M/s. Adhunik Infrastructure (P) Ltd, Kolkata V. Addl. CIT, Range - 10, Kolkata, Kolkata

ITA 214/KOL/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 4968 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 9 month(s) 19 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 28-11-2013
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: A
• Assessment Year: 2009-2010
• Appeal Filed On: 09-02-2012
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: SAURABH KUMAR
• Keywords: Retrospective amendment; Capital expenditure
• Section: 80G; 263

Judgement Text

I.T.A. NO.: 214/KOL./2012 ASSESSMENT YEAR : 2009-10 PAGE 1 TO 11 1 IN THE INCOME TAX APPELLATE TRIBUNAL, KOLKATA A BENCH, KOLKATA CORAM : SHRI MAHAVIR SINGH (JUDICIAL MEMBER) AND SHRI ABRAHAM P. GEORGE (ACCOUNTANT MEMBER) I.T.A. NO.: 214/KOL./ 2012 ASSESSMENT YEAR : 2009-2010 M/S. ADHUNIK INFRASTRUCTURES (P) LTD.,............. .........APPELLANT 308, KAMALALAYA CENTRE, 156, LENIN SARANI, KOLKATA-700 013 [PAN :AADCA 1315 L] -VS.- ADDITIONAL COMMISSIONER OF INCOME TAX,............. ..........RESPONDENT, RANGE-10, KOLKATA, P-7, CHOWRINGHEE SQUARE, KOLKATA-700 069 APPEARANCES BY: SHRI SOUMITRA CHOUDHURY, ADVOCATE FOR THE APPELLANT SHRI SAURABH KUMAR, SR. D.R., FOR THE RESPONDENT DATE OF CONCLUDING THE HEARING : NOVEMBER 19, 2013 DATE OF PRONOUNCING THE ORDER : NOVEMBER 28, 2013 O R D E R PER BENCH: 1. THROUGH THIS APPEAL, ASSESSEE ASSAILS AN ORDER D ATED 18 TH JANUARY, 2012 PASSED BY THE LD. COMMISSIONER OF INCOME TAX-I V, KOLKATA UNDER SECTION 263 OF THE ACT FOR THE ASSESSMENT YEAR 2009 -10. 2. FACTS APROPOS ARE THAT ASSESSEE ENGAGED IN MANUF ACTURE OF HOT MIX AGGREGATES AND ROAD CONSTRUCTION, DOING GOVERNMENT WORKS HAD FILED ITS RETURN FOR THE IMPUGNED ASSESSMENT YEAR ON 30.09.20 09 DECLARING AN INCOME OF RS.2,49,23,098/-. IN THE COMPUTATION STAT EMENT ATTACHED WITH THE RETURN OF INCOME, ASSESSEE CLAIMED DEDUCTION UN DER SECTION 80IA OF THE INCOME TAX ACT, 1961 (IN SHORT THE ACT) FOR A SUM OF RS.50,20,101/-. I.T.A. NO.: 214/KOL./2012 ASSESSMENT YEAR : 2009-10 PAGE 1 TO 11 2 ASSESSMENT WAS COMPLETED BY THE ASSESSING OFFICER O N 09.09.2011, INTER ALIA, MAKING AN ADDITION OF RS.5,00,000/- FOR DEFIC IENCIES IN VOUCHERS AND DENYING DEDUCTION OF RS.1,12,500/- CLAIMED UNDER SE CTION 80G OF THE ACT, FOR WANT OF EVIDENCE. 3. THEREAFTER, A NOTICE WAS ISSUED BY LD. CIT ON 23 .11.2011 PROPOSING A REVISION OF THE ASSESSMENT DONE FOR THE IMPUGNED ASSESSMENT YEAR. IN SUCH NOTICE, HE MENTIONED TWO REASONS FOR INVOKING THE REVISIONARY POWERS WHICH READ AS UNDER :- (1) FILING FEES OF RS.78,000/- DEBITED IN THE P&L ACCOUNT AND ALLOWED IN THE ASSESSMENT THOUGH IT HAS BEEN CERTIF IED AS CAPITAL EXPENDITURE IN PARA 17(1) OF THE 44AB REPOR T. THE ALLOWANCE BY THE AO IS THEREFORE, ERRONEOUS AND PRE JUDICIAL TO THE INTEREST OF REVENUE AS TAXABLE INCOME HAD ESCAP ED ASSESSMENT. (2) A DEDUCTION OF RS.50.20 LAKHS UNDER SECTION 80I A WAS ALLOWED IN THE ASSESSMENT THROUGH THE ASSESSEE IS A CONTRACTOR AND DOES NOT OWN THE ROAD OR OTHER INFRA STRUCTURE IT CONTRACTED UPON. FURTHER W.R.F. 01.04.2000, THE PROVISION OF SECTION 80IA HAS NOT BEEN MADE APPLICABLE TO WORKS CONTRACT/CONTRACTORS. IN THIS VIEW OF THE MATTER, T HE AOS ACTION OF ALLOWING DEDUCTION UNDER SECTION 80IA IS ERRONEOUS AND PREJUDICIAL TO THE INTEREST OF REVENUE AS TAXAB LE INCOME HAD ESCAPED ASSESSMENT. 4. IN ITS REPLY TO THE SAID NOTICE, ASSESSEE DID NO T STATE ANYTHING WITH REGARD TO THE FILING FEES OF RS.78,000/-. HOWEVER, WITH REGARD TO THE SECOND ISSUE, VIZ. DEDUCTION CLAIMED UNDER SECTION 80IA OF THE ACT, ASSESSEE STATED THAT IT WAS ENGAGED IN PROJECTS INV OLVING CREATION OF NEW INFRASTRUCTURE, LIKE CONSTRUCTION OF ROAD, BRIDGE A ND CULVERTS AND HAD MADE SUBSTANTIAL INVESTMENTS TO EXECUTE SUCH WORKS, TAKEN FROM GOVERNMENT AGENCIES. AS PER ASSESSEE, IT WAS A DEVE LOPER AND HAD MADE SUBSTANTIAL INVESTMENT WHILE EXECUTING CONTRACT WOR KS, RENDERING IT ELIGIBLE FOR CLAIMING DEDUCTION UNDER SECTION 80IA OF THE ACT. ASSESSEE THUS SUBMITTED THAT NO MISTAKE WAS COMMITTED BY ASS ESSING OFFICER WHILE ALLOWING SUCH CLAIM. I.T.A. NO.: 214/KOL./2012 ASSESSMENT YEAR : 2009-10 PAGE 1 TO 11 3 5. HOWEVER, LD. CIT WAS NOT IMPRESSED. ACCORDING TO HIM, EXPLANATION TO SUB-SECTION 13 OF SECTION 80IA OF THE ACT INTROD UCED BY FINANCE (NO. 2) ACT, 2009 WITH RETROSPECTIVE EFFECT FROM 1 ST APRIL, 2000 DISENTITLED ANY CONTRACTOR FROM CLAMING A DEDUCTION UNDER SECTION 8 0IA(4). AS PER LD. CIT, WORKS WHICH WERE EXECUTED BY THE ASSESSEE WERE AWARDED BY VARIOUS GOVERNMENT AGENCIES. WORK GIVEN BY PWD, NORTH SUBUR BAN DIVISION, KOLKATA WAS FOR IMPROVEMENT OF B.T. ROAD BY WIDENIN G AND BLACK TOPPING AND THE WORKS WAS CATEGORIZED AS WORK ORDER. SIMI LARLY, THE WORK ASSIGNED BY THE WEST BENGAL POWER DEVELOPMENT CORPO RATION LTD. FOR CONSTRUCTING ROAD, BRIDGE AND CULVERTS ON EITHER SI DE OF MIDNAPORE CANAL INCLUDING SLOPE PROTECTION, PIPE SHIFTING AND OTHER WORKS COULD ALSO BE CONSIDERED ONLY A WORKS CONTRACT. WORK DONE FOR WBS RDA RELATED TO CONSTRUCTION OF PAVEMENT, DRAINS, TRAFFIC SAFETY IN FORMATION BOARD, ROAD,, ETC. NATURE OF ALL THESE WORK EXECUTED BY THE ASSES SEE WERE NOTHING BUT MERE WORKS CONTRACT AND ASSESSEE WAS ONLY A NORMAL CONTRACTOR. ACCORDING TO HIM BY VIRTUE TO EXPLANATION TO SUB-SE CTION 13 OF SECTION 80IA OF THE ACT, WHICH WAS RETROSPECTIVE BY SUBSTIT UTED BY FINANCE (NO. 2) ACT OF 2009, ASSESSEES CLAIM SHOULD NOT HAVE BE EN ALLOWED. LD. CIT ALSO NOTED THAT ONLY PERSONS, WHO HAD AWARDED THE W ORK TO THE ASSESSEE WOULD BE ENTITLED FOR DEDUCTION UNDER SECTION 80IA OF THE ACT AND NOT ONE WHO HAD UNDERTAKEN CONTRACTS FROM THEM. AS PER LD. CIT, DECISION OF JAIPUR BENCH OF THIS TRIBUNAL IN THE CASE OF M/S. O M METAL INFRA-PROJECTS LTD. VS. CIT (ITA NOS. 722 & 723/JP/2008 DATED 3 1.12.2008) AS WELL AS THE DECISION OF MUMBAI BENCH OF THIS TRIBUNAL IN TH E CASE OF PATIL ENGINEERING VS.- DCIT COULD NOT BE APPLIED SINCE THE SAID DECISIONS WERE RENDERED WITHOUT CONSIDERING THE SUBSTITUTION OF EX PLANATION TO SUB- SECTION 13 OF SECTION 80IA OF THE ACT THROUGH FINAN CE (NO. 2) ACT, 2009. TAKING THIS VIEW, LD. CIT DIRECTED THE ASSESSING OF FICER TO CONSIDER THE ISSUE AFRESH AND DECIDE IT AS PER LAW. I.T.A. NO.: 214/KOL./2012 ASSESSMENT YEAR : 2009-10 PAGE 1 TO 11 4 6. NOW BEFORE US, LD. A.R. ASSAILING THE ORDER OF L D. CIT SUBMITTED THAT SUBSTITUTION OF EXPLANATION TO SUB-SECTION 13 OF SE CTION 80IA THROUGH FINANCE (NO. 2) ACT, 2009 WITH RETROSPECTIVE EFFECT FROM 01.04.2000 HAD NO EFFECT WHATSOEVER ON THE CLAIM OF ASSESSEE UNDER SECTION 80IA OF THE ACT. ACCORDING TO HIM, WORK ORDER DATED 04.01.2008 PLACED AT PAGE30 OF THE PAPER BOOK ISSUED BY NORTH SUBURBAN DIVISION OF THE EXECUTIVE ENGINEER, P.W.D, GOVERNMENT OF WEST BENGAL CLEARLY STATED THAT THE WORK ENTRUSTED WITH THE ASSESSEE WAS IMPROVEMENT OF B.T. ROAD BY WIDENING INCLUDING A WEARING COAT ON THE EXISTING BLACK TOP. SIMILARLY THE WORK ORDER DATED 21.03.2005 ISSUED BY THE WEST BENGAL PO WER DEVELOPMENT CORPORATION LIMITED PLACED AT PAGES 31-35 OF THE PA PER BOOK CLEARLY MENTIONED THAT IT WAS FOR CONSTRUCTION OF ROAD, BRI DGES AND CULVERTS ON EITHER SIDE OF MIDNAPORE CANAL. RELYING ON A LETTER OF ACCEPTANCE DATED 13.02.2006 ISSUED BY EXECUTIVE ENGINEER, NADIA DIVI SION, WEST BENGAL STATE RURAL DEVELOPMENT AGENCY, WEST BENGAL PLACED AT PAGE 36 OF THE PAPER BOOK, LD. A.R. SUBMITTED THAT WHAT WAS DONE B Y THE ASSESSEE WAS CONSTRUCTION OF ROAD FROM DAKSHIN JHITKIPOTA TO MOH ISNANGRA IN THE DISTRICT OF NADIA. ACCORDING TO LD. AR IN ALL THESE WORKS ASSESSEE WAS TO UNDERTAKE MAINTENANCE FOR TWO YEARS FREE OF COST. T HE WORKS GIVEN TO THE ASSESSEE WERE NOTHING BUT IN THE NATURE OF INFRASTR UCTURAL DEVELOPMENT BY VARIOUS GOVERNMENT AGENCIES. ACCORDING TO HIM, S ECTION 80IA(4) APPLIED TO EVERY ENTERPRISE CARRYING ON BUSINESS OF OPERATING, MAINTAINING OR DEVELOPING ANY INFRASTRUCTURE FACILI TY. ASSESSEE WAS DEVELOPING INFRASTRUCTURE FOR VARIOUS GOVERNMENT AG ENCIES. INFRASTRUCTURE FACILITY INCLUDES ROAD, HIGHWAY PROJ ECTS, BRIDGES, ETC. IT WAS ALSO INCLUDED WATER TREATMENT SYSTEM, SEWAGE SY STEM AND INLAND WATER WAY SYSTEM. ALL THE CONTRACTS EXECUTED BY ASS ESSEE FELL SQUARELY WITHIN THE SCOPE OF INFRASTRUCTURAL FACILITY. AR FU RTHER SUBMITTED THAT EXPLANATION TO SUB-SECTION 13 TO SECTION 80IA PRIOR TO ITS SUBSTITUTION BY FINANCE (NO. 2) ACT, 2009 OR THEREAFTER DID NOT MAK E ANY DIFFERENCE. FOR THIS, RELIANCE WAS PLACED BY HIM ON CIRCULAR NO. 4 OF 2010 DATED 18.05.2010 ISSUED BY MINISTRY OF FINANCE. ACCORDING TO HIM, IT WAS CLEARLY I.T.A. NO.: 214/KOL./2012 ASSESSMENT YEAR : 2009-10 PAGE 1 TO 11 5 MENTIONED THEREIN THAT BROADENING AN EXISTING ROAD BY CONSTRUCTING ADDITIONAL LANE ON A HIGHWAY PROJECT WOULD BE REGAR DED AS A NEW INFRASTRUCTURAL FACILITY. AR FURTHER SUBMITTED THAT ELEMENTARY REQUIREMENTS FOR INVOKING SECTION 263 OF THE ACT WE RE NOT SATISFIED. ACCORDING TO HIM, ASSESSING OFFICER HAD TAKEN A LAW FUL VIEW IN ALLOWING THE CLAIM TO THE ASSESSEE UNDER SECTION 80IA OF THE ACT. IT WAS NOT THAT ASSESSING OFFICER WAS NOT AT ALL AWARE OF SUCH CLAI M OF DEDUCTION. AR SUBMITTED THAT THE SAME ASSESSING OFFICER IN AN ASS ESSMENT DONE FOR ASSESSMENT YEAR 2008-09 VIDE ORDER DATED 30.04.2010 HAD ALLOWED THE CLAIM FOR DEDUCTION UNDER SECTION 80IA(4) OF THE AC T. ACCORDING TO HIM, INGREDIENTS REQUIRED FOR INVOKING SECTION 263 WERE NOT SATISFIED. CONSIDERABLE RELIANCE WAS PLACED ON TWO DECISIONS O F HYDERABAD BENCH OF THIS TRIBUNAL, FIRST IN THE CASE OF GVPR ENGINEERS LIMITED VS.- ACIT (2012) 51 SOT 207 (HYD)(URO) AND KMC CONSTRUCTIONS LIMITED VS.- ACIT [2012] 51 SOT 214 (HYD.)(URO). HOWEVER, LD. AR DID NOT ADVANCE ANY ARGUMENT WITH REGARD TO THE ISSUE OF FILING FEE S OF RS.78,000/- CITED BY LD. CIT FOR INVOKING SECTION 263 OF THE ACT. 7. PER CONTRA, LD. DR SUBMITTED THAT THE ASSESSING OFFICER HAD NOT APPLIED HIS MIND ON THE CLAIM OF DEDUCTION MADE BY THE ASSESSEE UNDER SECTION 80IA OF THE ACT. ASSESSING OFFICER HAD SIMP LY ACCEPTED THE CLAIM OF ASSESSEE WITHOUT VERIFYING WHETHER ASSESSEE WAS ELIGIBLE FOR DEDUCTION, CONSIDERING THE EXPLANATION TO SUB-SECTI ON 13 OF SECTION 80IA OF THE ACT AS SUBSTITUTED BY FINANCE (NO. 2) ACT, 2 009. ACCORDING TO HIM, NON-APPLICATION OF MIND BY ASSESSING OFFICER RENDER ED THE ORDER ERRONEOUS. NOT ONLY WAS IT ERRONEOUS BUT SUCH ORDER WAS ALSO PREJUDICIAL TO THE INTEREST OF THE REVENUE. SUBSTANTIAL CLAIM O F DEDUCTION UNDER SECTION 80IA OF THE ACT WAS UNJUSTIFIABLY ALLOWED, INSPITE OF ASSESSEE BEING ONLY A WORKS CONTRACTOR. ASSESSING OFFICER HA D NOT GONE THROUGH VARIOUS WORKS CONTRACT AGREEMENTS ENTERED BY ASSESS EE WITH VARIOUS GOVERNMENT AGENCIES AND HAD SUMMARILY ALLOWED CLAIM FOR DEDUCTION UNDER SECTION 80IA OF THE ACT. IN ANY CASE, ACCORDI NG TO HIM WITH REGARD I.T.A. NO.: 214/KOL./2012 ASSESSMENT YEAR : 2009-10 PAGE 1 TO 11 6 TO THE ISSUE OF FILING FEES OF RS.75,000/- ALLOWED BY ASSESSING OFFICER THOUGH IT WAS A CAPITAL EXPENDITURE, NO ARGUMENTS W HATSOEVER WERE ADVANCED BY LD. AR. 8. WE HAVE HEARD THE RIVAL SUBMISSIONS AND PERUSED MATERIAL AVAILABLE ON RECORD. ORIGINAL ASSESSMENT ORDER DATED 09.09.20 11, WHICH WAS THE SUBJECT MATTER TO THE REVISIONARY PROCEEDINGS CLEAR LY MENTIONED THAT ASSESSEE WAS DOING GOVERNMENT WORKS. THERE WERE TWO CLAIMS MADE BY ASSESSEE UNDER CHAPTER-VI-A OF THE ACT. ONE WAS THE DEDUCTION CLAIMED UNDER SECTION 80IA(4) OF THE ACT AND SECOND WAS A D EDUCTION CLAIMED UNDER SECTION 80G OF THE ACT. ASSESSING OFFICER ELE CTED TO DISALLOW DEDUCTION UNDER SECTION 80G OF THE ACT FOR A REASON THAT EVIDENCES WERE NOT PRODUCED FOR SUCH CLAIM. HENCE, IT IS NOT THAT ASSESSING OFFICER WAS NOT AWARE ABOUT THE CLAIMS MADE BY ASSESSEE UNDER C HAPTER-VI-A OF THE ACT. HE HAD ELECTED TO DISALLOW ONE CLAIM WHILE ALL OWING THE OTHER CLAIM. THAT ASSESSEE WAS DOING GOVERNMENT WORKS INVOLVING MANUFACTURING OF HOT MIX AGGREGATES AND ROAD CONSTRUCTION, WAS SPECI FICALLY MENTIONED IN THE OPENING PARA OF THE ASSESSMENT ORDER. IN THE FA CE OF THESE, TO SAY THAT ASSESSING OFFICER HAD NOT CONSIDERED THE CLAIM OF D EDUCTION UNDER SECTION 80IA(4) OF THE ACT MAY NOT BE APPROPRIATE. AS POINT ED OUT BY LD. AR, ASSESSEE WAS DOING WORK FOR PWD DEPARTMENT OF GOVER NMENT OF WEST BENGAL, WEST BENGAL POWER DEVELOPMENT CORPORATION L IMITED AND WEST BENGAL STATE RURAL DEVELOPMENT AGENCY. ALL THESE WE RE EITHER DEPARTMENTS OF GOVERNMENT OR UNDERTAKINGS OWNED BY THE GOVERNMENT OF WEST BENGAL. NATURE OF WORK IN THE CASE OF PUBLIC W ORKS DEPARTMENT WAS IMPROVEMENT OF B.T. ROAD BY WIDENING EXISTING ROAD. NATURE OF WORK WITH WEST BENGAL POWER DEVELOPMENT CORPORATION LIMITED W AS CONSTRUCTION OF ROADS, BRIDGES AND CULVERTS. NATURE OF WORK OF M/S. WEST BENGAL STATE RURAL DEVELOPMENT AGENCY WAS CONSTRUCTION OF ROAD F ROM DAKSHIN JHITKIPOTA TO MOHISNANGRA WITHIN KRISHNANAGAR-1 BLO CK IN THE DISTRICT OF NADIA. EXPLANATION TO SUB-SECTION 13 OF SECTION 80I A(4) MIGHT BE RELEVANT HERE AND THIS IS REPRODUCED HERE UNDER :- I.T.A. NO.: 214/KOL./2012 ASSESSMENT YEAR : 2009-10 PAGE 1 TO 11 7 EXPLANATION FOR THE PURPOSES OF THIS CLAUSE, IN FRASTRUCTURE FACILITY MEANS- (A) A ROAD INCLUDING TOLL ROAD, A BRIDGE OR A RAIL SYST EM; (B) A HIGHWAY PROJECT INCLUDING HOUSING OR OTHER ACTIVI TIES 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 WATER WAY [INLAND PORT OR NAVIGATIONAL CHANNEL IN THE SEA]. WORK DONE BY ASSESSEE DEFINITELY FELL WITHIN THE AB OVE EXPLANATION. THE ONLY ISSUE THAT REMAINS IS WHETHER ASSESSEE WAS HIT BY EXPLANATION TO SUB-SECTION 13 OF SECTION 80IA. THIS EXPLANATION IS ALSO REPRODUCED HERE UNDER :- EXPLANATION- FOR THE REMOVAL OF DOUBTS, IT IS HEREB Y 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 OF A WORKS CONTRACT AWARDED BY ANY PERSON (INCLUDIN G THE CENTRAL OR STATE GOVERNMENT) AND EXECUTED BY THE UN DERTAKING OR ENTERPRISE REFERRED TO IN SUB-SECTION 1. THE ABOVE IS AFTER SUBSTITUTION THROUGH FINANCE (NO . 2) ACT, 2009 WITH RETROSPECTIVE EFFECT FROM 1 ST APRIL, 2000. THE EFFECT OF THE SUBSTITUTED EXPLANATION WAS ONE OF THE ISSUES CONSIDERED BY HYD ERABAD BENCH OF THIS TRIBUNAL IN THE CASE OF GVPR ENGINEERS LTD. (SUPRA) , WHEREIN COORDINATE BENCH OF HYDERABAD HELD AS UNDER :- THE NEXT QUESTION TO BE ANSWERED IS WHETHER THE ASSESSEE IS A DEVELOPER OR MERE WORKS CONTRACTOR. T HE REVENUE RELIED ON THE AMENDMENTS BROUGHT IN BY THE FINANCE ACT, 2007 AND 2009 TO MENTION THAT THE ACTI VITY UNDERTAKEN BY THE ASSESSEE IS AKIN TO WORKS CONTRAC T AND IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA(4) . WHETHER THE ASSESSEE IS A DEVELOPER OR WORKS CONTRA CTOR PURELY DEPENDS ON THE NATURE OF THE WORK UNDERTAKEN BY THE ASSESSEE. EACH OF THE WORK UNDERTAKEN HAS TO BE ANALYZED AND A CONCLUSION HAS TO BE DRAWN ABOUT THE NATURE OF THE WORK UNDERTAKEN BY THE ASSESSEE. THE AGREEMENT ENTERED INTO WITH THE GOVERNMENT OR THE GOVERNMENT BODY MAY BE A MERE WORKS CONTRACTOR FOR DEVELOPMENT OF INFRASTRUCTURE. IT IS TO BE SEEN FRO M THE AGREEMENTS ENTERED INTO BY THE ASSESSEE WITH THE GOVERNMENT. THE GOVERNMENT HANDED OVER THE POSSESSI ON I.T.A. NO.: 214/KOL./2012 ASSESSMENT YEAR : 2009-10 PAGE 1 TO 11 8 OF THE PREMISES OF PROJECTS TO THE ASSESSEE FOR THE DEVELOPMENT OF INFRASTRUCTURE FACILITY. IT IS THE A SSESSEES RESPONSIBILITY TO DO ALL ACTS TILL THE POSSESSION O F PROPERTY IS HANDED OVER TO THE GOVERNMENT. THE FIRS T PHASE IS TO TAKE OVER THE EXISTING PREMISES OF THE PROJECTS AND THEREAFTER DEVELOPING THE SAME INTO INFRASTRUCT URE FACILITY. SECONDLY, THE ASSESSEE SHALL FACILITATE T HE PROPER TO USE THE AVAILABLE EXISTING FACILITY EVEN WHILE T HE PROCESS OF DEVELOPMENT IS IN PROGRESS. ANY LOSS TO THE PUBLIC CAUSED IN THE PROCESS WOULD BE THE RESPONSIB ILITY OF THE ASSESSEE. THE ASSESSEE HAS TO DEVELOP THE INFRASTRUCTURE FACILITY. IN THE PROCESS, ALL THE WO RKS ARE TO BE EXECUTED BY THE ASSESSEE. IT MAY BE LAYING OF A DRAINAGE SYSTEM, MAY BE CONSTRUCTION OF A PROJECT; PROVISION OF WAY FOR CATTLE AND BULLOCK CARTS IN TH E VILLAGE; PROVISION FOR TRAFFIC WITHOUT ANY HINDRANC E, THE ASSESSEES DUTY IS TO DEVELOP INFRASTRUCTURE WHETHE R IT INVOLVES CONSTRUCTION OF A PARTICULAR ITEM AS AGREE D TO IN THE AGREEMENT OR NOT. THE AGREEMENT IS NOT FOR A SP ECIFIC WORK, IT IS FOR DEVELOPMENT OF FACILITY AS A WHOLE. THE ASSESSEE IS NOT ENTRUSTED WITH ANY SPECIFIC WORK TO BE DONE BY THE ASSESSEE. THE MATERIAL REQUIRED IS TO B E BROUGHT IN BY THE ASSESSEE BY STICKING TO THE QUALI TY AND QUANTITY IRRESPECTIVE OF THE COST OF SUCH MATERIAL. THE GOVERNMENT DOES NOT PROVIDE ANY MATERIAL TO THE ASSESSEE. IT PROVIDES THE WORKS IN PACKAGES AND NOT AS A WORKS CONTRACT. THE ASSESSEE UTILIZES ITS FUNDS, IT S EXPERTISE, ITS EMPLOYEES AND TAKES THE RESPONSIBILI TY OF DEVELOPING THE INFRASTRUCTURE FACILITY. THE LOSSES SUFFERED EITHER BY THE GOVERNMENT OR THE PEOPLE IN THE PROCE SS OF SUCH DEVELOPMENT WOULD BE THAT OF THE ASSESSEE. THE ASSESSEE HANDS OVER THE DEVELOPED INFRASTRUCTURE FA CILITY TO THE GOVERNMENT ON COMPLETION OF THE DEVELOPMENT. THEREAFTER THE ASSESSEE HAS TO UNDERTAKE MAINTENANC E OF THE SAID INFRASTRUCTURE FOR A PERIOD OF 12 TO 24 MO NTHS. DURING THIS PERIOD, IF ANY DAMAGES ARE OCCURRED, IT SHALL BE THE RESPONSIBILITY OF THE ASSESSEE. FURTHER, DUR ING THIS PERIOD, THE ENTIRE INFRASTRUCTURE SHALL HAVE TO BE MAINTAINED BY THE ASSESSEE ALONE WITHOUT HINDRANCE TO THE REGULAR TRAFFIC. THEREFORE, IT IS CLEAR THAT FR OM AN UNDERDEVELOPED AREA, INFRASTRUCTURE IS DEVELOPED AN D HANDED OVER TO THE GOVERNMENT AND AS EXPLAINED BY T HE CBDT VIDE ITS CIRCULAR DATED 18.05.2010, SUCH ACTIV ITY IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA(4). THIS CANNOT BE CONSIDERED AS A MERE WORKS CONTRACT BUT HAS TO B E CONSIDERED AS A DEVELOPMENT INFRASTRUCTURE FACILITY . THEREFORE, THE ASSESSEE IS A DEVELOPER AND NOT A WO RKS CONTRACTOR AS PRESUMED BY THE REVENUE. THE CIRCULAR I.T.A. NO.: 214/KOL./2012 ASSESSMENT YEAR : 2009-10 PAGE 1 TO 11 9 ISSUED BY THE BOARD CLEARLY INDICATE THAT THE ASSES SEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA(4). THE DEPARTMENT IS NOT CORRECT IN HOLDING THAT THE ASSES SEE IS A MERE CONTRACTOR OF THE WORK AND NOT A DEVELOPER. AS PER THE PROVISIONS OF SECTION 80IA, A PERSON BEING A COMPANY HAS TO ENTER INTO AN AGREEMENT WITH THE GOVERNMENT OR GOVERNMENT UNDERTAKINGS. SUCH AN AGREEMENT IS A CONTRACT AND FOR THE PURPOSE OF THE AGREEMENT A PERSON MAY BE CALLED AS A CONTRACTOR AS HE ENTERED INTO A CONTRACT. BUT THE WORD CONTRACTOR IS USED TO DENOTE A PERSON ENTERING INTO AN AGREEMENT FOR UNDERTAKING THE DEVELOPMENT OF INFRASTRUCTURE FACIL ITY. EVERY AGREEMENT ENTERED INTO IS A CONTRACT. THE WOR D CONTRACTOR IS USED TO DENOTE THE PERSON WHO ENTER S INTO SUCH CONTRACT. EVERY A PERSON WHO ENTERS INTO A CON TRACT FOR DEVELOPMENT OF INFRASTRUCTURE FACILITY IS A CON TRACTOR. THEREFORE, THE CONTRACTOR AND THE DEVELOPER CANNOT BE VIEWED DIFFERENTLY. EVERY CONTRACTOR MAY NOT A DEVE LOPER BUT EVERY DEVELOPER DEVELOPING INFRASTRUCTURE FACIL ITY ON BEHALF OF THE GOVERNMENT IS A CONTRACTOR. SECTION 80IA INTENDS TO COVER THE ENTITIES CARRYING OUT DEVELOPING, OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY KEEPING IN MIND THE PRESENT BUSINESS MODELS AND INTEND TO GRANT THE INCENTIVES TO SUCH ENTITIES. THE CBDT, ON SEVERAL OCCASIONS, CLAR IFIED THAT PURE DEVELOPER SHOULD ALSO BE ELIGIBLE TO CLAI M DEDUCTION UNDER SECTION 80IA WHICH ULTIMATELY CULMINATED INTO AMENDMENT UNDER SECTION 80IA IN THE FINANCE ACT, 2001, TO GIVE EFFECT TO THE AFORESAID CIRCULARS ISSUED BY THE CBDT. TO AVOID MISUSE OF TH E AFORESAID AMENDMENT, AN EXPLANATION WAS INSERTED IN SECTION 80IA, IN THE FINANCE ACT, 2007 TO 2009, TO CLARIFY THAT MERE WORKS CONTRACT WOULD NOT BE ELIGIBLE FOR DEDUCTIONS UNDER SECTION 80IA, BUT, CERTAINLY, THE EXPLANATION CANNOT BE READ TO DO AWAY WITH THE ELIGIBILITY OF THE DEVELOPER; OTHERWISE, THE PARLIA MENT WOULD HAVE SIMPLY REVERSED THE AMENDMENT MADE IN TH E FINANCE ACT, 2001. THUS, THE AFORESAID EXPLANATION WAS INSERTED, CERTAINLY, TO DENY THE TAX HOLIDAY TO THE ENTITIES WHO DO MERE WORKS CONTRACT OR SUB-CONTRACT AS DISTI NCT FROM THE DEVELOPER. THIS IS CLEAR FROM THE EXPRESS INTENTION OF THE PARLIAMENT WHILE INTRODUCING THE EXPLANATION. THE EXPLANATORY MEMORANDUM TO FINANCE ACT, 2007 STATES THAT THE PURPOSE OF THE TAX BENEFI T HAS ALL ALONG BEEN TO ENCOURAGE INVESTMENT IN DEVELOPME NT OF INFRASTRUCTURE SECTOR AND NOT FOR THE PERSONS WH O MERELY EXECUTE THE CIVIL CONSTRUCTION WORK. IT CATEGORICALLY STATES THAT THE DEDUCTION UNDER SECTI ON I.T.A. NO.: 214/KOL./2012 ASSESSMENT YEAR : 2009-10 PAGE 1 TO 11 10 80IA IS AVAILABLE TO DEVELOPERS WHO UNDERTAKES ENTREPRENEURIAL AND INVESTMENT RISK AND NOT TO THE CONTRACTORS, WHO UNDERTAKE ONLY BUSINESS RISK. WITH OUT ANY DOUBT, THE ASSESSEE CLEARLY DEMONSTRATED THAT I T HAS UNDERTAKEN HUGTE RISKS IN TERMS OF DEVELOPMENT OF TECHNICAL PERSONNEL, PLANT AND MACHINERY, TECHNICAL KNOW-HOW, EXPERTISE AND FINANCIAL RESOURCES. AFTER THE AMENDMENT SECTION 80IA(4) IS READ AS (I) DEVELOPING OR (II) OPERATING AND MAINTAINING OR (III) DEVELOPING, OPERATING AND MAINTAINING ANY INFRASTRUCTURE FACILI TY. WHILE PRIOR TO AMENDMENT THE OR BETWEEN THE ACTIV ITIES WAS NOT THERE, AFTER THE AMENDMENT OR HAS BEEN INSERTED WITH EFFECT FROM 1.4.2002 BY FINANCE ACT, 2001. THEREFORE, IF THE CONTRACTS INVOLVE DESIGN, DEVELOP MENT, OPERATING AND MAINTENANCE, FINANCIAL INVOLVEMENT, A ND DEFECT CORRECTION AND LIABILITY PERIOD, THEN SUCH CONTRACTS CANNOT BE CALLED AS SIMPLE WORKS CONTRACT TO DENY THE DEDUCTION UNDER SECTION 80IA. THE CONTRACT S WHICH CONTAIN ABOVE FEATURES TO BE SEGREGATED, THIS DEDUCTION UNDER SECTION 80IA HAVE TO BE GRANTED AND THE OTHER AGREEMENTS WHICH ARE PURE WORKS CONTRACTS HIT BY THE EXPLANATION TO SECTION 80IA(13), THOSE WORK ARE NOT ENTITLED FOR DEDUCTION UNDER SECTION 80IA. THE PROF IT FROM THE CONTRACTS WHICH INVOLVE DESIGN, DEVELOPMEN T, OPERATING AND MAINTENANCE, FINANCIAL INVOLVEMENT, A ND DEFECT CORRECT AN LIABILITY PERIOD IS TO BE COMPUTE D BY THE ASSESSING OFFICER ON PRO RATA BASIS OF TURNOVER. TH E ASSESSING OFFICER IS DIRECTED TO EXAMINE THE RECORD S ACCORDINGLY AND GRANT DEDUCTION ON ELIGIBLE TURNOVE R AS DIRECTED ABOVE. THE SAME VIEW WAS REITERATED BY HONBLE HYDERABAD B ENCH OF THIS TRIBUNAL IN THE CASE OF KMC CONSTRUCTIONS LTD. (SUP RA). 9. IN THESE CIRCUMSTANCES, WE ARE OF THE OPINION TH AT THE ORDER OF ASSESSING OFFICER DATED 09.09.2011 FOR THE IMPUGNED ASSESSMENT YEAR DID NOT SATISFY THE TWIN CONDITIONS REQUIRED FOR INVOKI NG THE REVISIONARY JURISDICTION UNDER SECTION 263 OF THE ACT, IN SO FA R AS ITS CLAIM FOR DEDUCTION UNDER SECTION 80IA WAS CONCERNED. WE CANN OT SAY THAT CLAIM OF ASSESSEE FOR DEDUCTION UNDER SECTION 80IA WAS INCOR RECTLY ALLOWED. HOWEVER, WITH REGARD TO THE ISSUE OF FILING FEES OF RS.78,000/- THERE IS NO DISPUTE THAT IT WAS ALLOWED BY THE ASSESSING OFFICE R WITHOUT VERIFYING I.T.A. NO.: 214/KOL./2012 ASSESSMENT YEAR : 2009-10 PAGE 1 TO 11 11 WHETHER IT WAS CAPITAL EXPENDITURE OR NOT. THIS WAS SPECIFICALLY MENTIONED BY THE STATUTORY AUDITOR IN THE TAX AUDIT REPORT AS IN THE NATURE OF CAPITAL OUTGO. HENCE, THE ORDER OF CIT IN SO FAR AS IT RELATES TO THE ISSUE OF FILING FEES OF RS.78,000/-, CANNOT BE FAULTED. 10. IN THE RESULT, WE SET ASIDE THE ORDER LD. CIT I N SO FAR AS IT RELATES TO THE CLAIM OF DEDUCTION MADE BY ASSESSEE UNDER SECTI ON 80IA OF THE ACT, WHEREAS SUSTAIN IT IN SO FAR AS IT RELATES TO THE I SSUE OF FILING FEES. ORDER OF LD. CIT STANDS, ACCORDINGLY, MODIFIED. 11. APPEAL FILED BY ASSESSEE IS THEREFORE TREATED A S PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 28 TH DAY OF NOVEMBER, 2013. SD/- SD/- MAHAVIR SINGH ABRAHAM P. GEORGE (JUDICIAL MEMBER) (ACC OUNTANT MEMBER) KOLKATA, THE 28 TH DAY OF NOVEMBER, 2013 COPIES TO : (1) THE APPELLANT (2) THE RESPONDENT (3) CIT (4) CIT(A) (5) THE DEPARTMENTAL REPRESENTATIVE (6) GUARD FILE BY ORDER ETC ASSISTANT REGISTRAR INCOME TAX APPELLATE TRIBUNAL KOLKATA BENCHES, KOLKATA LAHA/SR. P.S.