduction u/s80IA as the CIT himself has considered and described various case laws cited by the assessee. In other words, whether under the facts and circumstances of the case, the assessee was eligible for deduction under Section 80IA or not is a controversial issue and on the issue there are two opinions and 1£ the A.O. has taken one then the order of the A.O. cannot be cited to be erroneous order. 15. Similar is the position in respect of unsecured loan and deposits. The A.O has made specific queries. The assessee submitted that the relevant records the A.O. verifying the same and came to the conclusion that the loan and advances shown by the assessee was in accordance with law. When the A. O. is satisfied then it is not necessary to discuss such matter in the order. The assessee has established that the assessee has furnished relevant documents in reply to the queries raised by the assessee. The view taken by the A.O. is after considering the material and submission of the assessee. The order of the A.O. cannot be said to be erroneous. CIT merely want further verification or according to him adequate verification. Such verification does not cover to exercise the power under Section 263 of the Act. 16. In the light of above discussion, we find that the order of A.O. is not erroneous and this basic condition for invoking section 263 of the Act has not been satisfied. Therefore the order of the CIT is not in accordance with law. We. therefore. set aside the order of the CIT. [Emphasis Supplied] Relevant extracts from few of the other landmark judicial precedents which have dealt with the issue of jurisdiction of CIT u/s ITA Nos.193-195/CTK/2019 73 263 of the Act are also reproduced hereunder for the ready reference of the Hon'ble Bench: • The Hon'ble ITAT Mumbai Bench 'F' in the case of Sir Dorabji Tata Trust v. DCIT, (Exemption) Circle 2(1), Mumbai reported in [2021] 188 ITD 38 (Mumbai - Trib.) vide order dated 28.12.2020 has discussed the issue of revisionary powers of CIT u/ s 263 of the Act at length and has categorically held that: "20 . Undoubtedly, the expression used in Explanation 2 to Section 263 is "when Commissioner is of the view "but that does not mean that the view so formed by the Commissioner is not subject to any judicial scrutiny or that such a view being formed is at the unfettered discretion of the Commissioner. The formation of his view has to be in a reasonable manner, it must stand the test of judicial scrutiny- and it must have, at its foundation, the inquiries, and verifications expected, in the ordinary course of performance of duties, of a prudent, judicious and responsible public servant- that an Assessing Officer is expected to be. lf we are to proceed on the basis, as is being urged by the learned Departmental Representative and as is canvassed in the impugned order, that once Commissioner records his view that the order is passed without making inquiries or verifications which should have been made, we cannot question such a view and we must uphold the validity of revision order, for the recording of that view alone, it would result in a situation that the Commissioner can de facto exercise unfettered powers to subject any order to revision proceedings. To exercise such a revision power, if that proposition is to be upheld, will mean that virtually any order can be subjected to revision proceedings; all that will be necessary is the recording of the Commissioner's view that "the order is passed without making inquiries or verification which should have been made". Such an approach will be clearly incongruous. The legal position is fairly well settled that when a public authority has the power to do something in aid of enforcement of a right· of a citizen, it is imperative upon him to exercise such powers when circumstances so justify or warrant. Even if the words used in the statute are prima facie enabling the courts will readily infer a duty to exercise a power which is invested in aid of enforcement of a right-public or private-of a citizen. (L Hirday Nereinv. ITO (1970} 78 ITR 26 (SC). As a corollary to this legal position, when a public authority has the powers to do something against any person, such an authority cannot exercise that power unless it is demonstrated that the circumstances so justify or warrant. In a democratic welfare state, all the powers vested in the public authorities are for the good of society. A fortiorari, neither can a public authority decline to exercise their powers, to help anyone, when circumstances so justify' or warrant, nor can a public authority exercise the powers, to the detriment of anyone, unless circumstances so justify or warrant. What essentially follows is that unless the Assessing Officer does not conduct, at the stage of passing the order which is subjected to revision proceedings, inquiries and verifications expected, in the ITA Nos.193-195/CTK/2019 74 ordinary course of performance of duties, of a prudent, judicious and responsible public servant- that an Assessing Officer is expected to be, Commissioner cannot legitimately form the view that "the order is passed without making inquiries or verification which should have been made ft. The true test for finding out whether Explanation 2(a) has been rightly invoked or not is, therefore, not simply existence of the view, as professed by the Commissioner, about the lack of necessary inquiries and verifications, but an objective finding that the Assessing Officer has not conducted, at the stage of passing the order which is subjected to revision proceedings, inquiries and verifications expected, in the ordinary course of performance of duties, of a prudent, judicious and responsible public servant that the Assessing Officer is expected to be. 21. That brings us to our next question, and that is what a prudent, judicious, and responsible Assessing Officer is to do in the course of his assessment proceedings. Is he to doubt or test every proposition put forward by the assessee and investigate all the claims made in the income tax return as deep as he can? The answer has to be emphatically in negative because, if he is to do so, the line of demarcation between scrutiny and investigation will get blurred, and, on a more practical note, it will be practically impossible to complete all the assessments allotted to him within no matter how liberal a time limit is framed. In scrutiny assessment proceedings, all that is required to be done is to examine the income tax return and claims made therein as to whether these are prima facie in accordance with the law and where one has any reasons to doubt the correctness of a claim made in the income tax return, probe into the matter deeper in detail. He need not look at everything with suspicion and investigate each and every claim made in the income tax return; a reasonable prima facie scrutiny of all the claims will be in order, and then take a call, in the light of his expert knowledge and experience, which areas, if at all any, required to be critically examined by a thorough probe. While it is true that an Assessing Officer is not only an adjudicator but also an investigator and he cannot remain passive in the face of a return which is apparently order but calls for further inquiry but, as observed by Hon'ble Delhi High Court in the case of Gee Vee Enterprises v. Addl. CIT [1975] 99 ITR 375 "it is his duty to ascertain the truth of the facts stated in the return when the circumstances of the case are such as to provoke an inquiry. (Emphasis, by underlining, supplied by us). It is, therefore, obvious that when the circumstances are not such as to provoke an inquiry, he need not put every proposition to the test and probe everything stated in the income tax return. In a way, his role in the scrutiny assessment proceedings is somewhat akin to a conventional statutory auditor in real-life situations. What Justice Lopes said, in the case of Re Kingston Cotton Mills ((1896) 2 Ch 279,], in respect of the role of an auditor, would equally apply in respect of the role of the Assessing Officer as well. His Lordship had said that an auditor (read Assessing Officer in the present context) "is not bound to be a ITA Nos.193-195/CTK/2019 75 detective, or, as was said, to approach his work with suspicion or with a foregone conclusion that there is something wrong. He is a watch-dog, but not a bloodhound. " Of course, an Assessing Officer cannot remain passive on the facts which, in his fair opinion, need to be probed further, but then an Assessing Officer, unless he has specific reasons to do so after a look at the details, is not required to prove to the hilt everything coming to his notice in the course of the assessment proceedings. When the facts as emerging out of the scrutiny are apparently in order, and no further inquiry is warranted in his bona fide opinion, he need not conduct further inquiries just because it is lawful to make further inquiries in the matter. A degree of reasonable faith in the assessee and not doubting everything coming to the Assessing Officer's notice in the assessment proceedings cannot be said to be lacking bona fide, and as long as the path adopted by the Assessing Officer is taken bona fide and he has adopted a course permissible in law, he cannot be faulted- which is a sine qua non for invoking the powers under section 263. In the case of Mala bar Industrial Co Ltd. v. CIT (2000) 109 Taxman 66/243ITR 83, Hon 'ble Supreme Court has held that "Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the ITO is unsustainable in law. " The test for what the least expected of a prudent, judicious and responsible Assessing Officer in the normal course of his assessment work, or what constitutes a permissible course of action for the Assessing Officer, is not what he should have done in the ideal circumstances, but what an Assessing Officer, in the course of his performance of his duties as an Assessing Officer should, as a prudent, judicious or reasonable public servant, reasonably do bona fide in aerial-life situation. It is also important to bear in mind the fact that lack of bona fide s or unreasonableness in conduct cannot be inferred on mere suspicion; there have to be some" strong indicators in direction, or there has to be a specific failure in doing what a prudent, judicious and responsible officer would have done in the normal course of his work in the similar circumstances. [Emphasis Supplied) The Hon'ble Supreme Court of India in its landmark judgment in the case of Malabar Industrial Co. Ltd. v. CIT reported in [2000] 243 ITR 83 (SC) after considering the decisions in the case of Rampyari Saraogi v. CIT [1968] 67 ITR 84 (SC) and in Smt. Tara Devi Aggarwal v. CIT [1973] 88 ITR 323 (SC) has held that: "6. A bare reading of this provision makes it clear that the pre- requisite to exercise of jurisdiction by the Commissioner suo motu under it, is that the order of the ITO is erroneous insofar as it is ITA Nos.193-195/CTK/2019 76 prejudicial to the interests of the revenue. The Commissioner has to be satisfied with twin conditions, namely, (i) the order of the Assessing Officer sought to be revised is erroneous and it is prejudicial to the interests of the revenue. If one of them is absent - if the order of the ITO is erroneous but is not prejudicial to the revenue or if it is not erroneous but is prejudicial to the revenue - recourse cannot be had to section 263{l}. 7. There can be no doubt that the provision cannot be invoked to correct each and every type of mistake or error committed by the Assessing Officer it is only when an order is erroneous that the section will be attracted. An incorrect assumption of facts or an incorrect application of law will satisfy the requirement of the order being erroneous. In the same category fall orders passed without applying the principles of natural justice or without application of mind. The phrase 'prejudicial to the interests of the revenue' is not an expression of art and is not defined in the Act. Understood in its ordinary meaning it is of wide import and is not confined to loss of tax. The High Court of Calcutta in Dewjee Dadabhov & Co. v. S.P. Jain [1957) 31 ITR 872, the High Court of Karnataka in CIT v. T. Narayana Pei [1975) 98ITR 422, the High Court of Bombay in CIT v. Gabrie1 India Ltd. [1993) 203 ITR208 and the High Court of Gujarat in CIT v. Smt. Mina1ben S. Parikh [1995) 215 ITR 81/ 79 Taxman 184 treated loss of tax as prejudicial to the interests of the revenue. 9. The phrase 'prejudicial to the interests of the revenue' has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an ITO adopted one of the courses permissible in law and it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the ITO is unsustainable in law. It has been held by this Court that where a sum not earned by a person is assessed as income in his hands on his so offering the order passed by the Assessing Officer accepting the same as such will be erroneous and prejudicial to the interests of the revenue - Rampyari Devi Saraogi v. CIT [1968] 67ITR 84 (SC) and in Smt. Tare Devi Aggarwal v. CIT [1973] 88ITR 323 (SC)." [Emphasis Supplied] • The Hon'ble Supreme Court of India in the case of CIT, Mumbai v. Amitabh Bachchan reported in [2016] 384 ITR 200 (SC) has held that: 21. There can be no doubt that so long as the view taken by the Assessing Officer is a possible view the same ought not to be ITA Nos.193-195/CTK/2019 77 interfered with by the Commissioner under Section 263 of the Act merely on the ground that there is another possible view of the matter. Permitting exercise of revisiona1 power in a situation where two views are possible would really amount to conferring some kind of an appellate power in the revisional authority. This is a course of action that must be desisted from ...... [Emphasis Supplied] • The Hon'ble Bombay High Court in the case of CIT v. Gabriel India Ltd. reported in [1993] 203 ITR 108 (Bombay) has categorically held that: (10. The power of suo motu revision under sub-sectif1n (1) is in the nature of supervisory jurisdiction and the same can be exercised only if the circumstances specified therein exist. Two circumstances must exist to enable the Commissioner to exercise power of re vision under this sub-section, viz., (i) the order is erroneous;(ii) by virtue of the order being erroneous prejudice has been caused to the interests of the revenue. It has, therefore, to be considered firstly as to when an order can be said to be erroneous. We find that the expressions 'erroneous', 'erroneous assessment' and 'erroneous' judgment' have been defined in Black's Law Dictionary • According to the definition/erroneous', means 'involving error; deviating from the law'. 'Erroneous assessment' refers to an assessment that deviates from the law and is, therefore, invalid, and is a defect that is jurisdictional in its nature, and does not refer to the judgment of the Assessing Officer in fixing the amount of valuation of the property. Similarly, 'erroneous judgment' means 'one rendered according to course and practice of Court, but contrary to law upon mistaken view of law, or upon erroneous application of legal principles '. 11. From the aforesaid definitions it is clear that an order cannot be termed as erroneous unless it is not in accordance with law. If an ITO acting in accordance with law makes a certain assessment, the same cannot be branded as erroneous by the Commissioner simply because, according to him, the order should have been written more elaborately. This section does not visualise a case of substitution of the judgment of the Commissioner for that of the ITO, who passed the order, unless the decision is held to be erroneous. Cases may be visualise where the ITO while making an assessment examines the accounts, makes enquiries, applies his mind to the facts and circumstances of the case and determines the income either by accepting the accounts or by making some estimate himself. The Commissioner, on perusal of the records, may be of the opinion that the estimate made by the officer concerned was on the lower side and left to the Commissioner, he would have estimated the income at a figure higher than the one determined by the ITO That would not vest the Commissioner with power to re-examine the accounts and determine the income himself at a higher figure. It is because the ITO has exercised the quasi-judicial power vested in him in accordance with law and ITA Nos.193-195/CTK/2019 78 arrived at a conclusion and such a conclusion cannot be termed to be erroneous simply because the Commissioner does not feel satisfied with the conclusion. It may be said in such a case that in the opinion of the Commissioner the order in question is prejudicial to the interests of the revenue. But that by itself will not be enough to vest the Commissioner with the power of suo motu revision because the first requirement, viz., that the order is erroneous, is absent. Similarly; if an order is erroneous but not prejudicial to the interests of the revenue, then also the power of suo motu revision cannot be exercised. Any and every erroneous order cannot be the subject-matter of revision because the second requirement also must be fulfilled. There must be some prima facie material on record to show that tax which was lawfully exigible has not been imposed or that by the application of the relevant statute on an incorrect or incomplete interpretation a lesser tax than what was just has been imposed. 13. We, therefore, hold that in order to exercise power under sub- section (1) of section 263 there must be material before the Commissioner to consider that the order passed by the ITO was erroneous insofar as it is prejudicial to the interests of the revenue. We have already held what is erroneous. It must be an order which is not in accordance with the law or which has been passed by the ITO without making any enquiry in undue haste. We have also held as to what is prejudicial to the interests of the revenue. An order can be said to be prejudicial to the interests of the revenue if it is not in accordance with the law in consequence whereof the lawful revenue due to the State has not been realised or cannot be realised. There must be material available on the record called for by the Commissioner to satisfy him prima facie that the aforesaid two requisites are present. If not, he has no authority to initiate proceedings for revision. Exercise of power of suo motu revision under such circumstances will amount to arbitrary exercise of power. It is well-settled that when exercise of statutory power is dependent upon the existence of certain objective facts, the authority before exercising such power must have materials on record to satisfy it in that regard. If the action of the authority is challenged before the Court, it would be open to the Courts to examine whether the relevant objective factors were available from the records called for and examined by such authority " [Emphasis Supplied] • The Ld. PCIT in his order stated that the Hon'ble Delhi High Court in the case of ITO v. D.G. Housing Projects Ltd. reported in [2012] 343 ITR 329 (Delhi) distinguished the earlier judgment of the Hon'ble Delhi High Court in the case of CIT v. Sunbeam Auto Ltd. reported in [2011] 332 ITR 167 (Delhi). However, this finding of the Ld. PCIT is not factually correct and the decision of the Hon'ble Delhi High Court in the case of CIT v. Sunbeam Auto Ltd. still holds goods wherein a distinction was laid down between 'lack of inquiry' and 'inadequate inquiry' and it was held as under: ITA Nos.193-195/CTK/2019 79 "12. We have considered the rival submissions of the counsel on the other side and have gone through the records. The first issue that arises for our consideration is about the exercise of power by the Commissioner of Income-tax under section 263 of the Income- tax Act. As noted above, the submission of learned counsel for the revenue was that while passing the assessment order, the Assessing Officer did not consider this aspect specifically whether the expenditure in question was revenue or capital expenditure. This argument predicates on the assessment order which apparently does not give any reasons while allowing the entire expenditure as revenue expenditure. However, that by itself would not be indicative of the fact that the Assessing Officer had not applied his mind on the issue. There are judgments galore laying down the principle that the Assessing Officer in the assessment order is not required to give detailed reason in respect of each and every item of deduction, etc. Therefore, one has to see from the record as to whether there was application of mind before allowing the expenditure in question as revenue expenditure. Learned counsel for the assessee is right in his submission that one has to keep in mind the distinction between 'tack of inquiry" and "inadequate inquiry". If there was any inquiry, even inadequate, that would not by itself, give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has different opinion in the matter. It is only in cases of 'tack of inquiry", that such a course of action would be open. " [Emphasis Supplied] • The Hon'ble Delhi High Court in the case of DIT v. Jyoti Foundation reported in [2013] 357 ITR 388 (Delhi) has held that: "4. Revisionary power under Section 263 of the Act is conferred by the Act on the Commissioner/Director of Income-tax when an order passed by the lower authority is erroneous and prejudicial to the interest of the Revenue. Orders which are passed without inquiry or investigation are treated as erroneous and prejudicial to the interest of the Revenue, but orders which are passed after inquiry/investigation on the question/issue are not per se or normally treated as erroneous and prejudicial to the interest of the Revenue because there visionary authority feels and opines that further inquiry/investigation was required or deeper or further scrutiny should be undertaken. " (Emphasis Supplied) • The Hon'ble Jurisdictional Bench of ITAT in the case of Surekha Builders & Developers Pvt. Ltd. Vs. Pr. CIT-l. Bhubaneswar [ITA No. 207/CTK/2018] vide order dated 17.07.2020 wherein one of your honors (Hon'ble Judicial Member) was co- author, quashed the revisional order passed by the Pr. CIT u/s 263 of the Act by observing as under: ITA Nos.193-195/CTK/2019 80 "15. It is well settled principle that the Assessing Officer is required to make reasonable, sufficient and adequate enquiry of impugned issues during assessment proceedings and in case of no enquiry or insufficient or inadequate enquiry, Pr.CIT is empowered to revise the order holding the same as erroneous and prejudicial to the interest of the revenue. But if this proposition is evaluated in the facts and circumstances of the present case then, it is clearly discernible that the AO by way of notice u/s.142(l) dated 26.10.2015 and 30.7.2015 called the documents/information from the assessee which includes copy of the audited balance sheet, profit and loss account, Annual report along with details of bank accounts maintained including bank name, branch details and a/c no. supported with bank statements for the financial year 2012-13 relevant to assessment year 2013-14. From the above, we also observe that the Assessing Officer also called the details of party- wise purchase and sales of land/flat, details of project-wise percentage of construction as on 31.3.2013, estimate cost of each projects and estimate sales price thereof and closing stock details with detail valuation and method of valuation, which were submitted by the assessee and this fact has not been negated or disputed by Pr. CIT in the impugned order as well as during the arguments before us by Ld. CIT DR. 16. In view of copies of notices and replies of the assessee available at APB page 43 to 51, we are satisfied that during assessment proceedings, the AO made proper, sufficient and adequate enquiry on the issues including issue of revenue recognition of the assessee by following percentage completion method, project-wise revenue recognition. Therefore, it is not a case of no enquiry, inadequate enquiry or insufficient enquiry. Therefore, without holding so, the impugned assessment order cannot be tagged or alleged as erroneous and prejudicial to the interest of revenue. [Emphasis Supplied] • The appellant also places reliance on the following judicial precedents in support of its contention: ~ The Pr. CIT, Surat-2 v. Shreeji Prints (P.) Ltd reported in [2021J 130 taxmann.com 294 (SC) ~ CIT (Central) v. Max India Ltd reported in [2008J 166 Taxman 188 (SC) ~ CIT, Gujarat-II v. Kwality Steel Suppliers Complex reported in [2017J 84 taxmann. com 234 (SC) ~ CIT, Central- III v. Nirav Modi reported in [2016J 71 taxmann.com 272 (Bombay) ~ CIT v. Honda Siel Power Products Ltd reported in [2010J 194 Taxman 175 (Delhi) ITA Nos.193-195/CTK/2019 81 ~ CIT, Meerut v. Vam Resorts & Hotels (P.) Ltd reported in [2019J 111 taxmann.com 62 (Allahabad) ~ CIT v. Rashid Exports Industries reported in [2016J 66 taxmann. com 38 (Allahabad) ~ CIT v. International Society For Krishna Consciousness reported in [2020J 117 taxmann. com 799 (Karnataka) ~ CIT, Bangalore v. Chemsworth (P.) Ltd reported in [2020J 119 taxmann.com 358 (Karnataka) ~ The CfT, Chennai v. M/s. A.R. Builders & Developers P Ltd. [T.CA. No. 70/2020 ~ Aakash Ganga Promoters & Developers v. Pr. CfT [ITA No. 164/CTK/2019 ~ Siddh International v. CIT reported in (2009J 32 SOT 14 (Ahmedabad) (URO) ~ Goa Bombay Roadlines v. CIT (ITA No. 3104/Del/2013 ~ M/s. Sunray Cotspin (P) Ltd. v. Pr. ell: Gurgaon (ITA No. 5239/DEL/2019 ~ Synergy Waste Management (P) Ltd v. The ACIl: Hisar reported in (2017J 88 taxmann.com 405 (Delhi - Trib.) ~ M/s Singhal Enterprises Pvt. Ltd v. DCIl: CC-4(1), Kolkata (ITA Nos. 1071 & 1072/Kol/2018 ~ Khetawat Properties Ltd. v. Pr. CIT-4, Kolkata (I.T.A. No. 578/Kol/2019 ~ Unipro Techno Infrastructure (P) Ltd v. PCIT reported in (2017J 88 taxmann.com 854 (Chandigarh - Trib.) ~ KR. Construction v. Pr. CIT-Central-3 (ITA No. 7615/Mum/2019J • Lastly, it is also worth noting that the reliance placed by the Ld. PCIT on the decision of the Hon'ble Jurisdictional Bench of ITAT in the case of Cuttack Development Authority Vs. CIT, Cuttack [ITA No. 361/CTK/2014] wherein action of the Pr. CIT u/s 263 of the Act was upheld, was totally misplaced since facts of that case and facts of the present case are clearly distinguishable. In the case of Cuttack Development Authority, the AO did not examine the issue and did not conduct any enquiries while framing the assessment order u/s 143(3) of the Act whereas in the facts of the present case, the Ld. AO raised a specific query requiring the appellant to furnish supporting documentary evidences so as to substantiate the deduction claimed by it u/s 80-lA of the Act and the Ld. AO allowed ITA Nos.193-195/CTK/2019 82 the claim of deduction u/s 80-lA of the Act only after scrutinizing all the relevant material placed on record including the documentary evidences/ books of accounts/reports in Form 10CCB and other papers produced during the course of assessment proceedings. Hence, findings of the Jurisdictional Bench of ITAT in the case of Cuttack Development Authority Vs. CIT, Cuttack shall not be applicable to the facts of the present case. 3.7] Further, the Ld. PCIT time and again re-iterated in his order that order passed by the Ld. AO shall be deemed to be erroneous and prejudicial to the interests of the revenue since" the order was passed without making inquiries or verification which should have been made" as per Explanation 2(a) to section 263( 1) of the Act. In this respect, it is humbly submitted that the above-stated allegation of the Ld PCIT does not hold water for the simple reason that the Ld. AO passed assessment order only after conducting detailed inquires with respect to the reasons for selection of the case for scrutiny. Even otherwise, Explanation 2 to section 263(1) of the Act was inserted w.e.f. 01.06.2015 and it should apply prospectively and not retrospectively i.e. Explanation 2 to section 263(1) of the Act shall not apply to the proceedings for the year under consideration i.e. for A.Y. 2014-15. The above-stated proposition has been affirmed in the following judicial precedents: ~ M/s Indus Best Hospitality & Realtors Pvt. Ltd. Vs. Pr. CIT-6, Mumbai [ITA No.3125/Mum/2017j ~ AV Industries v. ACIT [ITA No. 3469/Mum/2010 ~ Metacaps Engineering and Mahendra Constructions Co. (JV) v. CIT [ITA No. 2895/Mum/2014j ~ Reliance Money Infrastructure Ltd. v. PCIT [ITA No. 3259/Mum/2017j ~ Shantikrupa Estate Pvt. Ltd. [ITA No. 1252/Ahd/2015j ~ Amira Pure Foods Pvt. Ltd. v. PCIT [ITA No. 451/Del/2017j 3.8] In view of the elaborate discussion duly corroborated with the findings re-iterated in the judicial precedents cited supra, it becomes abundantly clear that in scrutiny assessment proceedings, all that is required to be done is to examine the income tax return and claims made therein as to whether these are prima facie in accordance with the law and where one has any reasons to doubt the correctness of a claim made in the income tax return, probe into the matter deeper in detail. The AO need not look at everything with suspicion and investigate each and every claim made in the income tax return. In the facts of the present case, it is clearly demonstrated that the Ld. Aa completed assessment only after detailed examination of the reasons for which case was selected for scrutiny and as a corollary, order of the Ld. AO could not have been ITA Nos.193-195/CTK/2019 83 interfered with by the Ld. PClT since the order passed by the Ld. AO was neither erroneous nor prejudicial to the interests of revenue so as to vest valid jurisdiction upon the Pr. PCIT to invoke the revisionary powers u/s 263 of the Act. Therefore, it is humbly prayed before the Hon'ble Bench that the order passed by the Ld. PCIT u/s 263 of the Act may kindly be quashed and set-aside since it is illegal, non-jurisdictional and void-ab-initio. 39. Ld. AR briefly reiterated the above submissions and submitted that the revisionary authority before invoking the provisions of Section 263 of the Act, is duty bound to reach to a logical conclusion that the assessment order is erroneous and prejudicial to the interest of revenue and in the present case the findings arrived by the ld. Pr.CIT are perverse and based on the misappropriation of facts and mis-interpretation of case laws rendered by the Hon‟ble Supreme Court, Hon‟ble various High Courts and coordinate benches of the Tribunal, therefore, the same is not sustainable. Ld. AR submitted that there must be material available on record called for by the Pr.CIT to satisfy him prima facie that the twin conditions have been fulfilled and requirement of prejudicial to the interest of revenue has to be read in conjecture that an erroneous order passed by the AO as every loss of revenue as a consequence of an order of AO cannot be treated as prejudicial to the interest of revenue. Ld. AR submitted that during the assessment proceedings the AO vide notice dated 21.11.2016, in query No.17 specifically required the assessee to furnish certain documentary evidence so as to substantiate the claim of deduction u/s.80IA(4) of the Act which was properly replied by the assessee along with relevant documentary evidence and other reports including audit report of the auditor. Ld. AR also submitted that the ITA Nos.193-195/CTK/2019 84 assessee also produced the relevant documents entered into by it with the employees/contractee before the AO so as to substantiate the fact that it was engaged in development of infrastructure facility and was eligible to claim deduction u/s.80IA of the Act after scrutinizing of the relevant materials placed on record including documentary evidence/books of accounts and other papers produced by the assessee, allowed the claim of deduction to the assessee u/s.80IA(4) of the Act. Therefore, the citation relied on by the ld. CITDR rendered by the Hon‟ble High Court of Madhya Pradesh in the case of Deepak Kumar Garg (supra) is not applicable in the present case as in that case the Assessing Officer failed to conduct enquiry for want of time but in the present case the Assessing Officer after due verification and examination of claim of assessee by way of adequate and sufficient enquiry has allowed the claim of assessee. 39.1 Ld. AR also pointed out that the submission of the assessee on merits clearly substantiate that the assessee satisfies all the conditions prescribed u/s.80IA(4) of the Act for claiming deduction and subsequently substantiated that the assessee was a contractor-cum-developer engaged in the development of infrastructural facility and was not merely a contractor engaged in the work contract, therefore, the claim of deduction u/s.80IA(4) of the Act to the assessee was within the four corners of the law. Ld. AR submitted that when the AO regarding allowability of deduction u/s.80IA(4) of the Act has taken a plausible view which was supported by documentary evidence in the similar and identical facts then ITA Nos.193-195/CTK/2019 85 such a view would not have been interfered by the ld. Pr.CIT by exercising revisionary powers u/s.263 of the Act. 40. Ld. AR submitted that the submissions made on behalf of the assessee on merits clearly supports the view taken by the AO in allowing deduction u/s.80IA(4) of the Act, therefore, the order passed by the ld. Pr.CIT directing the AO to make disallowance u/s.80IA(4) of the Act deserves to be quashed and set aside being illegal and void ab initio. To support these contentions, ld. AR has placed reliance on various decisions including the order of ITAT Cuttack Bench in the case of ARSS Infrastructure Projects Ltd. (supra) and order of ITAT Kolkata Bench in the case of BMW Industries Ltd. [2017] 162 ITD 650 (Kolkata-Trib), order of ITAT Agra Bench in the case of Shree Narayan Built UP (I) (P) Ltd. [2014] 61 SOT 79 (Agra-Trib)(URO) and contended that the order of AO is not erroneous and the twin conditions for invoking revisionary action u/s.263 of the Act has not been satisfied, therefore, the order of ld. Pr.CIT is not in accordance with law and, thus, deserves to be set aside. 41. Ld. AR, pressing into service along with proposition laid down by the Hon‟ble Supreme Court in the case of Malabar Industrial Co. Ltd. [2000] 243 ITR 83 (SC), in the case of Amitabh Bachchan [2016] 384 ITR 200 (SC) and in the case of Gabriel India Ltd. [1993] 203 ITR 108 (Bombay) including order of ITAT Mumbai Bench in the case of Sir Dorabji Tata Trust [2021] 188 ITD 38 (Mumbai-Trib), order dated 28.12.2020, submitted that during the assessment proceedings the AO has made proper, sufficient and adequate enquiry on all the issues including the ITA Nos.193-195/CTK/2019 86 issue of allowability of deduction u/s.80IA(4) of the Act to the assessee after examining all the relevant documents, financial statements, books of accounts and other relevant papers by way of issuing notice along with questionnaires, receiving replies from the assessee, therefore, it is not a case of no enquiry or inadequate enquiry or insufficient enquiry, thus, without holding so the assessment order cannot be treated as erroneous and prejudicial to the interest of revenue. Therefore, the findings of the ld. Pr.CIT are not valid and unsustainable. 42. On careful consideration of above rival submissions and thoughtful perusal of the material placed on record and case laws cited by both the parties, first of all, we may point out that the Explanation below Section 80IA(13) of the Act was inserted by the Finance Act, 2007 and subsequently it was again amended by way of inserting some words and specifying that the provisions of Section 80IA shall not apply in relation to a business referred to sub-section (4) which is in the nature of work contract awarded by any person including the Central Government or State Government and executed by the undertaking or enterprises was referred in sub-section (1) and this amendment was made applicable with retrospective effect i.e. 01.04.2000, this explanation restricts the benefit of deduction u/s.80IA(4) of the Act to a person who executes a project, which is in the nature of works contract. For proper understanding of said Explanation, it is required to consider the difference between a developer- cum-contractor and work contractor. In a common meaning a person is referred as developer-cum-contractor who undertakes a project to ITA Nos.193-195/CTK/2019 87 develop and conduct on own responsibility and takes all the risk including investment risk, financial risk, entrepreneur risk and all kinds of business risk, such responsibilities and risks can be summarized as under :- (i) That in a development contract" responsibility is fully assigned to the developer to do all acts for execution and completion of work right from designing the project till handing over the project to the Government. As such, the agreement is not for a specific work, it is for development of facility as a whole. Indeed the ownership of the site or the ownership over the land remains with the Government/owner but during the period of development agreement the developer exercise complete realm over the land or the project. However, in some case there can be a situation that the developer has to take the approval of the design from the Government/ contractee but that will not change the status of the developer as works contractor. (ii) That the first phase for the developers is to take over the existing premises of the projects and thereafter developing the same into infrastructure facility. Secondly, the assessee shall facilitate the people to use the available existing facility even while the process of development is in progress. (c) That a developer has to execute managerial responsibility by engaging the requisite qualified/ skilled/ semi-skilled staff and the labourers including the other supporting staff. As the developer under takes the complete responsibility of the manpower to be used in developing the infrastructure facility. (d) The assessee has to utilize its expertise, experience including its technical knowhow in the development of the project. (e) That a developer has to execute financial responsibility. A developer is therefore expected to arrange finances either by private placement or from financial institutions for the proper development of the project at its own risk. Thus the developers is the one who undertakes entrepreneurial and investment risk besides the business risk. (f) That a developer is required to bring the qualitative material. The Government does not provide any material to the assessee. (g) That a developer is required to bring plant and machineries to be utilized in the project. (h) Any loss caused to the public or the Government in the process of developing the project would be the responsibility of the ITA Nos.193-195/CTK/2019 88 developer. The Government shall not take any responsibility for any such kind of loss except where it is responsible. (i) That a developer stands as guarantor for the project developed by it and in the event of any defect it, he shall provide the remedy for the same. (j) That a developer shall be exposed to the penalty if it contravenes the any of the clause appearing in the contract awarded by the Government. Thus, the developer is responsible to complete the construction in a specified manner failing which it would be responsible for the consequences of delay/any other fault attributable to it. (k) That a developer shall undertake to maintain safety, security and protection of the environment. (l) That a developer shall provide and maintain at his own cost all lights, guards, fencing, warning signs and watching, when or where necessary. 43. In our humble understanding keeping view the nature of business as elaborated by the assessee and not controverted by the revenue, we clearly observe that the assessee obtained work by way of tenders wherein he submitted all technical bids in the form of details and working process that the assessee brought in his own material according to the specification of the employer/contractee, skilled man power, technical expertise for the execution and timely completion of the work, responsibility of development, to rectify and/or indemnify against damages and had undertaken entrepreneurial and investment risks while carrying out the infrastructure development facilities. From the copies of the agreement and the nature of work as explained by the assessee before the ld. Pr.CIT in the tabular form by referring requirements of contractee and consequent liabilities and responsibilities of the assessee, we also clearly observe that the assessee was required to furnish details of technical personnel, plant and machinery, past experience of similar work, ITA Nos.193-195/CTK/2019 89 financial strength etc. at the time of applying for tender in the form of technical bid, which further prove beyond doubt that the appellant not only carried business risk but also undertook entrepreneurial risk, financial risk and investment risk and almost all responsibilities as noted in preceding para of this order. 44. In our humble understanding, Explanation below section 80IA(13) was inserted to prevent misuse and abuse of tax incentives and the purpose of same was explained in the explanatory clause 22 to the amendment which clarifies that the provisions of section 80-IA 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 a person makes the investment and himself executes the development work i.e. carries out the civil construction work, he will be eligible for tax benefit under section 80-IA. The purpose of legislature behind insertion of Explanation below Section 80IA(13) of the Act was to clarify that mere works contract would not be eligible for deduction u/s.80IA of the Act and to disqualify the entities, who does only mere works contract or sub-contract as distinct from the work of a developer- cum-contractor. From the explanatory memorandum, the intention of Parliament is loud and clear that the purpose of tax benefit is to encourage investment in development of infrastructural sector and not for the persons who merely execute the civil construction work. In explanatory clause 22, it was categorically explained that the deduction u/s.80IA(4) of the Act will be available to the developers, who undertakes ITA Nos.193-195/CTK/2019 90 entrepreneur and investment risk and not for the contractors who undertakes only works contracts. This proposition has also rendered by the ITAT Cuttack Bench in the case of ARSS Infrastructure Ltd. (supra) as heavily relied on by the ld. AR. 45. In view of foregoing discussion, we are of the considered view that the ld. AR has successfully demonstrated by way of all relevant details and documents that the assessee at present, has undertaken huge risk in terms of deployment of technical persons, plant and machinery, technical knowhow, expertise managerial and financial resources which qualifies the assessee as developer-cum-contractor and the assessee is not merely a contractor who undertakes work contracts only. The financial statements, balance sheet and profit and loss account, clearly demonstrate that the assessee has used its own machinery and equipment of more than Rs.42 crores and has purchased and consumed materials of more than Rs.102 crores, purchased from various vendors during the relevant financial period, which was not provided by the contractee, these factual position has not been controverted by the ld. Pr.CIT in any manner, therefore, we safely presume that the assessee is not merely a contractor discharging works contract but it is a developer- cum-contractor, thus, rider created by the Explanation below Section 80IA(13) of the Act, which clearly provides that the entity doing work contract will not be eligible for benefit of deduction but the assessee cannot be put in the basket of work contractor and keeping in view wider scope of his work and various business risks such as entrepreneur, ITA Nos.193-195/CTK/2019 91 finance and other risks, the assessee has qualified a position of developer-cum-contractor, thus, proviso below section 80IA(13) of the Act does not create any bar in the allowability of deduction u/s.80IA(4) of the Act to the assessee. 46. From the relevant parts of the impugned revisionary order u/s.263 of the Act, we observe that the ld. Pr.CIT has made vehement emphasis on the precondition for allowability u/s.80IA(4) of the Act that the assessee is required to act as a developer, who is also operating and maintaining infrastructural facilities and has also placed reliance on the judgment of the Hon‟ble High Court of Bombay in the case of AVG Heavy Industries Ltd. (supra), On careful and respectful perusal of the judgment of Hon‟ble Bombay High Court particularly from paras 22 and 23, it is amply clear that after the amendment to clause (i) of the section 80IA(4) read as (i) developing or (ii) operating and maintaining or (iii) developing, operating and maintaining any infrastructure facility, prior to amendment the “or” between three activities were not there, after the amendment the word “or” has been inserted w.e.f.1-4-2002 by Finance Act 2001. The relevant paras 22 & 23 of the judgment of Hon‟ble Bombay High Court (supra) are thus, :- 22. Another submission which was urged on behalf of the Revenue is that under clause (iii) of sub-section (4A) of Section 80IA, one of the conditions imposed was that the enterprise must start operating and maintaining the infrastructure facility on or after 1st April 1995. The same requirement is embodied in sub-clause (c) of clause (i) of sub-section (4) of the amended provisions of Section 80IA. On this basis, it was urged that since the assessee was not operating and maintaining the facility, he did not fulfill 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 ITA Nos.193-195/CTK/2019 92 judgment. That the assessee was maintaining the facility is not in dispute. The facility was commenced after 1st April 1995. Therefore, the 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 1st April 1995. After Section 80IA 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 fulfills 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; and (iii) The start of operation and maintenance of the infrastructure facility on or after 1st April 1995. The requirement that the operation and maintenance of the infrastructure facility should commence after 1st April 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 entirety 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 1st April 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 80IA (4A) of the Act to clarify that the provision would apply to an enterprise engaged in (i) developing; or (ii) 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 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 80IA (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. Therefore, in view of above observations in the judgment of the Hon‟ble Bombay High Court in the case of AVG Heavy Industries Ltd. (supra), we clearly and respectfully note that the amendment by ITA Nos.193-195/CTK/2019 93 Parliament to section 80IA(4) of the Act settled the issue by stipulating that the three conditions for development, operation and maintenance were not intended to be cumulative in nature and the provision would apply to an enterprise engaged in (i) developing; (or) (ii) operating and maintaining ; (or) (iii) developing, operating and maintaining an infrastructure facility was reflective of a position which was always construed to hold the filed. In view of above discussion and after careful consideration of business and contract work undertaken by the present assessee, out of which impugned income, on which deduction/s.80IA(4) has been allowed by the AO, was accrued to the assessee from the business activity conducted or undertaken in the capacity of developer- cum-work contractor and not in the capacity of merely a work contractor. Therefore, in view of above factual matrix of the case, we reach to a logical conclusion that the assessee is a developer-cum-contractor and was engaged in the work of developing infrastructure facilities, thus, complying with the condition (i) of section 80IA(4) of the Act would be eligible for deduction u/s.80IA(4) of the Act and, thus, the assessment order granting deduction u/s.80IA(4) of the Act cannot be tagged or alleged as erroneous and prejudicial to the interest of revenue. This view taken by the Hon‟ble Bombay High Court has also followed by the ITAT Rajkot Bench in the case of Katira Constructions Ltd. (supra), ITAT Indore bench in the case of Sanee Infrastructure Pvt. Ltd.(supra), and the order of ITAT Kolkata Bench in the case of SPML Infra ltd. (supra). ITA Nos.193-195/CTK/2019 94 47.1 We are of the considered opinion that the assessee did not merely employ its labour while executing the project but it was also provided with the material and other requisites of technical and financial support by the contractee to carry out the desired work, therefore, we reached to a logical conclusion that the work relating to development of infrastructure facility did not partake the character of merely work contract and at the same time we are of the fortified opinion that the development work of infrastructure facility had been undertaken by the assessee out of which impugned amount of profit accrued to the assessee, hence, the ld. Pr.CIT was not justified and correct in distinguishing the judgment of Hon‟ble High Court of Bombay in the case of AVG Industries (supra) and other related judgment on this issue. 47.2 The ld. AR has also placed strong reliance on the order of ITAT Kolkata Bench in the case of ACIT Vs. Ho Hup Simplex JV [2018] 92 taxmann.com 108 (Kolkata-Trib.). In this case, the assessee was awarded a contract to construct Road by NHAI and it was to procure raw material, make arrangements for power, water, plant machinery etc., and conduct all other activities needed for construction, assessee was a developer and not a mere works contractor and, accordingly was held eligible for deduction u/s.80IA of the Act and similar facts exist in the present case and, thus, this proposition also supports the ground of assessee on merits. 47.3 The ld. CITDR has placed vehement reliance on the decision of Hon‟ble Madras High Court in the case of Covanta Samalpatti Operating ITA Nos.193-195/CTK/2019 95 (P) Ltd. (supra) and the order of ITAT Bangalore in the case of Yojaka Marine (P) Ltd. (supra). On careful and respectful perusal of these judgments, we are in agreement with the contentions of the ld. AR that these judgments are related to the assessees, who were engaged only in the contract of repair and maintenance and not doing any development of infrastructure facility akin to the business of present assessee, therefore, we respectfully hold that benefit of these judgments is not available for the revenue in the present case. The order of the ITAT Mumbai “L” Bench in the case of M/s Marriot International Licensing Company BV (supra) is not pertaining to the issue of Transfer Pricing and not pertaining the issue of allowability of claim u/s.80IA(4) of the Act. 47.4 The ld. CITDR has also placed reliance on the order of ITAT Delhi Bench in the case of Parnika Commercial & Estates (P) Ltd [2016] 72 taxmann.com 177 (Delhi-Trib.), where the Assessing Officer rejected the claim of deduction under section 80-IA(4) of assessee, engaged in Civil Contract Work, on ground that it was not engaged in eligible business as per section 80-IA(4), but before denying claim of assessee, AO did not make thorough enquiry in matter regarding nature of agreements, terms of payments, maintenance of account books with respect to project separately, etc., and matter was restored to the file of AO for readjudication after allowing due opportunity of hearing to the assessee but in the present case such position does not exit as the assessee by way of relevant documentary evidence, accounts, copies of the contract agreements and other facts has successfully demonstrated that the ITA Nos.193-195/CTK/2019 96 impugned income was earned to it from the business activity conducted in the capacity of developer-cum-contractor, therefore, benefit of this citation in favour of revenue is not available. 47.5 We find it relevant to go through the memorandum explaining the provisions in the Finance Bill 2007, which clearly lays out that the purpose of extending tax benefit u/s.80IA of the Act was to encourage investments from the private sector, hence, work contracts i.e. contracts involving merely labour or mere execution of construction work without making investment have been kept outside the purview of the provision of the section 80IA(4) of the Act. At the same time, from the said memorandum which reproduced below, clearly explains the purpose of tax benefit for encouraging private sector participation by way of investment in developing of the infrastructure sector and not to the persons who merely executes the civil construction work or any other works contract. The memorandum has been reported in (2007) 289 ITR(St.) 292 at page 312, which reads as under :- "Section 80-IA, 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 passive 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 (or the persons who merely execute the civil construction work or any other works contract. Accordingly, it is proposed to clarify that the provisions of section 80-IA 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 a person makes the investment ITA Nos.193-195/CTK/2019 97 and himself executes the development work, i.e., carries out the civil construction work, he will be eligible for tax benefit under section 80-IA. In contrast to this, a person who enters into a contract with another person (i.e., undertaking or enterprise referred to in section 80-IA) for executing works contract, will not be eligible for tax benefit under section 80-IA. This amendment will take retrospective effect from April 1, 2000 and will accordingly apply in relation to the assessment year 2000- 01 and subsequent years." 47.6 The above noted factual matrix, placed before the bench by way of relevant documentary evidence, copies of the contract development agreements and other legal propositions and citations on the issue pertaining to present assessee M/s Balaji Engicon Pvt. Ltd. (ITA No.195/CTK/2019) have not been controverted by the ld. CITDR. Therefore, we hold that the AO was right in allowing the claim of assessee u/s.80IA(4) of the Act after due examination and verification of the relevant materials, documents, copies of the contract and evidence etc., thus, on merits the assessment order cannot be alleged as erroneous and prejudicial to the interest of revenue. 48. Now, we further proceed to adjudicate the grounds of assessee on merits in ITA Nos.193&194/CTK/2019. Ld. AR has relied on the provision of sub-clause (a) of clause (i) of sub-section 4 of Section 80IA of the Act and has submitted that sub-section (4) applies to an entity which is owned by a company registered in India or by consortium of such company. He further explained that in these two appeals, the assessee the assessee has claimed deduction u/s.80IA(4) of the Act with regard to the income earned from the Joint Venture entity which was created by the respective assessees for the purpose of executing development-cum-contract work, ITA Nos.193-195/CTK/2019 98 thus, they are also entitled for deduction u/s.80IA(4) of the Act as these two companies earned income from the business of developer-cum- contract work done through Special Purpose Vehicles/Entities created for this special purpose under Joint Venture agreement for the similar kind of business of developer akin to the related assessee i.e. Shri Balaji Engicon Pvt. Ltd. (ITA No.194/CTK/2019). It has also been contended that the work was executed by the member of consortium, material were purchased by them, plant and machinery of members of consortium was also used and investment and other financial risk were also undertaken by the assessee in the capacity of member of consortium. He specifically pointed out that the work was obtained on the strength of technical and financial capacity of assessee and was executed under its supervision by Joint Venture entity and the work contract of developer-cum-contractor was neither sublet nor sub-contracted to any other outsider third party or entity, therefore, these two assessees are also eligible for deduction u/s.80IA(4) of the Act. The above factual position have not been controverted by the ld. CITDR during his arguments before the Bench and on careful reading of sub-clause (a) of clause (i) of Section 4 of Section 80IA of the Act, we clearly observe that the said provision also applies to an entity or company owned by a company registered in India or by consortium of such companies and this provisions qualifies both the assessee of ITA Nos.193&194/CTK/2019 for deduction u/s.80IA(4) of the Act. We may also point out that the ld. CITDR has also not demonstrated that the work undertaken by these companies was not in the nature of ITA Nos.193-195/CTK/2019 99 work of developer-cum-contractor and the same was worked by works contractor. Therefore, the findings arrived at by us in the foregoing paragraphs of this order pertaining to ITA No.195/CTK/2019 read with provision of Section 80IA(4)(i)(a) of the Act, we are compelled to hold that these two assessees are also qualified and entitled for deduction u/s.80IA(4) of the Act and, thus, on merits, the impugned assessment orders cannot be branded as erroneous and prejudicial to the interest of revenue. 49. Now, we proceed to adjudicate the legal contentions and objections raised by both the sides, it is a well settled legal position for invoking revisionary powers u/s.263 of the Act the ld. Pr.CIT has to be satisfied of two conditions namely, the order of the AO sought to revive is erroneous and prejudicial the interest of revenue and if any one of these conditions is absent then the revisionary powers u/s. 263 of the Act cannot be invoked to revive the assessment order. In the present case from the contentions of the ld. AR as explained by way of supporting documentary evidence we are convinced that the Assessing Officer has made adequate and sufficient enquiry on all the relevant issue including allowability of deduction u/s.80IA(4) of the Act. Therefore, the order cannot be alleged as erroneous and prejudicial to the interest of revenue. 50. So far as applicability of Explanation 2 to Section 263 of the Act is concerned, this issue was put up for adjudication before the coordinate bench of the Tribunal at Mumbai in the case of M/s Indus Best Hospitality ITA Nos.193-195/CTK/2019 100 & Realtors Pvt. Ltd. Vs. Pr.CIT, in ITA No.3125/Mum/2017, order dated 19.01.2018, wherein it was held as under :- 23. In this regard, we observe that the aforesaid judgments have been later considered by Hon'ble Mumbai Tribunal in several other cases. Further, in the recent judgments, the Hon'ble Tribunal has taken a view that the provisions to Explanation 2 to s. 263 of the Act introduced by the Finance Act, 2015 is prospective in nature and would not apply to the year under consideration as follows: (a) AV Industries v. ACIT [ITA No. 3469/Mum/2010] dated 06.11.2015. (b) Metacaps Engineering and Mahendra Constructions Co. (JV) v. CIT [ITA No. 2895/Mum/2014] dated 11.09.2017 (c) Reliance Money Infrastructure Ltd. v. PCIT [ITA No. 3259/Mum/2017] dated 06.10.2017. (d) Shantikrupa Estate Pvt. Ltd. [ITA No. 1252/Ahd/2015] dated 09.09.2016 (e) Amira Pure Foods Pvt. Ltd. v. PCIT [ITA No. 451/Del/2017] dated 29.11.2017. 51. Respectfully following the order of ITAT Mumbai in the case of M/s Indus Best Hospitality & Realtors Pvt. Ltd. (supra), we are compelled to hold that Explanation 2 to s.263 of the Act introduced by the Finance Act, 2015 is prospective in nature and would not apply to the year under consideration i.e. A.Y.2014-2015. Therefore, we decline to accept the contention of ld. CITDR that the impugned order of ld. Pr.CIT is sustainable in view of Explanation 2 to sub-section (1) of Section 263 of the Act. 52. The ld. AR has placed reliance on the recent order of ITAT Mumbai F Bench in the case of Sir Dorabjee Tata Trust Vs. DCIT, (2021) 188 ITD 38 and submitted that the revisionary powers u/s.263 of the Act cannot be ITA Nos.193-195/CTK/2019 101 exercised in an arbitrary manner. In this order, we observe that the Tribunal held that when a public authority has the power to do something in the aid of enforcement of a right of a citizen, it is imperative upon him to exercise such powers when circumstances so justify or warrant and as a coronary to this legal position, when a public has a power to do something against any person, such an authority cannot exercise that power unless it is demonstrated that the circumstances so justify or warrant. The Tribunal also held that it is also important to bearing in mind the fact that lack of bonafide or unreasonableness in conduct cannot be inferred on mere suspicion; there have to be some strong indicators in direction, or there has to be a specific failure in doing what a prudent, judicious and responsible officer would have done in the normal course of his work in the similar circumstances. In the present case, we are unable to see any omission or negligence on the part of the AO while allowing the claim of assessee u/s.80IA(4) of the Act, therefore, the powers u/s.263 of the Act cannot be exercised to review such order. 53. In the case of Malabar Industries Company Limited (supra), after considering its earlier judgments in the case of Rampyari Devi Saraogi and Tara Devi Agarwal (supra), the Hon‟ble Supreme Court held that, „the phrase „prejudicial to the interests of the revenue‟ has to be read in conjunction with an erroneous order passed by the Assessing Officer. Every loss of revenue as a consequence of an order of the Assessing Officer cannot be treated as prejudicial to the interests of the revenue, for example, when an ITO adopted one of the courses permissible in law and ITA Nos.193-195/CTK/2019 102 it has resulted in loss of revenue; or where two views are possible and the ITO has taken one view with which the Commissioner does not agree, it cannot be treated as an erroneous order prejudicial to the interests of the revenue unless the view taken by the ITO is unsustainable in law. In the present case, as we have discussed above the view on the allowaibility of deduction u/s.80IA(4) of the Act, taken by the AO is correct and plausible, therefore, that view cannot be revised by invoking powers u/s.263 of the Act merely because the ld. Pr.CIT was not agreed to the view taken by the AO. Similar situation is discernible from the impugned revisionary order. 54. The Hon‟ble Supreme Court in the case of CIT Vs. Amitabh Bachchan [2016] 384 ITR 200 (SC), at para 21, has held that there can be no doubt that so long as the view taken by the Assessing Officer is a possible view the same ought not to be interfered with by the Commissioner under Section 263 of the Act merely on the ground that there is another possible view of the matter. Permitting exercise of revisional power in a situation where two view are possible would really amount to conferring some kind of an appellate power in the revisional authority. This is a course of action that must be desisted from. In the present case, as we have noted above the view taken by the AO on merits is plausible and sustainable as per the provisions of law and scheme of Section 80IA(4) of the Act, therefore, revisionary powers cannot be exercised. In the present case also in view of foregoing discussion, we have concluded that we are unable to see an ambiguity, ITA Nos.193-195/CTK/2019 103 perversity or any other reason to allege that the view taken by the AO in allowing claim of assessee u/s.80IA(4) of the Act. Therefore, the said assessment order cannot be held as erroneous and prejudicial to the interest of revenue only to the extent of allowing the claim of the assessee u/s.80IA(4) of the Act. 55. The ld. AR also placed reliance on the decision of Hon‟ble Bombay High Court in the case of Gabriel India 203 ITR 108 (Bom), decision of Hon‟ble Delhi High Court in the case of D.G.Housing Project Ltd. 343 ITR 329 (Delhi), wherein it was held that one has to keep in mind the distinction between “lack of inquiry” and “inadequate inquiry”. If there was any inquiry, even inadequate, that would not by itself, give occasion to the Commissioner to pass orders under section 263 of the Act, merely because he has different opinion in the matter. It is only in cases of “lack of inquiry”, that such a course of action would be open.” Same view has been reiterated by Hon‟ble Delhi High Court in the case of DIT Vs. Jyoti Foundation, [2013] 357 ITR 388. As we have noted above, the Assessing Officer has done sufficient and adequate enquiry before allowing claim of the assessee u/s.80IA(4) of the Act, therefore, these citations support the legal ground of assessee. 56. In view of above, we are satisfied that during assessment proceedings, the AO made proper, sufficient and adequate enquiry on the issue of allowability of deduction u/s.80IA(4) of the Act. Therefore, it is not a case of no enquiry, inadequate enquiry or insufficient enquiry. Therefore, without holding so, the impugned assessment order cannot be ITA Nos.193-195/CTK/2019 104 tagged or alleged as erroneous and prejudicial to the interest of revenue. Therefore, we reached to a logical conclusion that the impugned revisionary order u/s.263 of the Act has not been passed by assuming valid jurisdiction to invoke such provision against such assessee, thus, the same is not valid and sustainable neither on merits nor on legal footings. We hold so and, thus, partly set aside the impugned order of the ld. Pr.CIT upto the extent of making disallowance u/s.80IA(4) of the Act. 57. On the basis of foregoing discussion, we reached to a logical conclusion that the conclusion arrived at by the ld. Pr.CIT on the issue of allowability of deduction u/s.80IA(4) of the Act pertaining to the impugned assessment year relevant to ITA No.195/CTK/2019 cannot be held as valid and, thus, the same is unsustainable. Regarding other two appeals i.e. ITA Nos.193&194/CTK/2019, we are of the considered view that on the identical facts and circumstances, these two assessees have undertaken work in the capacity of developer-cum-contractor creating consortium and by using their own skilled and technical staff, equipment, machinery, investment and financial resources and work has been executed by the member of consortium/special purpose vehicles by using the all means and resources of members of consortium. Ld. Pr.CIT has not demonstrated or controverted that these entities have not executed the development work contract in the capacity of developer-cum- contractor. The assessee has subsequently demonstrated that the work was executed by the member of consortium, material was purchased by them, plant and machinery owned by the members of consortium was ITA Nos.193-195/CTK/2019 105 used and investment and financial risk was also undertaken by the members of consortium and the work was neither sublet nor sub- contracted to any outsider third party or entity. We have noted above that the income earned by a consortium on such companies is also entitled for deduction/s.80IA(4) of the Act, therefore, the grounds of assessee raised in ITA Nos.193&194/2019 are also allowed by applying the conclusion drawn in ITA No.195/CTK/2019 on merits as well as on legal ground with regard to allowing the claim of the assessee u/s.80IA(4) of the Act. Ground No.2 of assessee in ITA No.195/CTK/2019 : 58. On the issue of invoking revisionary powers u/s.263 of the Act by the ld. Pr.CIT on the issue of disallowance u/s.14A of the Act, ld. AR submitted that it was mandatory for the AO to form a satisfaction prior to the invocation of the provisions of Section 14A of the Act read with rules 8D of the I.T.Rules and ld. Pr.CIT could not have substituted the satisfaction of the ld. AO. Ld. AR also pointed out that there was not even an iota of evidence that any expenditure debited in the Statement of Profit & Loss was related to earning of exempt income interest free funds were higher than the investments made and it shall therefore be presumed that investments were made out of interest free funds and not out of interest bearing funds. Ld. AR also submitted that no exempt income was received/receivable in respect of investment made in the shares of group companies, therefore, no disallowance should have been made u/s.14A read with rule 8D. The relevant written submissions of the assessee, in ITA Nos.193-195/CTK/2019 106 this regard, are available at pages 241 to 256 of the assessee‟s paper book dated 13.10.2021, which read as follows :- 2] GROUND NO. 2 - CHALLENGING THE ACTION OF THE LD. PC IT IN DIRECTING THE LD. AO TO MAKE DISALLOWANCE OF RS. 14,76,976/- U/S 14A OF THE ACT 2.1] The appellant in this ground of appeal has challenged the action of the Ld. PClT in directing the Ld. AO to make disallowance of Rs.14,76,976/- u/s 14A of the Act. 2.2] The Ld. PCIT in Para 12 to 14 of the show cause notice issued u/s.263 of the Act dealt with the issue of disallowance u/s 14A of the Act and observed that the appellant made investment in Joint Venture (JV) of Rs.2,42,09,412/ - and investment in equity shares of different companies of Rs.4,88,40,000/-. The Ld. PClT then observed that the Ld. AO did not examine the issue of disallowance as per the provisions of section 14A of the Act read with Rule 80 of the Rules during the course of assessment proceedings and if he had done so, an amount of Rs. 36,00,478/ - would have been disallowed u/s.14A of the Act. Hence, the Ld. PClT opined that the Ld. AO's failure to examine the issue from the angle of section 14A of the Act rendered the assessment order prima-facie erroneous in so far as it is prejudicial to the interest of revenue. 2.3] In response to the show cause notice issued vi] s 263 of the Act, the appellant duly furnished its submission along with the requisite explanations wherein it was categorically submitted that no disallowance was called for u/s.14A of the Act. The gist of the submission made by the appellant before the Ld. PClT has also been discussed in Para 46 on inner Page No. 32-34 of the order passed by the Ld. PClT. 2.4] However, the Ld. PClT did not completely accept the contentions put forth by the appellant citing various reasons/ case laws for his disagreement and he accordingly directed the Ld. AO to make disallowance of Rs. 14,76,976/- u/s 14A of the Act which was worked out as under: ITA Nos.193-195/CTK/2019 107 2.5.1] However, with due respect, it is being submitted that action of the Ld. PClT in directing the Ld. AO to make disallowance of Rs. 14,76,976/- u/s 14A of the Act is legally unsustainable for the below-mentioned reasons: (i) It was mandatory for the Ld. AO to form a satisfaction prior to invoking the provisions of section 14A of the Act read with Rule 80 of the Rules and the satisfaction of the Ld. PClT could not have substituted the satisfaction of the Ld. AO (ii) There was not even an iota of evidence that any expenditure debited in the Statement of Profit & Loss was related to earning of exempt income. (iii) Interest free funds were higher than the investments made and it shall therefore be presumed that investments were made out of interest free funds and not out of interest bearing funds (iv) No exempt income was received/ receivable in respect of investment made in the shares of group companies 2,5.2] The submission of the appellant apropos each of these reasons is discussed hereunder for the ready reference of the Hon'ble Bench: (i) It was mandatory for the Ld. AO to form a satisfaction prior to invoking the provisions of section 14A of the Act read with Rule 8D of the Rules and the satisfaction of the Ld. PClT could not have substituted the satisfaction of the Ld. AO ITA Nos.193-195/CTK/2019 108 • The provisions of section 14A of the Act are reproduced hereunder for the ready reference of the Hon 'ble Bench: "Expenditure incurred in relation to income not includible in total income. 14A. (1) For the purposes of computing the total income under this Chapter, no deduction shall be allowed in respect of expenditure incurred by the assessee in relation to income which does not form part of the total income under this Act. (2) The Assessing Officer shall determine the amount of expenditure incurred in relation to such income which does not form part of the total income under this Act in accordance with such method as may be prescribed, if the Assessing Officer, having regard to the accounts of the assessee, is not satisfied with the correctness of the claim of the assessee in respect of such expenditure in relation to income which does not form part of the total income under this Act. (3) The provisions of sub-section (2) shall also apply in relation to a case where an assessee claims that no expenditure has been incurred by him in relation to income which does not form part of the total income under this Act: Provided that nothing contained in this section shall empower the Assessing Officer either to reassess under section 147 or pass an order enhancing the assessment or reducing a refund already made or otherwise increasing the liability of the assessee under section 154, for any assessment year beginning on or before the 1st day of April, 2001. [Emphasis Supplied} • It is an uncontroverted fact that the Ld. PClT worked out the disallowance u/s 14A of the Act as per the method prescribed in Rule 80 of the Rules. However, sub-sections (2) and (3) of section 14A of the Act read with Rule 80 of the Rules merely prescribe a formula for determination of expenditure incurred in relation to income which does not form part of the total income under the Act in a situation where the Assessing Officer is not satisfied with the claim of the assessee. The law postulates the requirement of satisfaction of the Assessing Officer that having regard to the accounts of the assessee, as placed before him, it is not possible to generate the requisite satisfaction with regard to the correctness of the claim of the assessee. It is only thereafter that the provisions of section 14A(2) and (3) read with Rule 8D of the Rules would become applicable. • In the facts of the present case, no satisfaction was formed by the Ld. AO but it was the Ld. PCIT who formed the requisite satisfaction and directed the Ld. AO to make disallowance u/s 14A of the Act which is grossly unjustifiable and wholly unwarranted in light of the clear wordings contained in section 14A of the Act. It is a well settled position of law that when a statute confers the powers on the AO to record satisfaction, it is the AD alone who has to do so but ITA Nos.193-195/CTK/2019 109 not any other authority be it PCIT. Therefore, disallowance of Rs. 14,76,976/- worked out by the Ld. PClT u/s 14A of the Act read with Rule 8D of the Rules deserves to be annulled on this count itself. Relevant extracts from a couple of judicial precedents which have enunciated the above-mentioned principles are reproduced hereunder: • The legal principle and ratio is no longer res integra and is settled by the landmark judgment of the Hon'ble Supreme Court of India in the case of Godrej & Boyce Manufacturing Company Ltd. v. DCIT reported in [2017] 394 ITR 449(SC) wherein it was held that: "37. We do not see how in the aforesaid fact situation a different view could have been taken for the Assessment Year 2002-2003. Sub-sections (2) and (3) of Section 14A of the Act read with Rule BD of the Rules merely prescribe a formula for determination of expenditure incurred in relation to income which does not form part of the total income under the Act in a situation where the Assessing Officer is not satisfied with the claim of the assessee. Whether such determination is to be made on application of the formula prescribed under Rule BD or in the best judgment of the Assessing Officer, what the law postulates is the requirement of a satisfaction in the Assessing Officer that having regard to the accounts of the assessee, as placed before him, it is not possible to generate the requisite satisfaction with regard to the correctness of the claim of the assessee. It is only thereafter that the provisions of Section 14A{2} and (3) read with Rule BD of the Rules or a best judgment determination, as earlier prevailing, would become applicable. " [Emphasis Supplied] • The Hon'ble Delhi High Court in the case of Pr. CIT-9 v. Vedanta Ltd. reported in [2019] 102 taxmann.com 95 (Delhi) has categorically held that: "8. It is apparent that the Assessing Officer without examining, commenting and rejecting the disallowance made by the respondent-assessee had applied Rule 8D as compulsory and universally applicable rule where the 'aseessee has earned exempt income. However, Rule 8D cannot be invoked and applied unless the Assessing Officer records his dissatisfaction regarding correctness of the claim made by the assessee in relation to expenditure incurred to earn exempt income. This is the mandate and pre-condition imposed by sub-section (2) to Section 14A of the Act. Rule 8D is in the nature of best judgment determination i.e. determination in default and on rejection of the explanation of the assessee in relation to expenditure incurred to earn exempt income. Rule 8D is not applicable by default but only if and when the Assessing Officer records his satisfaction and rejects the explanation of the assessee regarding the disallowance of expenditure. In the present case the assessment order proceeds on a wrong assumption that Rule BD would applies to all cases and is mandatory. Finding of the Tribunal affirming the order of the Commissioner of Income Tax(Appeals) is in accordance with the law. " [Emphasis Supplied} ITA Nos.193-195/CTK/2019 110 • The appellant also places reliance on the following judicial precedents in support of its contention: CIT v. U. P. Electronics Corpn. Ltd. reported in [2017} 397 ITR 113 (Allahabad) Eicher Motors Ltd. v. CIT-III reported in [2017} 39B ITR 51 (Delhi) HT Media Ltd. v. Pr. CIT-IV, New Delhi reported in [2017} 399 ITR 576 (Delhi) Pr. CIT Vadodara-I v. Gujarat State Fertilizers And Chemicals Ltd. reported in [2019} 416 ITR 13 (Gujarat) Pr. CIT v. CIMS Hospital (P.) Ltd. reported in [2021} 125 taxmann.com 227 (Gujarat) CIT Bangalore v. Brigade Enterprises Ltd. reported in [2020} 429 ITR 615 [Karnataka] Hindustan Aeronautics Ltd. v. ACIT-3(1)(2), Bangalore reported in [2021} 125 taxmann.com BO (Karnataka) Azimuth Investments Ltd. Vs ACIT, CircJe-2(l), New Delhi [ITA No. 283/Del./2013 TTGA vs AddJ. CIT, Range-16, New Delhi [ITA No. 3530/Del/2014 In view of the law laid down in the judicial precedents cited supra, it can be conclusively held that the action of the Ld. PCIT in working out the disallowance u/s 14A of the Act read with Rule 80 of the Rules was legally unsustainable since the disallowance u/s. 14A of the Act was directed to be made in absence of satisfaction recorded by the Ld. AO which is a mandate and pre-condition imposed by sub-section (2) to Section 14A of the Act prior to working out the disallowance as per Rule 80 of the Rules. There was not even an iota of evidence that any expenditure debited in the Statement of Profit & Loss was related to earning of exempt income. It is a well settled proposition of law that if an expenditure incurred has no causal connection with the exempted income, then such an expenditure would obviously be treated as not related to the income that is exempted from tax, and such expenditure would be allowed as business expenditure and no disallowance would be made u/s 14A of the Act. In the facts of the present case, it is not in dispute that the appellant did not incur any expenditure on investment made in the shares of three group companies of Rs. 4,88,40,000/-, either in the year of investment or during the year under consideration, meaning thereby that not even a single penny was incurred by the appellant on ITA Nos.193-195/CTK/2019 111 account of investment in the aforesaid shares from the date of making such investment. It is also undisputed that the appellant did not make any efforts or devote time towards such investment in the year under consideration. All the expenses debited in the Statement of Profit & Loss had no connection directly or indirectly with the investment made by the appellant and all the expenses debited in the Statement of Profit & Loss were incurred in earning income chargeable to tax under the head, "Profits and Gains from Business or Profession." It is worth noting that there was also no finding whatsoever in the order of Ld. PClT that any expenditure was incurred by the appellant directly or indirectly to earn income which was not includible in the total income of the appellant. In absence of such a finding in the order of the Ld. PCIT, the action of the Ld. PClT' in directing the Ld. AO to make disallowance vi] s 14A of the Act was devoid of any merits. Relevant extracts from a couple of judicial precedents which have enunciated the above-mentioned principles are reproduced hereunder: • The legal principle and ratio is no longer res integra and is settled by the judgment of the Hon'ble Supreme Court of India in the case of Maxopp Investment Ltd. v. CIT, New Delhi reported in [2018] 402 ITR 640 (SC) wherein it was held that: "32. In the first instance, it needs to be recognised that as per section 14A(l) of the Act, deduction of that expenditure is not to be allowed which has been incurred by the assessee "in relation to income which does not form part of the total income under this Act". Automatically, it is that expenditure alone which has been incurred in relation to the income which is includible in total income that has to be disallowed. If an expenditure incurred has no causal connection with the exempted income. then such an expenditure would obviously be treated as not related to the income that is exempted from tax. and such expenditure would be allowed as business expenditure. To put it differently. such expenditure would then be considered as incurred in respect of other income which is to be treated as part of the total income. (Emphasis Supplied] • The Hon'ble Bombay High Court in the case of CIT v. Sociedade De Fomento Industrial (P.) Ltd. reported in [2020] 429 ITR 358 (Bombay) vide order dated 06.11.2020 has held that: "19. Here, on facts, the Tribunal noted that the AD only discussed the provisions of section 14A(l) but has not justified how the expenditure the Assessee incurred during the relevant year related ITA Nos.193-195/CTK/2019 112 to the income not forming part of its total income. The AO. according to the Tribunal. straightaway applied Rule 8D. Indeed. there must be a proximate relationship between the expenditure and the tax-exempt income. Only then would a disallowance have to be effected. This Court. we may note. on more than one occasion. has held that the onus is on the Revenue to establish that there is a proximate relationship between the expenditure and the exempt income. That is, the application of section 14A and rule 8D is not automatic in each and every case, where there is income not forming part of the total income. No doubt. the expenditure under section 14A includes both direct and indirect expenditure, but that expenditure must have a proximate relationship with the exempted income. Surmise or conjecture is no answer. 20. We may further reiterate that before rejecting the disallowance computed by the Assessee, the Assessing Officer must give a clear finding with reference to the Assessee's accounts as to how the other expenditure claimed by the Assessee out of the non-exempt income is related to the exempt income. 21. So, we see no valid reasons to upset the Tribunal's well- reasoned judgment on this substantial question of law. (Emphasis Supplied) • The appellant also places reliance on the following judicial precedents in support of its contention: Pr. CIT v. Infosys BPO Ltd. reported in (2021j 123 taxmann.com 216 (Karnataka) CIT, Chennai v. Celebrity Fashion Ltd. reported in (2020j 428 ITR 470 (Madras) • In view of the settled legal position enunciated in the judicial precedents cited supra, it becomes crystal clear that the Ld. PClT prior to invoking the provisions of section 14A of the Act ought to have demonstrated as to how the expenses claimed by the appellant out of the non-exempt income were related to earning of exempt income. However, no such exercise was undertaken by the Ld. PClT and the Ld. PClT simply jumped to Rule BD of the Rules and worked out the disallowance u/s 14A of the Act. Hence, action of the Ld. PClT in directing the Ld. AO to make disallowance u/s 14A of the Act is not justifiable on this count also. (iii) Interest free funds were higher than the investments made and it shall therefore be presumed that investments were made out of interest free funds and not out of interest bearing funds • Detail of investment of Rs. 4,88,40,000/ - made in the equity shares of group companies and shown under 'Note 13 - Non ITA Nos.193-195/CTK/2019 113 Current Investments' in the audited financial statements of the appellant is as under: SNo Name of the companies Amount as on 31.03.2014(Rs.) Amount as on 31.03.2013(Rs.) 1 Shree Radharaman Stone Crusher Pvt. Ltd. 30,00,000 30,00,000 2 Idea Suppliers Pvt. Ltd 48,40,000 48,40,000 3 Shree Balaji Buildcon Pvt. Ltd. 4,10,00,000 4,10,00,000 Total 4,88,40,000 4,88,40,000 It was categorically submitted before the Ld. PCIT that investment in the shares of the above-mentioned group companies was made out of undisclosed income surrendered during the course of search conducted on 24.05.2012. Once it was stated that investment in the shares of these group companies was made out of undisclosed income surrendered during the course of search which was offered for tax in the income- tax return and due taxes were paid thereon; then, there remained no scope for working out disallowance u/s 14A of the Act since it was established well beyond doubt that no interest bearing funds were invested in the shares of these group companies. • As regards the investment in joint venture (“JV") is concerned, it was submitted before the Ld. PCIT that major amount shown as current investment was against bills raised for contract work which should have been classified as debtors instead of investments. It was further submitted that investment shown in JV also comprised of profit booked during the year or in the preceding years' by the JV or out of own funds and that no borrowed funds were utilized for making investment in the JV. It was also submitted that investment in JV was not made to earn exempt income but rather it was a strategic investment and for the purpose of commercial expediency. • At this juncture, it is worth noting that the Ld. PCIT partly accepted the contentions of the appellant and he worked out the disallowance u/s 14A of the Act after excluding the amount of bills raised for contract work which should have been classified as debtors but which were included in the figure of investment in JV. Accordingly, the Ld. PCIT considered the figure of investment in JV as Rs. 1,03,60,867/- and Rs. 1,61,90,781/- as on 31.03.2013 and 31.03.2014 respectively instead of figure of investment in JV as per the audited financial statements of Rs. 2,41,01,458/ - and Rs. 2,42,09,412/ - as on 31.03.2013 and 31.03.2014 respectively. • However, it is being brought to the kind notice of the Hon'ble Bench that there have been some further modifications in the said working which was submitted before the Ld. PClT in order to exclude the correct effect of debtors' bill, royalty and share of profit which were included in the figure of investment in JV in the audited financial statements for these years'. A summary containing the correct figures of investment in JV to be considered for the purpose of working out the disallowance vi] s 14 of the Act, if any, is ITA Nos.193-195/CTK/2019 114 reproduced hereunder for the ready reference of the Hon'ble Bench: Correct figure of investment in JV to be considered for section 14A Amount (in Rs.) Particulars 31.03.2013 31.03.2014 BALAJI-ARSS (JV) - - SBEPL-GRILL (JV) - - GPT-BALAJI- RAWATS(JV) - 22,48,536.00 RAWATS-BALAJI(JV) 9,80,000.00 18,20,000.00 Total 9,80,000.00 40,68,536.00 On perusal of the summary reproduced hereinabove, it becomes quite clear that even if any disallowance ought to be worked out u/ s 14A of the Act in respect of investment in JV, it should be worked out considering the correct figure of investment in JV of Rs. 9,80,000/- and Rs. 40,68,536/- as on 31.03.2013 and 31.03.2014 respectively instead of figure of investment in JV considered by the Ld. PCIT as Rs. 1,03,60,867/- and Rs. 1,61,90,781/- as on 31.03.2013 and 31.03.2014 respectively. However, as elaborately justified in the synopsis, there arises no question of making any disallowance u/s.14A of the Act in respect of investment in JV. Thus, it is evident that interest bearing funds were not invested either in the shares of the group companies or in the JV. However, the Ld. PCIT in his over enthusiasm to work out the disallowance ii]« 14A of the Act completely brushed aside the contentions put forth by the appellant which is totally unacceptable more so when it was categorically explained that neither interest bearing funds were invested in the group companies/ JV nor was any expenditure debited in the Statement of Profit & Loss in respect of income which did not form part of the total income. WITHOUT PREJUDICE TO THE ABOVE • Even otherwise, it is a well settled position of law that where interest-free funds available with an assessee are sufficient to meet its investment, then it shall be presumed that the investments have been made out of interest-free funds and not out of borrowed funds. • The position of interest free funds available with the appellant and investments made in shares of group companies and JV is summarized hereunder for the ready reference of the Hon'ble Bench: ITA Nos.193-195/CTK/2019 115 • On perusal of the summary related to interest free funds available and investments made, it becomes crystal clear that since the appellant had sufficient interest free funds available with it to meet the investments, then, it shall be presumed that the investments were made out of interest-free funds and dot out of borrowed funds. Relevant extracts from a couple of judicial precedents which have enunciated the above-mentioned principles are reproduced hereunder: • The legal principle is no longer res integra and is recently once again affirmed by the judgment of the Hon'ble Supreme Court of India in the case of South Indian Bank Ltd. versus CIT [Civil Appeal No. 9606 of 2011] vide order dated 09.09.2021 wherein it was held that: "20. Applying the same logic, the disallowance would be legally impermissible for the investment made by the assessees.in bonds/shares using interest free funds, under Section 14A of the Act. In other words, if investments in securities is made out of common funds and the assessee has available, non-interest- bearing funds larger than the investments made in tax- free securities then in such cases, disallowance under Section 14A cannot be made. 27. The aforesaid discussion and the cited judgments advise this Court to conclude that the proportionate disallowance of interest is not warranted, under Section 14A of Income Tax Act for investments made in tax free bonds/ securities which yield tax free dividend and interest to Assessee Banks in those situations where, interest free own funds available with the Assessee, exceeded their investments. With this conclusion, we unhesitatingly agree with the view taken by the learned ITAT favouring the assessees. [Emphasis Supplied] ITA Nos.193-195/CTK/2019 116 • The Hon'ble Karnataka High Court in the case of Pr. CIT, Bangalore v. Subramanya Constructions & Development Co. Ltd. reported in [2021] 130 taxmann.com 115 (Karnataka) vide order dated 07.04.2021 has held that: 7. Thus, it is evident that the capital and reserves of the company are far in excess of the investment made. Therefore, the presumption arises that such investments have been made from capital and reserves of the company and from non-interest bearing funds and not out of borrowed funds to warrant any disallowance while computing the income. [See: Reliance Utilities and Power Ltd.(supra) and Lalsons Enterprises (supra). It is also pertinent to mention here that the Assessing Officer has not recorded the satisfaction that assessee had incurred expenditure to earn exempt income as envisaged under rule 8D(1) of the Rules. There is no positive material to show that the assessee had incurred such expenditure to earn exempt income. The Commissioner of Income- tax (Appeals) and the tribunal therefore, have rightly deleted the disallowance under section 14A read with rule 8D of the Rules. The Circular No. 5/2014 dated 11-2-2014 has no application to the facts of the case as the Assessment Year in question is 2009-10. In view of preceding analysis, the substantial question of law framed by a bench of this court is answered against the revenue and in favour of the assessee. (Emphasis Supplied] • The appellant also places reliance on the following judicial precedents in support of its contention: Pr. CIT-IV. Ahmedabad v. Sintex Industries Ltd. reported in (2018J 93 taxmann.com 24 (Se) & Pr. CIT-4 v. Sintex Industries Ltd. reported in (2017J 82 taxmann.com 171 (Gujarat) Pr. CIT (Central) v. Ashok Apperels (P) Ltd. reported in (2020J 423ITR 412 (Bombay) Pr. CIT-7 v. Premier Finance & Trading Co. Ltd. reported in (2019J 104 taxmann. com 97 (Bombay) Pr. CIT v. Sbepoorji Pellonji & Co. Ltd. reported in (2020J 423 ITR 220 (Bombay) CIT-Ill, Pune v. Shereda Erectors (P) Ltd. reported in (2016J 76 taxmann.com 107 (Bombay) Pr. CIT, Vedodere-I v. Gujeret Fluorochemicels Ltd. reported in (2021J 431 ITR 160 (Gujarat) ITA Nos.193-195/CTK/2019 117 • In view of the above discussion and findings re-iterated in the judicial precedents cited supra, it is well established that no disallowance ought to have been worked out u/s 14A of the Act since the appellant had sufficient interest free funds available with it to meet the investments and as a corollary, it shall be presumed that the investments were made out of interest-free funds and not out of borrowed funds. Hence, action of the Ld. PClT in directing the Ld. AO to make disallowance u/s.14A of the Act is not tenable on this count. (iv) No exempt income was received! receivable in respect of investment made in the shares of group companies • It was also submitted before the Ld. PClT that the appellant did not earn any tax free/exempt income during the year under consideration against such investments made in the shares of group companies. Accordingly, it was submitted that investment made in the shares of group companies could not have been considered for the purpose of working out the disallowance u/s 14A of the Act. • However, the Ld. PClT rejected the contentions put forth by the appellant by stating that the appellant earned exempt income of Rs. 76,47,802/- from its investment in JV being completely ignorant of the fact that no exempt income whatsoever was received/ receivable by the appellant in respect of its investment in the shares of group companies. • It is a well settled position of law that no disallowance is justifiable u/s 14A of the Act if no exempt income is received! receivable during the relevant previous year. Relevant extracts from a few judicial precedents which have enunciated the above- mentioned principles are reproduced hereunder: • The Hon'ble Supreme Court of India in the case of Pr. CIT v. GVK Project and Technical Services Ltd. reported in [2019] 264 Taxman 76 (SC) dismissed the SLP filed by the Department against the order of the Hon'ble Delhi High Court wherein it was categorically held that in absence of any exempt income reported by assessee, disallowance could not be made u/s 14A of the Act. The Hon'ble Delhi High Court in the case of CIT v. GVK Project & Technical Services Ltd. reported in [2019] 106 taxmann.com 180 (Delhi) has held that: "1. The Revenue's appeal is with respect to the disallowance made by the Assessing Officer ('A 0, under Section 14A of the Inc0I11.e- tax Act, 1961 (hereafter 'the Act'). The AO had proceeded to calculate the disallowance based upon the investments made by the assessee. The CIT(A) and the Income Tax Appellate Tribunal (ITAT) allowed the assessee's appeals by following the ruling in ITA Nos.193-195/CTK/2019 118 'Chemin vest Ltd. v. CIT [2015/61taxmann.com 118/234 Taxman 761/378 ITR 33 (Delhi); the Court had then held that in the absence of any exempt income disallowance was impermissible. For the relevant Assessment Year (2013-14). concededly. the assessee did not report any exempt income. Consequently, no substantial question of law arises; the appeal is therefore dismissed along with the pending application. [Emphasis Supplied) • The Hon'ble Delhi High Court in the case of Cheminvest Ltd. v. CIT-IV reported in [2015] 378 ITR33 (Delhi) has categorically held that: "23. In the context of the facts enumerated hereinbefore the Court answers the question framed by holding that the expression 'does not form part of the total income' in Section 14A of the envisages that there should be an actual receipt of income, which is not includible in the total income, during the relevant previous year for the purpose of disallowing any expenditure incurred in relation to the said income. In other words. Section 14A will not apply if no exempt income is received or receivable during the relevant previous year. » [Emphasis Supplied) • The Hon'ble Madras High Court in the case of Redington (India) Ltd. v. Addl. CIT, Co. Range-V, Chennai reported in [2017] 392 ITR 633 (Madras) has held that: "15. The exemption extended to dividend income would relate only to the previous year when the income was earned and none other and consequently the expenditure incurred in connection therewith should also be dealt with in the same previous year. Thus, by application of the matching concept, in a year where there is no exempt income. there cannot be a disallowance of expenditure in relation to such assumed income. Madras Industrial Investment Corpn. Ltd. v. CIT (1997) 225ITR 802/91 Taxman 340 (SC). The language of s.14A(l) should be read in that context and such that it advances the scheme of the Act rather than distort it . 16. In conclusion, we are of the view that the provisions of s. 14A read with Rule BD of the Rules cannot be made applicable in a vacuum i.e. in the absence of exempt income. The questions of law are answered in favour of the assessee and against the department and the appeal allowed. No costs." [Emphasis Supplied) • The appellant also places reliance on the following judicial precedents in support of its contention: ~ Pr. CIT-6 v. Kohinoor Project (P) Ltd. reported in /2020/ 425ITR 700 (Bombay) ~ Pr. CIT v. Red Chillies Entertainment (P) Ltd. reported in /2020/ 116 taxmann.com 770 (Bombay) ITA Nos.193-195/CTK/2019 119 ~ Pr. CIT-04 v. IL & FS Energy Development Company Ltd. reportedin /2017/ 399 ITR 483 (Delhl) ~ Biocon Ltd. v. DCI~ Circie-ll(2), Bangalore reported in /2021/ 431 ITR 326 (Karnataka) ~ Pr. CIT v. Novell Software Development India (P.) Ltd. reported in /2021/ 434 ITR 154 (Karnataka) ~ Pr. CIT-I, Chandigarh v. Vardhman Chemtech (P) Ltd. reported in /2020/ 423 ITR 241 (Punjab & Haryana) • It is further well settled that only those investments are to be considered for computing average value of investment which yielded exempt income during the year. The Hon'ble ITAT Delhi Bench cH' (Special Bench) in the case of ACIT, Circle 17(1), New Delhi v. Vireet Investment (P.) Ltd. reported in [2017]58 ITR(T) 313 (Delhi- Trib.) (SB) has held that: 11.16 Therefore, in our considered opinion, no contrary view can be taken under these circumstances. We. accordingly. hold that only those investments are to be considered for computing average value of investment which yielded exempt income during the year." [Emphasis Supplied] • In view of the above discussion and findings re-iterated in the judicial precedents cited supra, it becomes quite clear that the investment made in the shares of group companies did not yield any tax free exempt income to the appellant during the year under consideration and henceforth, there was absolutely no rationale for working out the disallowance u/s. 14A of the Act in respect of investment made in the shares of these group companies. 2.6] In view of the detailed explanations/ justification discussed supra, it becomes crystal clear that the action of the Ld. PCIT in directing the Ld. AO to make disallowance of Rs. 14,76,976/- ix] s 14A of the Act read with Rule 8D of the Rules deserves to be set- aside being illegal and void- ab-initio. The appellant also relied upon findings re-iterated in the numerous judicial precedents cited during the course of revisionary proceedings and appellate proceedings before the Hon 'ble Bench to buttress its contentions that no disallowance ought to have been made u/s 14A of the Act for the A.Y. 2014-15. Hence, it is hereby pleaded that the Hon'ble Bench may kindly consider the contentions put forth by the appellant and may kindly set-aside the order of the Ld. PCIT on this count. 59. Placing reliance on the decision of Hon‟ble Supreme Court in the case of Godrej & Boyce manufacturing Company Ltd. [2017] 394 ITR 449 (SC) and the decision of Hon‟ble Delhi High Court in the case PCIT Vs. ITA Nos.193-195/CTK/2019 120 Vedanta Ltd. [2019] 102 taxmann.com 95 (Delhi), ld. AR submitted that rule 8D cannot be invoked and applied unless the Assessing Officer records his dissatisfaction regarding correctness of the claim made by the assessee in relation to expenditure incurred to earn exempt income. This is the mandate and pre-condition imposed by sub-section (2) to Section 14A of the Act. Rule 8D is in the nature of best judgment determination i.e. determination in default and on rejection of the explanation of the assessee in relation to expenditure incurred to earn exempt income. Rule 8D is not applicable by default but only if and when the Assessing Officer records his satisfaction and rejects the explanation of the assessee regarding the disallowance of expenditure. 60. Further ld. AR drew our attention towards the Note No.13 which is Non-current investment in the audited financial statement of assessee, ld. AR submitted that the interest free funds were higher than the investment made, therefore, it has to be presumed that the investments were made out of the interest free funds and not out of interest bearing funds as per the profit and loss account, which is amply clear that the assessee has not claimed any expenditure or interest towards earning of any exempt income. Ld. AR again point out that no exempt income was received/receivable in respect of shares of group companies or from any other investments in the shares, therefore, in view of the decision of Hon‟ble Delhi High Court in the case of Cheminvest Ltd. [2015] 378 ITR 33 (Delhi), section 14A of the Act will not apply if no exempt income is received or receivable during the relevant previous year and, thus, the AO ITA Nos.193-195/CTK/2019 121 was right in not taking action u/s.14A of the Act r.w.r.8D and the ld. Pr.CIT is not entitled to invoke revisionary proceedings u/s.263 of the Act on such issue. 61. Lastly, placing reliance on the decision of ITAT Delhi Special Bench in the case of Vireet Investment (P) Ltd. [2017] 58 ITR (T) 313 (Delhi), ld. AR submitted that the scope of disallowance is very narrow and it was not available for the AO in the present case, therefore, the direction of the ld. PCIT are not sustainable and valid in this regard. 62. On merits, the ld. AR submitted that interest free funds were higher than the investment made and therefore it has to be presumed that investments were made out of interest free funds and not out of interest bearing funds. The ld. AR further submitted that as regards investment in the joint venture is concerned, it was submitted before the ld. Pr.CIT that amount shown as current investment was against bills raised for contract work, which should have been classified as debtors instead of investment and investment shown in JV also comprised of book profit during the year or in the preceding year by the JV out of own funds of assessee and no borrowed funds were utilized for making investment in the JV. Therefore, the ld. Pr.CIT was not correct in directing the AO to make disallowance u/s.14A of the Act r.w.rule 8D of the I.T.Rules, 1962. 63. Replying to the above, ld. CITDR strongly supported the revisionary order u/s.263 of the Act and submitted that the Assessing Officer has not even examined the issue during the course of assessment proceedings ITA Nos.193-195/CTK/2019 122 and this has rendered the assessment order prima facie, erroneous and prejudicial to the interest of revenue. 64. Placing rejoinder to the above, the ld. AR submitted that there was not even an iota of evidence that any expenditure was debited to the profit and loss account was related to earning exempt income. The ld. AR further submitted that an expenditure would obviously be treated as not related to the income that is exempted from tax and such expenditure would be allowed as business expenditure and no disallowance would be made u/s.14A of the Act. It was also contended that it is not in dispute that the appellate did not incur any expenditure on the investment made on share on three group companies either in the year of investment or during the year under consideration meaning thereby that not a single rupee was incurred by the assessee on account of investment in the said shares from the date of making such investment. All expenses debited in the statement of the profit and loss account had no direct or indirect connection with the investments made by the assessee and all expenses debited therein have been incurred earing income chargeable to tax under the head profit and gains from business or profession. It was also contended that there is no finding by the ld. Pr.CIT that any expenditure was incurred by the assessee directly or indirectly to earn income which was not includible in the total income of the assessee. Therefore, in view of settled legal position and relevant judicial precedents it is clear that the ld. Pr.CIT prior to invoking the provisions of Section 14A of the Act ought to have demonstrated how the expenses claimed by the assessee out of ITA Nos.193-195/CTK/2019 123 non-exempt income were related to earning of exempt income. In this situation no direction u/s.263 of the Act can be issued to the AO. 65. On careful and vigilant perusal of the material placed on the record, inter alia, impugned assessment order, impugned revisionary order u/s.263 of the Act and written submission of assessee on legal and merits, we are of the considered opinion that from the assessment order dated 29.12.2016 passed u/s.143(3) of the Act for A.Y.2014-2015, it is vivid that the AO has not raised this issue during the assessment proceedings, therefore, on this issue we are in agreement with the observations of the ld. Pr.CIT that the AO has not even examined the issue at all during the course of assessment proceedings and, thus, upto this extent, the order of ld. Pr.CIT is confirmed. The AO is directed to calculate the disallowance u/s.14A of the Act r.w.rule 8D of the Rules on the investments in shares, from which the assessee has earned exempt income, after affording due opportunity of hearing to the assessee. 66. In the result, appeal of the assessee in ITA No.195/CTK/2019 is partly allowed and ITA Nos.193&194/CTK/2019 are allowed. Order pronounced as per rule 34(4) of ITAT Rules, 1963 on 23/12/2021, at Cuttack Sd/- (मिीष बोरड़) (MANISH BORAD) Sd/- (सी.एम.गगा) (C.M.GARG) ऱेखा सदस्य / ACCOUNTANT MEMBER न्यानयक सदस्य / JUDICIAL MEMBER कटक Cuttack; ददनाांक Dated 23/12/2021 Prakash Kumar Mishra, Sr.P.S. ITA Nos.193-195/CTK/2019 124 आदेश की प्रनिलऱपप अग्रेपषि/Copy of the Order forwarded to : आदेशाि ु सार/ BY ORDER, (Senior Private Secretary) आयकर अपीऱीय अधिकरण, कटक/ITAT, Cuttack 1. अऩीलाथी / The Appellant- 2. प्रत्यथी / The Respondent- Pr.CIT, Sambalpur 3. आयकि आय ु क्त(अऩील) / The CIT(A), 4. आयकि आय ु क्त / CIT 5. ववभागीय प्रनतननधध, आयकि अऩीलीय अधधकिण, कटक / DR, ITAT, Cuttack 6. गार्ा पाईल / Guard file. सत्यावऩत प्रनत //True Copy//