ACIT, CHENNAI V. M/s. R.R.Constructions, CHENNAI

ITA 2061/CHNY/2010

• Counselvise Citation: 206121714 RSA 2010
• Duration Of Justice: 9 month(s) 27 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-10-2011
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: C
• Next Hearing Date: 25-08-2011
• Assessment Year: 2007-2008
• Appeal Filed On: 06-12-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: T N BETGIRI
• Assessee Lawyers: N DEVANATHAN VAKALAT NOT FILED
• Keywords: Retrospective amendment
• Section: 80IB

Judgement Text

IN THE INCOME-TAX APPELLATE TRIBUNAL CHENNAI C BENCH, CHENNAI. BEFORE DR. O.K. NARAYANAN, VICE PRESIDENT AND SHRI HARI OM MARATHA, JUDICIAL MEMBER I.T.A. NO.2061/MDS/2010 ASSESSMENT YEAR: 2007-08 THE ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE IV, CHENNAI 34. VS. M/S. R.R. CONSTRUCTIONS, NO.1, DORAI ARASAN STREET, SALIGRAMAM, CHENNAI 93. [PAN:AAAFR0752N] (APPELLANT) (RESPONDENT) REVENUE BY : SHRI T.N. BETGIRI, JCIT ASSESSEE BY : SHRI N. DEVANATHAN, ADVOCATE (VAKALAT NOT FILED) DATE OF HEARING : 25.08.2011 DATE OF PRONOUNCEMENT 03.10.2011 ORDER PER HARI OM MARATHA, J.M. THIS APPEAL OF THE REVENUE, FOR THE ASSESSMENT YEA R 2007-08, IS DIRECTED AGAINST THE ORDER OF THE LD. CIT(A) DATED 17.09.201 0. 2. BRIEFLY STATED, FACTS OF THE CASE ARE THAT THE ASSESSEE FIRM IS ENGAGED IN THE EXECUTION OF CIVIL CONTRACT WORKS, ENGINEERS AND BU ILDERS. FOR THE YEAR UNDER CONSIDERATION, THE FIRM E-FILED ITS RETURN OF INCOM E ON 13.12.2007 ADMITTING TOTAL INCOME OF ` .1,39,58,651/- AFTER CLAIMING DEDUCTION UNDER SECTI ON 80IA(4) OF THE INCOME TAX ACT AMOUNTING TO ` .1,58,06,032/-. THE ASSESSMENT ORDER WAS COMPLETED BY DETERMINING TOTAL INCOME AT ` .3,18,45,860/-. TO ARRIVE AT THE ABOVE INCOME, THE ASSESSING OFFICER HAS DISALLOWED THE CL AIM OF DEDUCTION UNDER SECTION 80IA OF ` .1,58,06,032/- AND HAS ADDED THE DIFFERENCE IN CONT RACT RECEIPTS OF I II I.T.A. NO. .T.A. NO. .T.A. NO. .T.A. NO. 2061 2061 2061 2061/MDS/ /MDS/ /MDS/ /MDS/1 11 10 00 0 2 ` .20,81,177/-. FEELING AGGRIEVED, THE ASSESSEE PREFE RRED APPEAL BEFORE THE LD. CIT(A) AND THE LD. CIT(A) HAS DELETED BOTH THE ADDI TIONS. NOW THE REVENUE IS AGGRIEVED AND FOLLOWING GROUNDS HAVE BEEN RAISED: 1. THE ORDER OF THE COMMISSIONER OF INCOME TAX (A PPEALS) IS OPPOSED TO THE FACTS AND CIRCUMSTANCES OF THE CASE. 2. THE LD. CIT(A) ERRED IN HOLDING THAT THE ASSESS EE IS ELIGIBLE FOR CLAIM OF DEDUCTION UNDER SECTION 80 IA (4) AND IN D IRECTING THE ASSESSING OFFICER TO ALLOW THE DEDUCTION OF ` . 1,58,06,032/-. 3. THE LD. CIT(A) ERRED IN COMING TO A CONCLUSION THAT THE DEDUCTION IS AVAILABLE FOR A PERSON WHO HAS OBTAINED THE CONT RACT FOR DEVELOPMENT ALSO. 3.1 THE LD.CIT(A) FAILED TO APPRECIATE THAT THE AS SESSEE IS ONLY A 'CONTRACTOR' AND NOT A 'DEVELOPER'. 3.2 THE LD. CIT(A) OUGHT TO HAVE NOTICED THAT AS P ER THE PROVISIONS OF SECTION 80 IA (4), THE BENEFIT IS AVAILABLE ONLY TO ANY ENTERPRISE CARRYING ON THE BUSINESS OF 'DEVELOPING', OR 'OPERA TING AND MAINTAINING' OR 'DEVELOPING, OPERATING AND MAINTAINING' . IT IS SUBMITTED THAT THE ASSESSEE IS NOT AN ENTERPRISE ENGAGED IN THE BUSINE SS OF INFRASTRUCTURE DEVELOPMENT AND HENCE THE BENEFIT CANNOT BE EXTENDE D TO IT. 3.3 THE LD. CIT(A) FAILED TO NOTE THAT IN THE MEMOR ANDUM EXPLAINING THE FINANCE BILL 2007 REPORTED IN 289 ITR ST. 292 AT PAGE 312 IT IS STATED THAT THE TAX BENEFIT (UNDER SECTION 80 IA -4) IS FO R ENCOURAGING PRIVATE SECTOR PARTICIPATION BY WAY OF INVESTMENT IN DEVELO PMENT OF THE INFRASTRUCTURE SECTOR AND NOT FOR THE PERSONS WHO M ERELY EXECUTE THE CIVIL CONSTRUCTION WORK OR ANY OTHER WORKS CONTRACT . 3.4 THE LD.CIT(A) FAILED TO APPRECIATE THAT THE TDS CERTIFICATES FILED BY THE ASSESSEE ARE PROOF TO THE FACT THAT THE ASSE SSEE IS ONLY A 'WORKS CONTRACTOR'. HAD THE ASSESSEE BEEN A 'DEVELOPER' OF INFRASTRUCTURE PROJECTS, THE QUESTION OF TAX DEDUCTION WOULD NOT H AVE ARISEN AT ALL. 4. THE LD. CIT(A) ERRED IN HOLDING THAT THE ASSESS EE SATISFIED THE PROVISIONS OF SECTION 80 IA (4) (I) (A). 4.1 THE LD. CIT(A) FAILED TO APPRECIATE THAT THE P ROVISIONS CLEARLY STATE THAT THE ENTERPRISE SHOULD BE OWNED BY A COMP ANY OR BY A CONSORTIUM OF SUCH COMPANIES OR BY AN AUTHORITY OR A BOARD OR A CORPORATION OR ANY OTHER BODY ESTABLISHED OR CONSTI TUTED UNDER ANY CENTRAL OR STATE ACT. 4.2 THE LD. CIT(A) ERRED IN HIS INTERPRETATION THA T THE ASSESSEE, A PARTNERSHIP FIRM IS ESTABLISHED UNDER A STATE ACT A ND HENCE IT SATISFIES THE ABOVE PROVISIONS. I II I.T.A. NO. .T.A. NO. .T.A. NO. .T.A. NO. 2061 2061 2061 2061/MDS/ /MDS/ /MDS/ /MDS/1 11 10 00 0 3 4.3 IT IS SUBMITTED THAT WHEN THE PROVISIONS OF TH E ACT ARE CLEAR AND UNAMBIGUOUS, THEY CANNOT BE MISINTERPRETED. THIS VI EW HAS BEEN EXPRESSED BY THE HON'BLE APEX COURT IN THE CASE OF IPCA LABORATORIES (266 ITR 521). 5. IT IS SUBMITTED THAT THE DECISIONS OF THE HON'B LE ITAT, MUMBAI RELIED UPON BY THE CIT(A) HAVE NOT BEEN ACCEPTED BY THE DEPARTMENT AND HAVE NOT REACHED FINALITY YET. 6. FOR THESE AND OTHER GROUNDS THAT MAY BE ADDUCED AT THE TIME OF HEARING, IT IS PRAYED THAT THE ORDER OF THE COMMISS IONER OF INCOME TAX (APPEALS) MAY BE SET ASIDE AND THAT OF ASSESSING OF FICER RESTORED. 3. WE HAVE HEARD RIVAL SUBMISSIONS AND HAVE CAREFU LLY PERUSED THE ENTIRE RECORD. THE FIRST ISSUE OF THE APPEAL IS REGARDING CLAIM OF DEDUCTION UNDER SECTION 80IA(4) OF THE ACT. THE CASE OF THE REVENUE IS THAT THE ASSESSEE IS A WORKS CONTRACTOR AND NOT A DEVELOPER AS STIPULATED UND ER SECTION 80IA(4) OF THE ACT. THE SECTION 80IA(4) APPLIES TO ANY ENTERPRISE, WHICH CA RRIES ON THE BUSINESS OF (I) DEVELOPING OR (II) OPERATING AND MAINTAINING OR (II I) DEVELOPING, OPERATING AND MAINTAINING ANY INFRASTRUCTURE FACILITIES, WHICH FU LFILL ALL THE ABOVE CONDITIONS. THERE CANNOT BE ANY QUESTION OF PROVIDING A CONDITION FOR SUCH AN ENTERPRISE TO START OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILI TY ON OR AFTER 01.04.1995. FROM THE ASSESSMENT YEAR 2000-01, DEDUCTION IS AVAILABLE IF THE ASSESSEE IS CARRYING OUT THE BUSINESS OF ANY ONE OF THE ABOVE MENTIONED THRE E TYPES OF ACTIVITIES. WHEN AN ASSESSEE IS ONLY DEVELOPING AN INFRASTRUCTURE FACIL ITY PROJECT AND IS NOT MAINTAINING NOR OPERATING IT, OBVIOUSLY SUCH AN ASSESSEE WILL B E PAID FOR THE COST INCURRED BY IT; OTHERWISE, HOW WILL THE PERSON, WHO DEVELOPS THE IN FRASTRUCTURE FACILITY PROJECT, REALIZE ITS COST? IF THE INFRASTRUCTURE FACILITY, J UST 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 DEVE LOPMENT OF INFRASTRUCTURE I II I.T.A. NO. .T.A. NO. .T.A. NO. .T.A. NO. 2061 2061 2061 2061/MDS/ /MDS/ /MDS/ /MDS/1 11 10 00 0 4 FACILITY CARRIED OUT BY THE ASSESSEE, IT CANNOT BE SAID THAT THE ASSESSEE DID NOT DEVELOP THE INFRASTRUCTURE FACILITY. IF THE INTERPR ETATION DONE BY THE ASSESSING OFFICER IS ACCEPTED, NO ENTERPRISE CARRYING ON THE BUSINESS OF ONLY DEVELOPING HE INFRASTRUCTURE FACILITY WOULD BE ENTITLED TO DEDUCT ION UNDER SECTION 80IA(4), WHICH IS NOT THE INTENTION OF THE LAW. AN ENTERPRISE, WHO DE VELOP THE INFRASTRUCTURE FACILITY IS NOT PAID BY THE GOVERNMENT, THE ENTIRE COST OF DEVE LOPMENT WOULD BE A LOSS IN THE HANDS OF THE DEVELOPER AS HE IS NOT OPERATING THE I NFRASTRUCTURE FACILITY. THE LEGISLATURE HAS PROVIDED THAT THE INCOME OF THE DEV ELOPER OF THE INFRASTRUCTURE PROJECT WOULD BE ELIGIBLE FOR DEDUCTION, IT PRESUPP OSES 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 WO ULD 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 INFRA STRUCTURE FACILITY AND TO COLLECT TOLL THEREFROM, HAS NO OTHER SOURCE OF RECOUPMENT OF HIS COST OF DEVELOPMENT. WHILE FILING THE RETURN, THE ASSESSEE HAD MADE CLAIM UNDE R SECTION 80IA(4) OF THE ACT FOR THE FOLLOWING PROJECTS: R.R. CONSTRUCTIONS NO.1, DORAI ARASAN STREET, SALIGRAMAM, CHENNAI 600 093. ANNEXURE I TO FORM 10CCB : ASSESSMENT YEAR 2007-08 SL. NO. NAME OF UNDERTAKING NATURE OF WORK CLIENT DISTRICT STATE DATE OF COMMENC EMENT 1. KOTDWAR INFRASTRUCTURAL ROAD, PHE & ALLIED CIVIL WORKS STATE INDUSTRIAL DEVELOPMENT CORPORATION LTD. UTTARANCHAL PAURI GARHWAL UTTARANCHAL 12.12.2005 2. ASIGANGA CONSTRUCTION OF DESILTING TANK AND POWER CHANNEL EXECUTIVE ENGINEER UTTARANCHAL JAL VIDYUT NIGAM LTD. UTTARKASI UTTARANCHAL 07.12.2005 3. SITARGANJ INFRASTRUCTURE DEVELOPMENT WORK AT EIDECO SIDCUL EIDECO SIDCUL INDUS. PARK GOVERNMENT OF UDDAMSING NAGAR UTTARANCHAL 18.07.2006 I II I.T.A. NO. .T.A. NO. .T.A. NO. .T.A. NO. 2061 2061 2061 2061/MDS/ /MDS/ /MDS/ /MDS/1 11 10 00 0 5 INDUSTRIAL PARK UTTARANCHAL 4. HARIDHWAR MAINTENANCE OF WATER MANAGEMENT INCLUDING CIVIL IMPROVEMENTS IN HARIDHWAR INDL. AREA, HARIDHWAR STATE INDUSTRIAL DEVELOPMENT CORPORATION LTD. UTTARANCHAL. HARIDHWAR UTTARANCHAL 31.05.2006 5. UTTARKASI FABRICATION & ERECTION OF STEEL RAILING AT DIVIDE WALL AND WING WALL OF MANERI BHALI STATE II PROJECT EXECUTIVE ENGINEER MANERI BHALI NIRMAN KHAND I DIVISION GOVT. OF UTTARANCHAL UTTARKASI UTTA RANCHAL 08.06.2005 6. DHARASU EXCAVATION OF HRT FROM PHASE IV THROUGH DHARASU ADIT OF MANERI BHALI STAGE II PROJECT EXECUTIVE ENGINEER MANERI BHALI NIRMAN KHAND I DIVISION GOVT. OF UTTARANCHAL UTTARKASI UTTARANCHAL 12.01.2006 4. THE ASSESSEE HAS ALSO PRODUCED ALL SIX AGREEMEN TS REGARDING SIX PROJECTS UNDERTAKEN BEFORE THE ASSESSING OFFICER, WHOSE COPI ES ARE AVAILABLE BEFORE US ALSO. IT IS A FACT THAT EVEN AFTER TAKING A CONTRAC T FROM THE GOVERNMENT, IF THE ASSESSEE DEVELOPS INFRASTRUCTURE FACILITIES, IT WOU LD BE REGARDED AS A DEVELOPER AND NOT AS A WORKS CONTRACTOR. THE ASSESSEE FIRM HAS CARRIED ON ENTIRE CONSTRUCTION/DEVELOPMENT OF THE INFRASTRUCTURE FACI LITIES AND SATISFY ALL THE CONDITIONS OF SECTION 80IA(4)(I)(A). IT IS UNDENIAB LE FACT THAT THE ASSESSEE HAS TAKEN DEVELOPMENT OF INFRASTRUCTURE FACILITY AGREEMENT FR OM THE STATE GOVERNMENT/LOCAL AUTHORITY. A CONTRACTOR WHO DEVELOPS THE INFRASTRUC TURE FACILITY BECOMES A DEVELOPER TO CLAIM EXEMPTION UNDER SECTION 80IA(4). THE HONBLE BOMBAY BENCH OF ITAT WHILE DECIDING THE CASE OF PATEL ENGINEERIN G LTD. VS. DCIT IN ITA NO. 1221/MUM/2004 HAS GONE TO THE EXTENT OF HOLDING THA T THE ASSESSEE, A CIVIL CONTRACTOR, HAVING EXECUTED A PART OF CONTRACTS OF IRRIGATION AND WATER SUPPLY ON BUILD AND TRANSFER BASIS AND HANDED OVER THEM TO CONTRACTEE GOVERNMENTS, WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA(4). I II I.T.A. NO. .T.A. NO. .T.A. NO. .T.A. NO. 2061 2061 2061 2061/MDS/ /MDS/ /MDS/ /MDS/1 11 10 00 0 6 5. WE HAVE ALSO TAKEN A SIMILAR VIEW IN ITA NO.554 /MDS/2010 IN THE CASE OF EAST COAST CONSTRUCTIONS & INDUSTRIES LTD V. DCIT V IDE ORDER DATED 13.09.2011 AND RELEVANT PARAS FROM 9 TO 14 ARE REPRODUCED HERE UNDER: 9. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE CA N SAFELY SAY THAT THE BENEFIT OF SECTION 80IA IS AVAILABLE ONLY TO A DEVELOPER WHO CARRIES ON BUSINESS OF DEVELOPING OF INFRASTRUCTUR E FACILITY. A PERSON WHO ENTERS INTO CONTRACT WITH ANOTHER PERSON FOR EX ECUTING WORKS CONTRACTS IS NOT ELIGIBLE FOR SUCH A BENEFIT. E XPLANATION TO SECTION 80IA WAS INSERTED BY FINANCE ACT, 2007 WITH RETROSP ECTIVE EFFECT FROM 1.4.2000 WHICH HAS FURTHER BEEN AMENDED BY FINANCE (NO.2) ACT, 2009 WITH RETROSPECTIVE EFFECT FROM 1.4.2000. THE AMENDMENT IN THIS EXPLANATION WAS NECESSITATED DUE TO CONTRARY JUDICI AL DECISION ON THIS ISSUE. THUS, WE CAN UNEQUIVOCALLY NOW SAY THAT ANY UNDERTAKING OR ENTERPRISE WHICH EXECUTES THE INFRASTRUCTURE DEVELO PMENT PROJECT, AS REFERRED TO IN SUB-SECTION(4) AS A WORKS CONTRACT AWARDED BY ANY PERSON INCLUDING THE CENTRAL OR STATE GOVERNMENT, I S NOT ELIGIBLE FOR TAX BENEFIT U/S 80IA(4). HAVING SAID THAT, NOW WE EXAMINE THE FACTS OF THIS CASE. THE ASSESSEE-COMPANY WAS GIVEN THIS B ENEFIT IN ASSESSMENT YEAR 2003-04 BY THE DEPARTMENT ON IDENTI CAL FACTS AFTER CONSIDERING THE EXPLANATION AND AMENDMENT THERETO. TO TRACE THE HISTORY OF THIS DEDUCTION, WE FIND THAT ORIGINALLY, IN THE PROVISION OF SECTION 80IA, THERE WAS NO MENTION OF ANY DEVELOPME NT OF INFRASTRUCTURE FACILITY. IT IS ONLY WITH EFFECT FROM 1.4.2000, THIS SECTION WAS DIVIDED INTO TWO PORTIONS 80IA AND 80IB . SECTION 80IA(4) PRESCRIBES ABOUT THE DEDUCTION AVAILABLE TO A DEVE LOPER WHO DEVELOPS INFRASTRUCTURE FACILITIES. IN VIEW OF THE AMENDMEN T INSERTED BY THE FINANCE ACT, 2007, WITH RETROSPECTIVE EFFECT FROM 1 .4.2000, THE DEDUCTION U/S 80IA IS AVAILABLE TO THOSE ASSESSEES WHO ARE INVESTING AND DEVELOPING INFRASTRUCTURE FACILITY AND NOT TO PERSONS WHO SIMPLY EXECUTES WORKS-CONTRACTS. EXPLANATION IN QUESTION , AS IT STANDS TODAY, READS AS UNDER: EXPLANATION - FOR THE REMOVAL OF DOUBTS, IT IS HER EBY DECLARED THAT NOTHING CONTAINED IN THIS SECTION(I.E 80IA) SH ALL APPLY TO A PERSON WHO EXECUTES A WORKS CONTRACT ENTERED INTO W ITH THE UNDERTAKING OR ENTERPRISE, AS THE CASE MAY BE. IN CONTRAST TO THIS, A PERSON WHO ENTERS INTO A CON TRACT WITH ANOTHER PERSON (I.E., UNDERTAKING OR ENTERPRISE REF ERRED TO IN I II I.T.A. NO. .T.A. NO. .T.A. NO. .T.A. NO. 2061 2061 2061 2061/MDS/ /MDS/ /MDS/ /MDS/1 11 10 00 0 7 SECTION 80-IA) FOR EXECUTING WORKS CONTRACT, WILL N OT BE ELIGIBLE FOR TAX BENEFIT UNDER SECTION 80- IA. 10. WE HAVE FOUND THAT THE ASSESSEE-COMPANY IS A W ORKS CONTRACTOR, WHO HAS ENTERED INTO AGREEMENT WITH THE LOCAL BODIES TO EXECUTE CERTAIN PART OF THE WORK AWARDED TO IT THRO UGH CONTRACT FOR INFRASTRUCTURE FACILITY. IT IS TRUE THAT WHERE A P ERSON WHO MAKES INFRASTRUCTURE AND HIMSELF EXECUTES DEVELOPMENT WOR K AND CARRIES OUT CIVIL WORK WILL BE ELIGIBLE FOR TAX BENEFIT U/S 80I A OF THE ACT. IN CONTRAST TO THIS, A PERSON WHO ENTERS INTO A CONTRACT WITH A NOTHER PERSON FOR EXECUTING WORKS CONTRACT, WILL NOT BE ELIGIBLE FOR TAX BENEFIT U/S 80IA. IT WAS CLARIFIED BY THE CIRCULAR NO.3 OF 2008 DATE D 12.3.2008 THAT THE PROVISIONS OF SECTION 80IA SHALL NOT APPLY TO A PER SON WHO EXECUTES ONLY WORK CONTRACTS AND ONLY THOSE WHO MAKE THE DEVELOPM ENT WORK WILL BE ELIGIBLE FOR TAX BENEFIT U/S 80IA OF THE ACT. BE THAT AS IT MAY, WHEN WE APPLY THIS PROVISION IN ITS LETTERS AND SPIRIT, WE FIND THAT THIS ASSESSEE IS VERILY ELIGIBLE FOR DEDUCTION U/S 80IA, AS THE ASSE SSEE-COMPANY FULFILLS ALL THE RELEVANT CONDITIONS. THE FACTS OF THIS C ASE GO TO PROVE THAT THE ASSESSEE IS A DEVELOPER OF INFRASTRUCTURE FAC ILITIES. THE REASONS FOR OUR ABOVE CONCLUSION ARE GIVEN IN THE FOLLOWING PAR AS. FIRSTLY, THE ASSESSEE-COMPANY NOT ONLY DESIGNS BUT ALSO CREATES NEW PRODUCTS. THE ASSESSEE HAD UNDERTAKEN FOUR PROJECTS DURING TH E RELEVANT YEAR AND EXECUTED, CONSTRUCTED, DELIVERED AND MAINTAINED BY IT. AS PER THE DEFINITION OF ADVANCED LAW LEXICON [PLACED AT PAGE 533 OF THE PAPER BOOK] DEVELOPER MEANS A PERSON ENGAGED IN DEVELOPMENT OR OPERATION OR MAINTENANCE OF SPECIAL ECONOMIC ZONE, AND ALSO INCLUDES ANY PERSON AUTHORIZED FOR SUCH PURPOSE BY ANY SUCH DEVELOPER. THE WORKS CONTRACT MEANS AN AGREEMENT IN WRITING FOR THE EXECUTION O F ANY WORK RELATING TO CONSTRUCTION, REPAIR, OR MAINT ENANCE OF ANY BUILDING OR SUPERSTRUCTURE, DAM, WEIR, CANAL, RESER VOIR, TANK, LAKE, ROAD, WELL, BRIDGE, CULVERT, FACTORY, WORKSHOP, POWERHOUS E, TRANSFORMERS OR SUCH OTHER WORKS OF THE STATE GOVERNMENT OR PUBLIC UNDERTAKINGS AS THE STATE GOVERNMENT MAY BE BY NOTIFICATION, SPECIFY IN THIS BEHALF AT ANY OF ITS STAGES ENTERED INTO BY THE STATE GOVERNMENT OR BY AN OFFICIAL OF THE STATE GOVERNMENT OR PUBLIC UNDERTAKING AND INCL UDES AN AGREEMENT FOR THE SUPPLY OF GOODS OR MATERIAL AND ALL OTHER M ATTERS RELATING TO EXECUTION OF ANY OF THE SAID WORKS. THE CASE OF ACIT VS INDWELL LIANINGS PVT. LTD (SUPRA), ON WHICH THE ASSESSING O FFICER HAS PLACED RELIANCE IS ALSO RELEVANT AND WE EXTRACT CERTAIN RE LEVANT PORTION OF THIS DECISION FOR READY REFERENCE: I II I.T.A. NO. .T.A. NO. .T.A. NO. .T.A. NO. 2061 2061 2061 2061/MDS/ /MDS/ /MDS/ /MDS/1 11 10 00 0 8 VIDE FINANCE ACT, 2007, AN EXPLANATION WAS INSERTED WITH RETROSPECTIVE EFFECT FROM APRIL 1, 2000 AFTER SUB-SECTION (13) OF SECTION 80- IA, WHICH READS AS UNDER : 'FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED T HAT NOTHING CONTAINED IN THIS SECTION SHALL APPLY TO A PERSON W HO EXECUTES A WORKS CONTRACT ENTERED INTO WITH THE UNDERTAKING OR ENTERPRISE, AS THE CASE MAY BE.' ACCORDING TO ATTORNEY'S POCKET DICTIONARY, IN RELATION TO A CORPORATION OR BUSINESS, THE TERM 'UNDERTAKING' DENOTES ITS WHOLE ENTERPRISE AND THE WORD 'ENTERPRISE' CONNOTES ALL THE RELATED ACTIVITIES PE RFORMED EITHER THROUGH UNIFIED OPERATION OR COMMON CONTROL BY ANY PERSON O R PERSONS FOR A COMMON BUSINESS PURPOSE. THE MENS LEGIS WITH REFERENCE TO DEVELOPER OF INFRASTRUCTURE FACI LITY CAN BE GATHERED FROM THE MEMORANDUM EXPLAINING THE PROVISI ONS IN THE FINANCE BILL, 2007, 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 Z ONES. THE TAX BENEFIT WAS INTRODUCED FOR THE REASON THAT INDUSTRIAL MODERNIZATION REQUIRES A PASSIVE EXPANSION OF, AND QUALITATIVE IM PROVEMENT IN, INFRASTRUCTURE (VIZ., EXPRESSWAYS, HIGHWAYS, AIRPOR TS, PORTS AND RAPID URBAN RAIL TRANSPORT SYSTEMS) WHICH WAS LACKING IN OUR CO UNTRY. THE PURPOSE OF THE TAX BENEFIT HAS ALL ALONG BEEN FOR ENCOURAGING PRIV ATE SECTOR PARTICIPATION BY WAY OF INVESTMENT IN DEVELOPMENT OF THE INFRASTRUCT URE SECTOR AND NOT FOR THE PERSONS WHO MERELY EXECUTE THE CIVIL CONSTRUCTI ON WORK OR ANY OTHER WORKS CONTRACT. ACCORDINGLY, IT IS PROPOSED TO CLARIFY THAT THE PRO VISIONS 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., CARRIE S OUT THE CIVIL CONSTRUCTION WORK, HE WILL BE ELIGIBLE FOR TAX BENE FIT UNDER SECTION 80- LA. IN CONTRAST TO THIS, A PERSON WHO E NTERS INTO A I II I.T.A. NO. .T.A. NO. .T.A. NO. .T.A. NO. 2061 2061 2061 2061/MDS/ /MDS/ /MDS/ /MDS/1 11 10 00 0 9 CONTRACT WITH ANOTHER PERSON (I.E., UNDERTAKING OR ENTERPRISE REFERRED TO IN SECTION 80-IA) FOR EXECUTING WORKS C ONTRACT, WILL NOT BE ELIGIBLE FOR TAX BENEFIT UNDER SECTION 80- I A. THIS AMENDMENT WILL TAKE RETROSPECTIVE EFFECT FROM APRIL I, 2000 AND WILL ACCORDINGLY APPLY IN RELATION TO THE ASSESSMEN T YEAR 200 -01 AND SUBSEQUENT YEARS.' IT IS MADE ABUNDANTLY CLEAR THAT THE PRESCRIPTION O F SECTION 80- IA SHALL NOT APPLY TO A PERSON WHO EXECUTES WORK CONTR ACTS ENTERED INTO WITH AN UNDERTAKING OR ENTERPRISE. THUS, IN A CASE WHERE A PERSON WHO MAKES INVESTMENT AND HIMSELF EXECUTES DEVELOPME NT WORKS AND CARRIES OUT CIVIL WORKS, WILL BE ELIGIBLE FOR TAX BENEFIT UNDER SECTION 80- IA OF THE ACT. IN CONTRAST TO THI S, A PERSON WHO ENTERS INTO A CONTRACT WITH ANOTHER PERSON FOR EXEC UTING WORKS CONTRACT WILL NOT BE ELIGIBLE FOR THE TAX BENEFIT U NDER SECTION 80- IA OF THE ACT. IN THE PRESENT CASE, WE FIND THAT THE ASSESSEE WAS DOING ONLY CONTRACT WORKS OF INSITU CEMENT LINING FOR WATER S UPPLY PROJECT OF THE GUJARAT WATER SUPPLY AND SEWERAGE FOARD. AS SUCH, T HE BENEFIT OF SECTION 80-IA CANNOT BE EXTENDED TO THE ASSESSEE. T HE DECISIONS RELIED UPON BY THE ASSESSEE WERE RENDERED PRIOR TO THE AMENDMENT AND AS SUCH NOT RELEVANT FOR DECIDING THIS ISSUE. W E, THEREFORE, RESTORE THE ORDER OF THE ASSESSING OFFICER AND REVE RSE THE ORDER OF THE COMMISSIONER OF INCOME-TAX (APPEALS). 11. TO FURTHER ELABORATE THE DISCUSSION ON THIS IS SUE, PARAS 5 & 6 OF THE DECISION OF ITAT PUNE BENCH RENDERED IN THE CAS E OF LAXMI CIVIL ENGG. P. LTD VS ADDL. CIT, ORDER DATED 8.6.2011 A RE BEING EXTRACTED HEREIN BELOW: 5. WE HEARD BOTH THE PARTIES AND PERUSED THE ORDE RS OF THE REVENUE. THE CONTENTIOUS ISSUES BEFORE US ARE (I) W HETHER THE CONTRACTOR IS SYNONYMOUS WITH THE DEVELOPER WITHIN THE MEANING OF SECTION 80IA (4)(I) OF THE ACT; (II) WHETHER THE CO NDITION PLACED IN CLAUSE (C) IS APPLICABLE TO THE CASE OF A DEVELOPER , WHO IS NOT CARRYING ON BUSINESS OF OPERATING AND MAINTAINING T HE INFRASTRUCTURAL FACILITIES. IN OUR OPINION, THE ANSWER TO THESE QUE STION ARE PROVIDED BY THE JUDGMENT OF THE BOMBAY HIGH COURT IN THE CAS E OF ABG HEAVY ENGG LTD (SUPRA). IN THIS REGARD, WE PERUSED THE ABOVE CITED PARA-22 OF THE SAID JUDGMENT AND FOR THE SAKE OF CO MPLETENESS, THE SAID PARAGRAPH IS REPRODUCED AS UNDER:- '22. THE SUBMISSION WHICH WAS URGED ON BEHALF OF TH E REVENUE IS I II I.T.A. NO. .T.A. NO. .T.A. NO. .T.A. NO. 2061 2061 2061 2061/MDS/ /MDS/ /MDS/ /MDS/1 11 10 00 0 10 THAT CLAUSE (III) OF SUB-SECTION (4A) OF SECTION 80 -LA, ONE OF THE CONDITIONS IMPOSED WAS THAT THE ENTERPRISE MUST STA RT OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILI TY ON OR AFTER 1 ST APRIL, 1995. THE SAME REQUIREMENT IS EMBODIED IN SUB- CLAUSE (1) OF SUB-CLAUSE (4) OF THE AMENDED PROVISIONS. IT WAS URGED THAT SINCE THE ASSESSEE WAS NOT OPERATING AND MAINTAINING THE FACILITY, HE DID NOT FULFILL THE CONDITION. THE SUBMISSION IS FALLACIOUS BOTH IN FACT AND IN LAW. ' THAT THE ASSESSEE WAS MAINTAINING THE FACILITY IS N OT IN DISPUTE. THE FACILITY WAS COMMENCED AFTER 1 S1 APRIL, 1995. THEREFORE, THE REQUIREMENT WAS MET IN FACT. MOREOVER, AS A MATTER OF LAW, WHAT THE CONDITION ESSENTIALLY MEANS IS THAT THE INFRAST RUCTURE FACILITY SHOULD HAVE BEEN OPERATIONAL AFTER 1 S1 APRIL, 1995. AFTER SECTION 80IA WAS AMENDED BY THE FINANCE ACT, 2001, THE SECTION APPLIES TO AN ENTERPRISE CARRYING ON THE BU SINESS OF (I) DEVELOPING; OR (II) OPERATING AND MAINTAINING; OR (III) DEVELOPING, OPERATING AND MAINTAINING ANY INFRASTRU CTURE FACILITY' WHICH FULFILLS CERTAIN CONDITIONS. THOSE CONDITIONS ARE (I) OWNERSHIP OF THE ENTERPRISES BY A COMPANY REGISTERE D IN INDIA OR BY A CONSORTIUMS; (II) AN AGREEMENT WITH THE CENTRA L OR STATE GOVERNMENT, LOCAL AUTHORITY OR STATUTORY BODY ; AND (III) THE START OF OPERATION AND MAINTENANCE OF THE INFRA STRUCTURE FACILITY SHOULD COMMENCE AFTER 1ST APRIL, 1995. THE REQUIREMENT THAT OPERATION AND MAINTENANCE OF THE INFRASTRUCTUR E FACILITY SHOULD COMMENCE AFTER 1ST APRIL, 1995 HAS TO BE HARMONIOUSLY CONSTRUED WITH THE MAIN PROVISION UNDER WHICH DEDUCTION IS AV AILABLE TO AN ASSESSEE WHO DEVELOPS OR OPERATES AND MAINTAINS, OR DEVELOPS, OPERATES AND MAINTAINS AN INFRASTRUCTURE FACILITY'. A HARMONIOUS READING OF THE PROVISIONS IN ITS ENTIR ETY WOULD LEAD TO THE CONCLUSION THAT THE DEDUCTION IS AVAILABLE TO AN ENTERPRISE WHICH (I) DEVELOPS, OR OPERATES AND MAINTAINS; OR ( III) DEVELOPS, MAINTAIN AND OPERATES THAT INFRASTRUCTURE FACILITY. HOWEVER, THE COMMENCEMENT OF THE OPERATION AND MAINTENANCE: OF T HE INFRASTRUCTURE FACILITY SHOULD BE AFTER 1' APRIL, 1995. IN THE PRESENT CASE THE ASSESSEE CLEARLY FULFILLED THIS CONDITION '. BEFORE THE AMENDMENT THAT WAS BROUGHT ABOUT BY PARL IAMENT BY FINANCE ACT, 2001 WE HAVE ALREADY NOTED THAT THE CO NSISTENT LINE OF CIRCULARS OF THE BOARD POSTULATED THE SAME POSITION . THE AMENDMENT MADE BY PARLIAMENT TO S.80-IA(4) OF THE A CT, SET THE MATTER BEYOND ANY CONTROVERSY BY STIPULATING THAT T HE THREE CONDITIONS FOR DEVELOPMENT, OPERATION AND MAINTENAN CE WERE NOT INTENDED TO BE CUMULATIVE IN NATURE '. 6. THE ABOVE JUDGMENT OF THE HON'BLE HIGH COURT I S DELIVERED IN I II I.T.A. NO. .T.A. NO. .T.A. NO. .T.A. NO. 2061 2061 2061 2061/MDS/ /MDS/ /MDS/ /MDS/1 11 10 00 0 11 THE CASE OF ABG HEAVY ENGG LTD (SUPRA), WHO IS A CO NTRACTOR FOR THE LNP TRUST AND THAT CONTACTOR, ASSESSEE IS FOUND TO BE AN ELIGIBLE DEVELOPER FOR MAKING CLAIM OF DEDUCTION U/S SECTION 80IA (4) OF THE ACT. FROM THE ABOVE, IT IS EVIDENT THAT THE PERSON WHO ONLY DEVELOPS THE INFRASTRUCTURE DO NOT HAVE THE OCCASION TO OPER ATE AND MAINTAIN THE INFRASTRUCTURE. IT IS FURTHER EVIDENT THAT THE HARMONIOUS READING IS NECESSARY AND MANDATORY IN VIEW OF HIGH COURT'S JUD GMENT IN THE CASE OF AN ENTERPRISE CARRYING ON BUSINESS OR DEVEL OPING WHICH IS THE CASE OF THE ASSESSEE, ALL THE CONDITIONS REFERR ED TO CLAUSE (I) OF SECTION 80IA (4) SHOULD REFER TO THE CONDITIONS AS APPLICABLE TO THE DEVELOPER. IN OTHER WORDS, THE DEVELOPER WHO IS ONL Y DEVELOPING THE INFRASTRUCTURE FACILITIES SINCE HE DOES NOT OPERATE AND MAINTAIN INFRASTRUCTURAL FACILITIES , CANNOT BE EXPECTED TO FULFILL THE CONDITION AT SUBCLAUSE ( C) WHICH IS AN IMPOSSIBILITY AND THE RE QUIREMENTS TO FULFILL THE SAID CONDITION SHALL AMOUNT TO ABSURDIT Y AND THEREFORE UNCALLED FOR. THEREFORE, WE FIND REQUIREMENT OF HAR MONIOUS READING OF SUB-CLAUSE (C) VIS--VIS OF CLAUSE (I) OF SECTI ON 80IA (4) OF THE ACT. THUS, THE DISCUSSION IN HIGH COURT'S DECISION IN PARAGRAPH-22 EXTRACTED ABOVE, IS DIRECTLY APPLICABLE TO THE FACT S OF THE CASE AND EVENTUALLY IS ENTITLED FOR THE DEDUCTION UNDER SECT ION 80IA (4) OF THE ACT. ACCORDINGLY, THE MODIFIED GROUND, WHICH IS COM MON IN ALL THE FOUR APPEALS IS ALLOWED IN FAVOUR OF THE ASSESSEE. 12. LET US REMIND OURSELVES THAT THE HON'BLE SUPRE ME COURT IN THE CASE OF BAJAJ TEMPO LTD VS CIT, 196 ITR 188, HAS OR DAINED THAT TAXING STATUTE GRANTING INCENTIVES FOR PROMOTING GROWTH AND DEVELOPMENT SHOULD BE LIBERALLY CONSTRUED. 13. NOW, THE QUESTION ARISES AS TO WHETHER THE TERM CO NTRACTOR IS NOT ESSENTIALLY CONTRADICTORY TO THE TERM DEVELOPE R. IN FACT, IN EVERY DEVELOPMENT THE TERM DEVELOPER WILL DEFINITELY BE A WORKS CONTRACTOR BUT EVERY WORKS CONTRACTOR MAY NOT BE A DEVELOPER . A DEVELOPER IS A SPECIFIC KIND OF WORKS CONTRACTOR TO BE ELIGIBLE FOR DEDUCTION U/S 80IA(4) WHO FULFILLS ALL THE CONDITIONS NAMELY, IF THE ASSESSEE DEVELOPS THE INFRASTRUCTURE FACILITY IF IT OPERATES THE INFR ASTRUCTURE FACILITY AND IF IT MAINTAINS THE INFRASTRUCTURE FACILITY OR TO PUT IT IN SIMPLER TERMS, THE HARMONIOUS READING OF THE PROVISIONS IN ITS ENTIRET Y WOULD LEAD TO THE CONCLUSION THAT THIS DEDUCTION IS AVAILABLE TO AN E NTERPRISE WHO DEVELOPS OR OPERATES AND ALSO MAINTAINS; OR DEVELOPS, MAINTAINS AND OPERATES THAT INFRASTRUCTURE FACILITY. THE PRO VISION FOR GIVING THE IMPUGNED INCENTIVES HAS BEEN EXAMINED, RE-EXAMINED, MODIFIED AND AMENDED AFTER GIVING CONSCIOUS AND DELIBERATE DISCU SSIONS BY THE CONCERNED LAW MAKERS. TO OUR GREAT CHAGRIN EVEN AF TER THIS CONSCIOUS I II I.T.A. NO. .T.A. NO. .T.A. NO. .T.A. NO. 2061 2061 2061 2061/MDS/ /MDS/ /MDS/ /MDS/1 11 10 00 0 12 EXERCISE AN ENTITY WHO EXECUTES THE WORKS CONTRACT ENTERED INTO BETWEEN LOCAL AUTHORITY/CENTRAL OR STATE GOVERNMENT AND MAKES A DEVELOPMENT OF AN INFRASTRUCTURE HAS NOT BEEN EXCLU DED FROM THE SCOPE OF THIS PROVISION. AND RIGHTLY SO, BECAUSE W HAT INFRASTRUCTURE IS REQUIRED IN PUBLIC DOMAIN IS THE OUTLOOK/DUTY OF A LOCAL AUTHORITY OR OF A CENTRAL/STATE GOVERNMENT. WHEN A CERTAIN INFRAST RUCTURE IS NEEDED, THE CONCERNED AUTHORITIES HAVE A BROADER PICTURE IN THEIR MIND AIMING AT ACQUIRING CERTAIN FACILITY FOR WHICH INFRASTRUCT URE DEVELOPMENT IS REQUIRED. SO, TO SAY, WHEN ANY ASSESSEE/ENTERPRISE AGREES UNDER A CONTRACT TO DEVELOP SUCH AN INFRASTRUCTURE FACILITY , IT CANNOT STRAIGHT AWAY BE DUBBED AS NOT THE BRAINCHILD OF THAT ENTERP RISE, BUT ONLY OF THE AUTHORITY IN QUESTION. THEREFORE, AGAIN THIS P ROVISION IN SO FAR AS THE CONDITIONS REQUIRED TO BE FULFILLED TO BE ELIGI BLE FOR THIS INCENTIVE HAD TO BE PROVIDED BY THE JURIDICAL FORUMS DEALING WITH THIS ISSUE. AFTER IN-DEPTH DELIBERATIONS, DISCUSSIONS AND EXAMI NATION OF THESE PROVISIONS, FINALLY, IT HAS BEEN RESOLVED THAT IF A N ENTERPRISE EVEN AFTER ENTERING INTO A CONTRACT WITH A LOCAL AUTHORITY OR THE GOVERNMENTS, MAY BE CENTRAL OR STATE, IN CASE IT CONSTRUCTS THE INFRASTRUCTURE FACILITY, OPERATES IT AND ALSO MAINTAINS THE SAME, IT WOULD B E ELIGIBLE FOR THIS DEDUCTION. 14. NOW, LET US EXAMINE THE FACTS OF THE GIVEN CASE . IT IS AN UNDENIABLE FACT THAT THE ASSESSEE IS ENGAGED IN THE CIVIL CONSTRUCTION WORK LIKE CONSTRUCTION OF FLYOVER, BRIDGE UNDERPASS , SEWERAGE, WATER SUPPLY ETC. FOR VARIOUS LOCAL BODIES, RAILWAYS, CEN TRAL/STATE GOVERNMENTS. IN FACT, AS PER THE TERMS OF AGREEMENT , EVEN THE INITIAL PROPOSALS FORMULATED BY THE DEPARTMENT WHICH ARE ST ATED TO BE TENTATIVE, THE ASSESSEE HAS THE LIBERTY TO MAKE DIF FERENT PROPOSALS WITHOUT DETRIMENTAL TO THE GENERAL FEATURES OF THE DEPARTMENTAL PROPOSAL, LIKE ROAD LEVEL/BOTTOM OF DECK LEVEL, MFL , SILL LEVEL, LINEAR WATER WAY, WIDTH OF THE BRIDGE ETC. RIGHT FROM THE DRAWINGS TO THE WORK OF CONSTRUCTION HAS BEEN DONE BY THIS ASSESSEE AND HAS BORNE THE COST ITSELF. THE COMPANY HAS CONSTRUCTED, DELI VERED AND MAINTAINED AND SECURITY IS ALSO MAINTAINED THEREAFT ER. SO, THIS IS A CASE OF TRANSFER OF PROPERTY IN CHATTEL AND NOT A C ONTRACT OF SERVICE. A DEVELOPER AS PER THE ADVANCED LAW LEXICON MEANS A PERSON ENGAGED IN DEVELOPMENT OR OPERATION OR MAINTENANCE OF SPECIAL ECONOMIC ZONE, AND ALSO INCLUDES ANY PERSON AUTHORI ZED FOR SUCH PURPOSE BY ANY SUCH DEVELOPER. IN THE CASE OF ACI T VS BHARAT UDYOG LTD, F BENCH OF ITAT MUMBAI, HAS CONCLUDED THAT A NY ASSESSEE WHO IS ENGAGED IN DEVELOPING THE INFRASTRUCTURE FACILIT Y AND ALSO OPERATING I II I.T.A. NO. .T.A. NO. .T.A. NO. .T.A. NO. 2061 2061 2061 2061/MDS/ /MDS/ /MDS/ /MDS/1 11 10 00 0 13 AND MAINTAINING THE SAME, IS ENTITLED TO THE BENEFI T OF DEDUCTION U/S 80IA(4). A COPY OF THIS DECISION IS ENCLOSED AT PA GE 139 OF THE PAPER BOOK. IN THE CASE OF PATEL ENGINEERING LTD VS DY. CIT, 84 TTJ (MUMBAI) 646 [COPY ENCLOSED AT PAGE NO.145 OF THE P APER BOOK], IT HAS BEEN HELD THAT A PERSON, WHO ENTERS INTO A CONT RACT WITH ANOTHER PERSON WILL BE TREATED AS A CONTRACTOR UNDOUBTEDL Y; AND THAT ASSESSEE HAVING ENTERED INTO AN AGREEMENT WITH THE GOVERNMEN T OF MAHARASHTRA AND ALSO WITH APSEB FOR DEVELOPMENT OF THE INFRASTRUCTURE PROJECTS, IS OBVIOUSLY A CONTRACTOR BUT DOES NOT DEROGATE THE ASSESSEE FROM BEING A DEVELOPER AS WELL. TH E TERM CONTRACTOR IS NOT NECESSARILY CONTRADICTORY TO THE TERM DEVEL OPER. ON THE OTHER HAND, RATHER SECTION 80IA(4) ITSELF PROVIDES THAT A SSESSEE SHOULD DEVELOP THE INFRASTRUCTURE FACILITY AS PER THE AGRE EMENT WITH THE CENTRAL GOVERNMENT, STATE GOVERNMENT OR A LOCAL AUT HORITY. SO, ENTERING INTO A LAWFUL AGREEMENT AND THEREBY BECOMI NG A CONTRACTOR SHOULD IN NO WAY BE A BAR TO THE ONE BEING A DEVEL OPER. THE ASSESSEE HAS DEVELOPED INFRASTRUCTURE FACILITY AS P ER THE AGREEMENT WITH MAHARASHTRA GOVERNMENT/APSEB, THEREFORE, MEREL Y BECAUSE IN THE AGREEMENT FOR DEVELOPMENT OF INFRASTRUCTURE FAC ILITY THE ASSESSEE IS REFERRED TO AS A CONTRACTOR OR BECAUSE SOME BASI C SPECIFICATIONS ARE LAID DOWN, IT DOES NOT DETRACT THE ASSESSEE FROM TH E POSITION OF BEING A DEVELOPER; NOR WILL IT DEBAR THE ASSESSEE FROM CLAIMING DEDUCTION U/S 80IA(4). THE FACTS OF THE PRESENT CASE ARE EX ACTLY IDENTICAL TO THE FACTS OF THAT CASE RENDERED BY ITAT MUMBAI BENCH IN WHICH UNDER IDENTICAL FACTS AND CIRCUMSTANCES, THE ASSESSEE HAS BEEN HELD TO BE ELIGIBLE FOR DEDUCTION U/S 80IA(4). SECTION 80IA(4 )(I)(B) REQUIRES DEVELOPMENT OF INFRASTRUCTURE FACILITY AND TRANSFER THEREOF AS PER AGREEMENT AND IT CANNOT BE DISPUTED IN VIEW OF THE MATERIAL ON RECORD THAT THE ASSESSEE HAS TRANSFERRED THE INFRASTRUCTUR E FACILITY DEVELOPED BY IT BY HANDING OVER THE POSSESSION THEREOF TO THE CONCERNED AUTHORITY AS REQUIRED BY THE AGREEMENT. THE HANDIN G OVER OF THE POSSESSION OF DEVELOPED INFRASTRUCTURE FACILITY/PRO JECT IS THE TRANSFER OF THE INFRASTRUCTURE FACILITY/PROJECT BY THE ASSESSE E TO THE AUTHORITY. THE HANDING OVER OF THE INFRASTRUCTURE FACILITY/PRO JECT BY THE DEVELOPER TO THE GOVERNMENT OR AUTHORITY TAKES PLACE AFTER RE COUPMENT OF THE DEVELOPERS COSTS WHETHER IT BE BT OR BOT OR B OOT BECAUSE IN BOT AND BOOT THIS RECOUPMENT IS BY WAY OF COLLE CTION OF TOLL THEREFROM WHEREAS IN BT IT IS BY WAY OF PERIODICA L PAYMENT BY THE GOVERNMENT/AUTHORITY. THE LAND INVOLVED IN INFRASTR UCTURE FACILITY/PROJECT ALWAYS BELONGS TO THE GOVERNMENT/L OCAL AUTHORITY ETC., WHETHER IT BE THE CASE OF BOT OR BOOT AND IT I S HANDED OVER BY THE I II I.T.A. NO. .T.A. NO. .T.A. NO. .T.A. NO. 2061 2061 2061 2061/MDS/ /MDS/ /MDS/ /MDS/1 11 10 00 0 14 GOVERNMENT/AUTHORITY TO THE DEVELOPER FOR DEVELOPME NT OF INFRASTRUCTURE FACILITY/PROJECT. THE SAME HAS BEEN THE POSITION IN THE GIVEN CASE AS WELL. SO, DEDUCTION U/S 80IA(4) IS A LSO AVAILABLE TO THIS ASSESSEE WHICH HAS UNDERTAKEN WORK OF A MERE DEVEL OPER. RATHER, THE STATUTORY PROVISION AS CONTAINED IN SECTION 80I A WHICH PROVIDES FOR DEDUCTION OF INFRASTRUCTURE FACILITY NO WAY PROVIDE S THAT ENTIRE INFRASTRUCTURE FACILITY PROJECT HAS TO BE DEVELOPED BY ONE ENTERPRISE. THUS, AS PER SECTION 80IA THE ASSESSEE SHOULD DEVEL OP THE INFRASTRUCTURE FACILITY AS PER THE AGREEMENT WITH T HE CENTRAL/STATE GOVERNMENT/LOCAL AUTHORITY. ENTERING INTO A LAWFUL AGREEMENT AND THEREBY BECOMING SHOULD, IN NO WAY BE A BAR TO THE ONE BEING A DEVELOPER. IN THIS REGARD, AS WE HAVE ALREADY STA TED, THE DECISION OF ACIT VS BHARAT UDYOG LTD, 118 ITD 336 AND PATEL EN GINEERING LTD VS DY. CIT, 84 TTJ 646, ARE RELEVANT. AS PER CIRCULAR NO.4/2010[F.NO.178/14/2010-ITA-I] DATED 18.5.2010, WIDENING OF EXISTING ROADS CONSTITUTES CREATION OF NEW INFRASTR UCTURE FACILITY FOR THE PURPOSE OF SECTION 80IA(4)(I) . THE ASSESSEE IS NO T REQUIRED TO DEVELOP THE ENTIRE ROAD IN ORDER TO QUALIFY FOR DED UCTION U/S 80IA AS HAS BEEN HELD BY THE HON'BLE BOMBAY HIGH COURT IN T HE CASE OF CIT VS ABG HEAVY INDUSTRIES LTD, 322 ITR 323. THE NEWLY I NSERTED EXPLANATION 2 TO SECTION 80IA VIDE FINANCE ACT, 200 7, DOES NOT APPLY TO A WORKS CONTRACT ENTERED INTO BY THE GOVERNMENT AND THE ENTERPRISE. IT APPLIES TO A WORK CONTRACT ENTERED INTO BETWEEN THE ENTERPRISE AND OTHER PARTY THE SUB-CONTRACTOR. THE AMENDMENT AIMS AT DENYING DEDUCTION TO THE SUB CONTRACTOR WHO EXEC UTES A WORK CONTRACT WITH THE ENTERPRISE AS HELD BY THE ITAT, J AIPUR A BENCH IN THE CASE OF OM METAL INFRAPROJECTS LTD VS CIT-I, JA IPUR, IN I.T.A.NO. 722 & 723/JP/2008 DATED 31.12.2008. THE RELIANCE BY THE LD. CIT(A) ON THE DECISION OF ITAT, CHENNAI BENCH IN THE CASE OF ACIT VS INDWELL LIANINGS PVT. LTD, 313 ITR(AT) 118, HAS BEEN ENLARG ED IN ITS FINDING BY THE ITAT, MUMBAI F BENCH IN ITS DECISION RENDERED IN THE CASE OF ACIT VS BHARAT UDYOG LTD , BY HOLDING THAT SUCH A D EDUCTION IS ONLY TO BE DENIED TO A SUB-CONTRACTOR AND NOT A MIN CONTRAC TOR. SIMILAR VIEW HAS BEEN TAKEN BY THE ITAT CHENNAI BENCH IN THE CAS E OF ACIT VS SMT C.RAJINI (SUPRA) IN WHICH BOTH OF US CONSTITUTED TH E BENCH. IN THIS DECISION THE DEFINITION AND DIFFERENCE BETWEEN WORK S CONTRACTOR AND A DEVELOPER HAS BEEN EXAMINED IN DETAIL. THE MAIN TH RUST OF THE DECISION IS THAT A DEVELOPER NEED NOT BE THE OWNER OF THE LAND ON WHICH DEVELOPMENT IS MADE. ALTHOUGH THAT DECISION WAS RENDERED IN THE CONTEXT OF A DEVELOPER OF BUILDINGS AND THE DED UCTION WAS IN RESPECT OF 80IB(10), BUT THE DEFINITION OF DEVELO PER GIVEN IN THAT I II I.T.A. NO. .T.A. NO. .T.A. NO. .T.A. NO. 2061 2061 2061 2061/MDS/ /MDS/ /MDS/ /MDS/1 11 10 00 0 15 CASE IS ALSO RELEVANT FOR THIS PURPOSE. MOREOVER, WE ARE IN AGREEMENT THAT IN INCENTIVE PROVISIONS, THE CONSTRUCTION SHOU LD BE LIBERALLY GIVEN AS HELD BY THE HON'BLE SUPREME COURT RENDERED IN TH E CASE OF BAJAJ TEMPO LTD VS CIT, 196 ITR 188. THUS, WHEN THE ASSE SSEE MAKES INVESTMENT AND HIMSELF EXECUTES DEVELOPMENT WORK AN D CARRIES OUT CIVIL WORKS, HE IS ELIGIBLE FOR TAX BENEFIT U/S 80I A OF THE ACT. ACCORDINGLY, WITH THE FOREGOING DISCUSSION, WE HOLD THAT THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 80IA(4) OF THE ACT, AN D THEREFORE, WE ORDER TO DELETE THE ADDITION MADE IN THIS RESPECT. 6. THEREFORE, BY FOLLOWING THE ABOVE ARGUMENTS AND REASONING, WE CONFIRM THE FINDINGS OF THE LD. CIT(A) AND DO NOT FIND ANY VALI D MERIT IN THE REVENUES APPEAL. ACCORDINGLY, THE APPEAL STANDS DISMISSED. 7. IN THE RESULT, ALL THE APPEAL OF THE REVENUE IS DISMISSED. ORDER PRONOUNCED IN THE OPEN COURT ON 03.10.2011. SD/- SD/- (O.K. NARAYANAN) VICE PRESIDENT (HARI OM MARATHA) JUDICIAL MEMBER CHENNAI, DATED, THE 03.10.2011 VM/- TO: THE ASSESSEE//A.O./CIT(A)/CIT/D.R.