The ACIT, Circle-5, RAJKOT-GUJARAT V. M/s. Kishan Infrastructure P. Ltd,, RAJKOT-GUJARAT

ITA 232/RJT/2014

• Counselvise Citation: [2024] 100 COUNSELVISE.COM (IT) 3999 (ITAT-RAJKOT)
• Duration Of Justice: 9 year(s) 10 month(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 01-02-2024
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Next Hearing Date: 22-01-2024
• Assessment Year: 2010-2011
• Appeal Filed On: 01-04-2014
• Result in Favour of: Assessee
• Court: TRIBUNAL

Judgement Text

आयकरअपीलीयअधिकरण , राजकोटनयायपीी INTHEINCOMETAXAPPELLATETRIBUNAL, RAJKOTBENCH,RAJKOT (ConductedthroughVirtualCourt) BEFORESHRIWASEEMAHMED,ACCOUNTANTMEMBER And SHRITRSENTHILKUMAR,JUDICIALMEMBER आयकरअपीलसं ./ITANos.231&232/Rjt/2014 धििाधरणणवध / Asstt.Years:(2009-2010&2010-2011) TheA.C.I.T, CentralCircle-5, Rajkot. Vs. M/sKishanInfrastructurePvt.Ltd., GandhiChambers, GondalRoad, Rajkot. PAN:AACCK4463G (Applicant)(Respondent) Assesseeby:ShriSamirJani,A.R Revenueby:ShriShramdeepSinha,CIT.D.R सुिणाईकीतारीख /DateofHearing:23/01/2024 घोवणाकीतारीख /DateofPronouncement:02/02/2024 आदेश /ORDER PERWASEEMAHMED,ACCOUNTANTMEMBER: ThecaptionedtwoappealshavebeenfiledattheinstanceoftheRevenue againsttheseparateordersofLearnedCommissionerofIncomeTax(Appeals)-IV, Rajkot,arisinginthematterofassessmentorderpassedunders.143(3)ofthe ITAnos.231&232/AHD/2014 A.Ys.2009-10&2010-11 2 IncomeTaxAct,1961(here-in-afterreferredtoas"theAct")relevanttothe AssessmentYears2009-2010&2010-11. 2.TheRevenuehasraisedfollowinggroundsofappeal: 1.Onthefactsandcircumstancesofthecase,thelearnedCIT(A)haserredininterpreting theprovisionofS.80IA(4)oftheActwherebythevitalconditionstobefulfilledsuchas findingson"newinfrastructurefacilityandrequirementofeligibleincometobederived fromuseofthesaidinfrastructurefacilitywasignoredwhiledecidingtheissueof deductionu/s.80IA(4)oftheAct. 2.Onthefactsandcircumstancesofthecase,thelearnedCIT(A)erredinnottakinginto accountthevariousdecisionofHon'bleSupremeCourtofIndiaontheissueof'work contract'vizdecisioninthecaseofM/sHAL55STC327(SC)dtd16/12/1983todecide ontheissueof"workcontract"vis-à-vis"developmentcontact"fordeductionu/s80IA(4) oftheAct.InthesaidcaseofM/sHAL,Hon'bleApexCourthadheldthatnoelementof ownershiporrightofproperlyisproducedinthecaseof'workcontract'.Applyingthis bindingdecisionofHon'bleApexCourt,noneoftheappellant'sprojectscouldbetermed asdevelopmentprojectssoastobeeligiblefordeductionu/s801A(4)oftheAct. 3.Onfactsandcircumstancesofthecaseandinlaw,theId.CIT(A)haserredindeleting theadditionofRs.2,34,97,141/-madebytheAOonaccountofdisallowanceofdeduction u/s80IA(4)oftheITAct. 4.Indoingso,theLd.CIT(A)hasnotconsideredalltheaspectsofcontractualobligations betweentheassesseeandtheStateGovt.inrespectof"Contracts"undertakenbythe assesseefromvariousGujaratGovt.Agencies,whichshowthattheContractsareinthe natureof"WorkContract". Theaspectswhichneedtobeproperlyconsideredisenumeratedbelow:- i.Closereadingofthe"Contracts"forliningofirrigationCanalsshowthattheprojecthas beenconceivedbytheGujaratStateGovt./SardarSarovarNigamLtd.andthatthe assesseehasonlyexecutedtheProjectasperthespecificationsanddirectionswiththe overallsupervisionandcontrolvestingwiththeGujaratStateGovt./SardarSarovarNigam Ltd. ii.TheownershipoftheProjectexecutedbytheassesseeforGujaratStateGovt.was nevervestedwiththeassesseeandthattheirrigationProjecthastobefinallyhandedover toGujaratStateGovt./SardarSarovarNigamLtd.byaspecifieddateofcompletionof Project.TheonlyeffectiveissueraisedbytherevenueisthatthelearnedCIT(A)erredin allowingtheclaimoftheassesseefordeductionundersection80IA(4)oftheAct amountingtoRs.2,34,97,141/-only. iii.Theassesseehasmerelyexecutedtheinfrastructureprojectwhichdoesnotqualifyfor deductionu/s.801A(4)Expl.13oftheAct. ITAnos.231&232/AHD/2014 A.Ys.2009-10&2010-11 3 iv.Themaincontentionoftheassesseeisthat,ithasmadelotofinvestmentbywayofV. man,skill,machineryandmoney,whichcannotbeadistinguishingpointbetweena "InfrastructureDeveloper"or"WorkContractor"asbothrequiresuchinvestment.Noneof theContractsspecifytheperiodorno.ofyearsforwhichtheassesseehastomaintainthe "InfrastructureProject",whichprovesthattheassessee'sclaimthatitgotthecontractsto build,operateandmaintain(BOT)thefacilitiesisincorrect. 5.Furthermore,theLd.CIT(A)hasnotproperlyappreciatedthedecisionofHon'ble SupremeCourtinthecaseofStateofAndhraPradeshVs.KoneElevators(1)Ltd.,which statesasunder:- *"ItisasettledlawthatthesubstanceandnottheFromofcontractismaterialin determiningthenatureoftransaction.Nodefiniterulecanbeformulatedtodeterminethe questionastowhetheraparticulargivencontractisacontractforsaleofgoodsorisa workscontracts.Ultimately,itthetermsofagivencontractwouldbedeterminativeofthe matureofthetransaction,whetheritis"sale"ofaworkcontract.Therefore,thisquestion hastobeascertainedonfactsofeachcase,onproperconstructionoftermsand conditionsofthecontractbetweentheparties." 3.Thefactsinbriefarethattheassessee,aprivatecompany,isengagedin thebusinessofcivilconstruction.Theassesseeduringtheyearunder considerationcarriedouttheworkondifferentinfrastructureprojects(9projects) relatingtoirrigationfacilities,beingDAMandCanal.Alltheprojectwereallotted totheassesseebythedepartmentsofGovernmentofGujaratTheassessee againsttheprofit/incomederivedfromtheprojectsclaimeddeductionunder section80IA(4)oftheActforRs.2,34,97,141/-asdeveloperofinfrastructure facilities. 3.1However,theAOfoundthattheassesseehascarriedoutonlyconstruction activityrelatedtotheprojectofGovernmentofGujaratStatebeingGujarat EmergencyReconstructionProjectforDamsafetyandIrrigation.Theworktaken bytheassesseewasinthecapacityofworkcontractoronly.TheAOinholdingthe workedcarriedoutbytheassesseeinthecapacityofworkcontractoronly, referredthejudgmentofHon’bleSupremeCourtincaseofStateofAndhra Pradeshvs.KoneElevators(India)Ltdreportedin3SCC389whereintheHon’ble SupremeCourtlaiddownthemeasureandmetricsforacontractbeingwork contractorcontractforsale.Accordingly,theAOdisallowedtheclaimofthe deductionundersection80IA(4)oftheActinpursuancetotheexplanation ITAnos.231&232/AHD/2014 A.Ys.2009-10&2010-11 4 interestedundersection80IA(13)byFinanceAct2009(2)andmadeadditionofRs. Rs.2,34,97,141/-onlytothetotalincomeoftheassessee. 4.TheaggrievedassesseepreferredanappealbeforethelearnedCIT(A).The learnedCIT(A)afterconsideringthefactsintotalitydeletedtheadditionmadeby theAO.TherelevantobservationofthelearnedCIT(A)isextractedasunder: 12.ThisshowsthattheappellantisrequiredtoemployProjectManagers,whoare qualifiedCivilEngineers,siteengineersandsupervisorsandlabourers.Theplansand designsgiveninthetenderdocumentsaregeneralinnature,andtheythemselvescannot betakenascomprehensiveforbeingexecuted.Theyareonlybasicdrawingsanddesigns, basedonwhichtheappellanthastopreparetheworkingplans,drawingsanddesigns,and therebyimplementtheproject.Itisalsoseenthat,thereisnoincidenceofmobilization advanceandevenifthereismobilizationadvance,thesameisnotgivenfreely.Ithas beengivenonlyaftertheappellantfurnishedrequisitebankguarantee,andthebank guaranteehasbeengivenbythebank,onlyaftergettingenoughsecurityfromthe assessee,toprotectitselffromanyriskonaccountofanydefaultonthepartofthe appellant.Therefore,theappellanthastogetfinancialassistancefrombanks,share ""holdersanddirectorsforwhichthereisincidenceofinterestexpenditure,whichisclearly reflectedinthetheProfitandLossAccountoftheappellant.Similarly,theappellanthad investeditsownfundcanbeseenfromtheBalanceSheetofvariousyears.Fromthe contractdocument,itcanalsobeseenthat,theGovernmenthasnotsuppliedanymaterial toexecutethework.Theappellanthastoprocureitsownmen,materialandmachinery. Needlesstostate,sincetheprojectsbenefitsthepublicatlarge,thePrincipalagencyof theGovernmentshallnotcompromisewiththequalityoftherawmaterials.Infact,in someoftheworkorders,itisalsomentionedthat,whereveranyfacilityofthegovernment isbeingutilized,theappellanthastopaydueroyaltyinadvanceforwhichnecessary challanhastobeproducedevenbeforetheworkcommences,andwhateversuch machineryissuppliedbytheGovernment,thesameshallbehandedoverbacktothe Governmentinproperandsameform.Thus,theappellanthasnotgotanymachineryfrom theDepartmentfreeofcost.Inshort,theappellanthasmadeinvestmentsofownaswell asborrowedfundsandhasinvestedthesameinallkindsofresourcesforitsbusiness, namelyplantandmachineries,structuresatsites,workingcapital,humanresources, technicalexpertise,etc.Theappellantpossessesitsowntechnicalknowledgeonhowto developtheinfrastructureandalsohasitsowntechnicalaswellasmanagerialpoolof manpowerforthesame.Proofsregardingtechnicalandfinancialcapacityoftheappellant arerequiredtobefurnishedtothegovernment.Theappellanthaspurchasedand deployeditsownmaterialsfordevelopmentandconstructionoftheinfrastructureandno sub-lettingisdone.Theentireplanningofitsbusinessasalsotheworkhasbeendoneby theappellantandnotbythegovernment.Thoughthespecificationsoftheworkmaybe specifiedinthetender,buthowtoexecutethesameisupontheappellanttofulfil.The fundamentalpreconditionofsection801A(4)isthattheinfrastructurefacilitymusthave beendevelopedordeveloped,operatedandmaintainedbyenteringintoacontractwith thegovernment.Therefore,contractwiththegovernmentisasinequanonforbecoming eligibleforthededuction.Therefore,contractingbyitselfcannotmaketheappellanta workscontractor.Oncethereisacontractforanewfacility,thereareboundtobe obligationsunderthecontractwhichincludeobligationsofinteralia,observingthe specificationsoftheinfrastructurefacility.Hence,althoughtheremaybepre-decided specificationsinthecontract,theexecutionthereofforbuildingandcreatingthe infrastructureleavesmuchscopeandfreedomtotheappellantwhoiscarryingoutthe ITAnos.231&232/AHD/2014 A.Ys.2009-10&2010-11 5 contract,bywayofitsplanning,designing,knowhow,funds,risks,humanresources,etc., allofwhicharecarriedoutatthesoleriskoftheappellant. 13.Therefore,inviewofthevariousspecificclausesintheagreementfasteningtherisks tobeundertakenbytheappellant,discussedabove,itcannotbesaidthattheappellant hasnotundertakenanyrisk.Itisalsoseenfromthelistofmachinerymentionedinthe balancesheetandtheschedulesattachedthereto,thatallthemachineryarespecific constructionorientedmachineries.Noneofthesemachineriescanbeutilizedinanyother industry.Therefore,ahugeoutlayofcapitalexpenditurehasgoneintoacquiringthese machineries.Infuture,iftheappellantfailstogetanyworkwithregardtothecivil construction,theappellant'sinvestmentinmachineriesbecomesdeadandtheyturninto redundantscraponly.Therefore,theriskisinvolvednotjustinexecutingthe infrastructuredevelopmentwork,butalsoinvolvedinnotgettingfurtherdevelopment contracts,ashugecapitaloutlayhasgoneintoacquiringcapitalassets. 14.Sofarastheelementofexecutionrisksareconcerned,itisseenfromtheagreements enteredintobytheappellantwiththeGovernmentthattheGovernmenthandedoverthe possessionofthepremisesofprojectstotheappellantforthedevelopmentof infrastructurefacility.Itistheappellant'sresponsibilitytodoallactstillthepossessionof propertyishandedovertotheGovernment.Theagreementisnotforaspecificwork,but itisfordevelopmentoffacilityasawhole.Thegovernmentprovidestheworksin packagesandnotasaworkscontract.Theappellanthandsoverthedeveloped infrastructurefacilitytotheGovernmentoncompletionofthedevelopment.Therefore,itis clearthatfromanun-developedarea,infrastructureisdevelopedandhandedovertothe Government. 15.Therefore,thefindingoftheAOintheassessmentorderthattheappellanthasnot failedtofulfilthetwinconditionsviz.,(i)investmentineligibleprojectand(ii)executionby theprojectbytheassesseeitself,isnotcorrectandhence,thisstandfailstosurvivewhile decliningtheclaimofdeductionu/s.801A(4). 16.Nowcomingtothenextlimbofthediscussioni.e.,thejudicialpronouncementsrelied uponbytheAOintheassessmentorder,Ihavecarefullyperusedthesedecisions.Sofar asthedecisionoftheHon'bleMumbaiITATinthecaseofIndianHumePipeCoLtdis concerned,itisseenthattheAOhaddenieddeductionu's.801A(4)byrelyinguponthe decisionoftheBTPatil&Sons.TheId.CIT(A)alsoupheldthesaidassessmentorderby relyinguponthesamedecision.However,thefactsofthecaseofBTPatil&Sonsisthat,it wasengagedasasubcontractorbyanothercontractortocarryoutcivilworkanditwas theothercontractorwhohadenteredintothecontractswiththegovernmentanditisin thisparticularviewthatthetribunalhadheldthattheassesseewasnotadeveloper,by virtueofexplanationinsertedbyFinanceNo.2Act,2009.Whereas,inthepresentcase, theappellantisadeveloperandhadnotgotworkfromanyothercontractorasasub- contract. 17.SofarasdecisioninthecaseofIndwellLiningsP.Ltdisconcerned,theclaimwas declinedastheassesseeinthatcasewasonlyengagedinundertakingcontractworksfor insituliningforwatersupplyprojectandanticorrosivelining.Itwasspecificallyheldinthe saidorderthat,sincetheassesseebyitselfwasnotdevelopinganyinfrastructureproject onitsown,claimofdeductionu/s801Awasnoteligible. 18.SofarasthedecisionoftheHon'bleSupremeCourtinthecaseofKoneElevatorsis concerned,itneedstobeemphasizedthattheHon'bleSupremeCourthadcategorically ITAnos.231&232/AHD/2014 A.Ys.2009-10&2010-11 6 heldthatthefactsofeachandeverycasehastobeexaminedindependentlyandithas nottobegeneralized.Further,theHon'bleSupremeCourthasnotlaiddownany guidelineswithregardtotheclaimofdeductionandtherefore,itcannotbesaidthatsuch adecisionisagainsttheappellant. 19.Inviewoftheabove,itisclearthatneithertheadverseinferencedrawnbytheAOnor thejudicialpronouncementsrelieduponbytheAOholdthattheappellant'sclaimof deductioniserroneous. 20.Againstthis,thejudicialdecisionsrelieduponbytheId.ARoftheappellant,and reproducedsupra,holdssubstantialground.Recently,theHyderbadITAT'B'BenchinITA No.1008/Hyd/2013forAssessmentyear2009-10andinITANo.1009/Hyd/2013 XXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXXX 21.Itisalsopertinenttomentionherethat,theorderoftheHon’bleGujaratHigh CourtinthecaseofKatiraConstructionltdvs.UnionofIndia(353ITR513)onlyrelates totheconstitutionalvalidityoftheintroductionofexplanationtosection80IA(13). 22.Inviewoftheabovefindings,itisheldthattheappellantisengagedin infrastructuredevelopmentactivityandhence,eligibleforclaimofdeductionu/s.80IA(4) oftheITAct.Therefore,thisgroundofappealisallowed. 5.BeingaggrievedbytheorderofthelearnedCIT(A),theRevenueisin appealbeforeus. 6.ThelearnedDRbeforeusfiledpaperbookvideletterdated27-01-2021 and18-08-2021runninginto1to115and1to33pagesalongwiththewritten submissionandreliedontheorderoftheAOwhereastheld.ARbeforeusalso filedpaperbooksrunningintopages1to62and1to68alongwithwritten submissionandvehementlysupportedtheorderoftheld.CIT-A. 7.Wehaveheardtherivalcontentionsofboththepartiesandperusedthe materialsavailableonrecord.Fromtheprecedingdiscussion,wenotethattheAO hasdeniedthedeductionclaimedundersection80-IA(4)oftheActtothe assesseeforthereasonsthattheworkawardedtotheassesseeisinthenatureof executionofworkcontractandhitbytheprovisionofexplanationbelowthe section80IA(13)oftheAct.Atthisjuncture,itispertinenttorefertheprovisions oftheExplanationattachedbelowsection80-IAoftheActasreproducedbelow: "Fortheremovalofdoubts,itisherebydeclaredthatnothingcontainedinthissection shallapplyinrelationtoabusinessreferredtoinsub-section(4)whichisinthenatureof ITAnos.231&232/AHD/2014 A.Ys.2009-10&2010-11 7 aworkscontractawardedbyanyperson(includingtheCentralorStateGovernment)and executedbytheundertakingorenterprisereferredtoinsub-section(1)." 7.1TheaforesaidExplanationtosection80-IAwasinsertedbytheFinanceAct, 2007andlateramendedbytheFinance(No.2)Act,2009butthesamewasmade applicablewithretrospectiveeffecti.e.1-4-2000.Thisexplanationrestrictsthe benefitofdeductionundersection80-IA(4)oftheActtoapersonwhoexecutesa projectwhichisinthenatureofworkscontract.Forthispurpose,firstofall,itis imperativetoappreciatethedifferencebetweena'developer'anda'contractor'. Generally,incommonparlanceapersonisreferredas'developer'whoundertakes theprojecttodevelopandconstructatitsownresponsibilityandtakesallthe risksofthedevelopment.Theseresponsibilitiesandriskcanbecategorisedas under: (a)Thatinadevelopmentcontract”responsibilityisfullyassignedtothe developertodoallactsforexecutionandcompletionofworkrightfrom designingtheprojecttillhandingovertheprojecttotheGovernment. Assuch,theagreementisnotforaspecificwork,itisfordevelopment offacilityasawhole.Indeed,theownershipofthesiteorthe ownershipoverthelandremainswiththeGovernment/ownerbutduring theperiodofdevelopmentagreementthedeveloperexercisecomplete realmoverthelandortheproject.However,insomecasetherecanbe asituationthatthedeveloperhastotaketheapprovalofthedesign fromtheGovernment/contracteebutthatwillnotchangethestatusof thedeveloperasworkscontractor. (b)Thatthefirstphaseforthedeveloperistotakeovertheexisting premisesoftheprojectsandthereafterdevelopingthesameinto infrastructurefacility.Secondly,theassesseeshallfacilitatethepeople tousetheavailableexistingfacilityevenwhiletheprocessof developmentisinprogress. ITAnos.231&232/AHD/2014 A.Ys.2009-10&2010-11 8 (c)Thatadeveloperhastoexecutemanagerialresponsibilitybyengaging therequisitequalified/skilled/semi-skilledstaffandthelabourers includingtheothersupportingstaff.Assuch,thedeveloperundertakes thecompleteresponsibilityofthemanpowertobeusedindeveloping theinfrastructurefacility. (d)Theassesseehastoutilizeitsexpertise,experienceincludingits technicalknowhowinthedevelopmentoftheproject. (e)Thatadeveloperhastoundertakefinancialresponsibility.Adeveloperis thereforeexpectedtoarrangefinanceseitherbyprivateplacementor fromfinancialinstitutionsfortheproperdevelopmentoftheprojectat itsownrisk.Thus,thedeveloperistheonewhoundertakes entrepreneurialandinvestmentriskbesidesthebusinessrisk. (f)Thatadeveloperisrequiredtobringthequalitativematerials.The Governmentdoesnotprovideanymaterialtotheassessee. (g)Thatadeveloperisrequiredtobringplantandmachineriestobe utilizedintheproject. (h)AnylosscausedtothepublicortheGovernmentintheprocessof developingtheprojectwouldbetheresponsibilityofthedeveloper.The Governmentshallnottakeanyresponsibilityforanysuchkindofloss exceptwhereitisresponsible. (i)Thatadeveloperstandsasguarantorfortheprojectdevelopedbyit andintheeventofanydefectintheproject,heshallprovidethe remedyforthesame. (j)Thatadevelopershallbeexposedtothepenaltyifitcontravenesanyof theclauseappearinginthecontractawardedbytheGovernment.Thus, thedeveloperisresponsibletocompletetheconstructioninaspecified ITAnos.231&232/AHD/2014 A.Ys.2009-10&2010-11 9 mannerfailingwhichitwouldberesponsiblefortheconsequencesof delay/anyotherfaultattributabletoit. (k)Thatadevelopershallundertakestomaintainsafety,securityand protectionoftheenvironment. (l)Thatadevelopershallprovideandmaintainathisowncost,alllights, guards,fencing,warningsignsandwatcing,whenorwherenecessary. 7.2Thesearefewbroadsamplequalities/parametersofadeveloperthrough whichthecharacterofadevelopercanbedefined. 7.3Ontheotherhand,a'contractor'isapersonwhoundertakesworkona contractbasis.Hedoesnotassumerisksandresponsibilitieslikethatofa developer.Hemerelycarriesouttheworkashasbeeninstructedtohimbythe contractee.Moreover,incaseofsuchwork,thecontractorgetsfixedamountof revenueforexecutingsuchworkandisnotentitledtoanyshareofprofitfrom revenuegeneratedbythedeveloper/landowner. 7.4Tosummarize,thedeveloperactsasaprincipalwhereasthecontractor actsasanagentinperformingthefunctionsasrequiredbythedeveloper.The developers,intruesense,arethepersonswhoarecarryingoutthebusinessof developingoroperatingandmaintainingordeveloping,operating,and maintainingtheinfrastructurefacilitieswhereasthecontractorsarethosepersons whomerelyexecutepartofthesefunctionsonbehalfofdeveloperanddonot ownanyrisksandresponsibilitiesofthework.Insuchcases,thecontractorsmay notbeeligibleforthedeductionundersection80-IA(4)oftheAct,astheyarenot developinganyinfrastructurefacilitybutonlyprovidingassistancetotheactual developer. 7.5Inviewoftheabove,wenotethatitispossibletoascertainwhetheracivil constructionworkisassignedondevelopmentbasisorcontractbasisonlyonthe basisofthetermsandconditionsoftheagreement.Onlyonthebasisoftheterms ITAnos.231&232/AHD/2014 A.Ys.2009-10&2010-11 10 andconditionsitcanbeascertainedaboutthenatureofthecontractassigned thatwhetheritisa“workcontract”ora“developmentcontract. 7.6Inthebackdropoftheabovestateddiscussion,weproceedtoanalyzethe factsofthepresentcasetofindoutwhethertheassesseeisactingasadeveloper orworkscontractor.Theassesseeintheyearunderconsiderationhasundertaken certainprojectsofgovernmentofGujaratawardedbySardarSarovarNarmada NigamLtdforconstructionofcanalearthwork.Theassesseewithrespecttosuch projectsclaimedadeductionunder80IAoftheAct.Thedetailsofalltheprojects claimedtobeeligiblefordeductionundersection80IA(4)oftheActalongwith theamountofdeductionundersection80IA(4)oftheActarereproducedon pages4to5oftheassessmentorder. 7.7ThelearnedCIT(A)hasgivencategoricalfindingregardingthetermsand conditionsoftheagreemententeredbytheassesseefortheimpugnedproject withSardarSarovarNarmadaNigamLtdandthesamearedetailedasunder: 1.Generallayoutplanandconstructionplantandequipmentforexecutionofwork. 2.Drawingsorprintsshowingthelocationofthemajorplantsandotherfacilitieswhich youareproposingtoputupatthesiteincludinganychangeingenerallayout. 3.Monthwiseconstructionprogramme. 4.Organizationstructurechartforthemanagementandimplementationofquality assuranceprogrammewithnameandqualificationoftechnicallyqualifiedandexperienced engineer/personsemployedfortheexecutionofworkaslaiddownintender. 5.Variouscategoriesoflabourbeingemployedbyyoubeforecommencementofwork. 6.Registrationcertificateissuedbythecompetentauthoritiesasrequiredundercontract LabourRegulations&AbolitionAct1970andContractLabourRegulations&Abolition Rules1972beforecommenceworkofworkthroughtheDeputyEngineer 7.RegistrationCertificaterequiredunderEmployeesProvidentFund&MiscProvisionAct 1952shallbefurnished 8.Youarealsorequestedtosubmitintime,alltheinformationanddetailsasrequiredto befurnishedundertender,stipulationperiodviz.,latestincometaxclearancecertificate andintimepermanentaccountnumberandtheincometaxWard/Circle/Rangeunder whichyourfirmisassessedandlatestbanksolvencycertificate. ITAnos.231&232/AHD/2014 A.Ys.2009-10&2010-11 11 9.Timelimitofthisworkshallbe24monthsonlyasspecifiedinthetenderdocument fromthedateofissueofworkorder. 10.Itistakenforgrantedthatallthepossiblesitesandworkarehandedovertoyoufor startingtheexecutionofworkfallingunderthiscontractfromthedateoftheworkorder. 11.Thecopiesofworkorderssubmittedbytheappellantforeachoftheprojects undertakenbyitforvariousyearshavebeenperused.Thesecontractsvaryoverthe periodoflitigation.Itisseenthat,thelanguageoftermsandconditionsforeachofthe projectaresimilar.Hence,thefollowingsalientfeatureshastobenoted. a.Thattheappellantisrequiredtofurnishgenerallayoutplan&constructionplantand equipmentforexecutionofwork. b.ThattheappellantisrequiredtofurnishDrawingsorprintsshowingthelocationofthe majorplantsandotherfacilitieswhichitproposedtoputupatthesiteincludingany changeingenerallayout. c.ThatitwasrequiredtosubmitOrganizationstrúcturechartforthemanagementand implementationofqualityassuranceprogrammewithnameandqualificationoftechnically qualifiedandexperiencedengineer/personsemployedfortheexecutionofwork. d.Thatitwasrequiredtosubmitdetailsofvariouscategoriesoflabourbeingemployed. e.ThatitwasliabletoobtainRegistrationcertificateissuedbythecompetentauthorities asrequiredundercontractLabourRegulations&AbolitionAct1970andContractLabour Regulations&AbolitionRules1972andasrequiredunderEmployeesProvidentFund& MiscProvisionAct1952. f.Thatitwasrequiredtofurnishlatestbanksolvencycertificate,andfinally; g.Thattheprincipalsshallmakethepaymentsubjecttofinalmeasurementsatratesin considerationofconstructionandcompletionofworkatthetimeandinthemanner prescribedbythecontract. 7.8Onthedetailedanalysisoftheld.CIT-Afindings,wefindthattheassessee meetsthecriterialaiddownforthedeveloperasdiscussedabove.TheITATinthe caseofMontecarloConstructionLimitedinITANo.1892/AHD/2013fortheAY 2008-09,involvingidenticalfactsandcircumstances,hasobservedasunder: 11.14Inthebackdropoftheabovestateddiscussion,weproceedtoanalyzethefactsof thepresentcasetofindoutwhethertheassesseeisactingasadeveloperorworks contractor.Theassesseeintheyearunderconsiderationhasundertakencertainprojects andclaimedadeductionundersection80IAoftheAct.Thedetailsofalltheprojects whethereligiblefordeductionornotundersection80IA(4)oftheActalongwiththe amountofdeductionundersection80IA(4)oftheActstandasunder: S.No.NAMEOFTHEPROJECTAMOUNTELIGIBLEU/S80IA 1CONSTRUCTIONOF CHINDWARA-AMARWAR- 4,96,50,980/- ITAnos.231&232/AHD/2014 A.Ys.2009-10&2010-11 12 NARSINGHPURROAD 2CONSTRUCTIONOFCANAL SERVICEROADTOKUTCHCHH BRANCHCANALCH.112.500TO 122.219. 31,20,355/- 3UPGRADATIONREHABILIATION ANDSTENGTHENINGOF PACKAGE-14,LAKHNADAN- ,MANDIA-DINDORI(SH-10) ROADPROJECT. 80,35,352/- 4CONSTRUCTIONOF SAURASHTRABRANCHCANAL CH50.00TO59.700KM 20,155/- 5CONSTRUCTIONOFEARTH WORK84TO97KMOFRANI AVANTIBAISAGARCANAL PROJECT. 11,74,837/- 11.15Onsamplebasis,weanalyzetherelevantclausesofthetenderdocumentsplaced inthepaperbookNO.IIinrespectoftheprojectnamelyUPGRADATIONREHABILIATION ANDSTENGTHENINGOFPACKAGE-14,LAKHNADAN-,MANDIA-DINDORI(SH-10)ROAD PROJECTwhichcastcertainresponsibilities/accountabilitiesupontheassessee.The detailsofthesamestandasunder: (A)SiteData i)AsperpointNo.7.2onpageNo.266ofthepaperbook,containinginstructionto bidder,itwasadvisedtothebiddertovisitandexaminethesiteofworktoobtainfor itselfonitsownresponsibilityallinformationthatmaybenecessaryforpreparingthe bidandenteringacontractforconstructionofthework. ii)AsperclauseNo4.10onpageNo.356,thecontractorshallbedeemedtohave obtainedallnecessaryinformationastorisks,contingenciesandothercircumstances whichmayinfluenceoraffectthetenderorworkstothesameextent.Thecontractor shallbedeemedtohaveinspectedandexaminedthesite,anditssurroundings.The contractorshallhavetobesatisfiedbeforesubmittingthetendersonalltherelevant mattersincluding: i.Theformandnatureofsite,includingsub-surfacecondition, ii.Thehydrologicalandclimaticconditions, iii.Theextentandnatureofworksnecessaryfortheexecutionandcompletionof theworkandtheremedyofanydefects. iv.Thelaws,procedures,andlabourpracticesofthecountryand v.Thecontractor’srequirementsforaccess,accommodation,facilities,personnel, power,transport,water,andotherservices. (B)Designandexecutethework i)Itcanbeverifiedfromthecontractagreementthattheassesseewasliabletothe drawinganddesignoftheproject. ii)AsperClauseNo.4.1onpageNo.352,itwasmentionedthatcontractorshalldesign (totheextentspecifiedinthecontract),executeandcompletetheworkinaccordance withthecontractandwiththeengineer’sinstructions,andshallprovideremedyany defectsintheworks.AsperClauseNo.4.1onpageNo.433,itwasmentionedthat contractorshallberesponsibleforthedetaileddesignofmajor/mediumbridgesor shallgetproofcheckedfromthecompetentauthority. (C)PerformanceSecurityclause4.2pageNo.353 ITAnos.231&232/AHD/2014 A.Ys.2009-10&2010-11 13 i)ThecontractorshalldeliverthePerformancesecuritywithin28daysafterreceivingthe letterofacceptancewhichisvalidandenforceableuntilthecontractorhasexecuted andcompletedtheworkandremediedanydefects. (D)SettingOut,clause4.2PageNo.355 i)Contractorshallsetouttheworksinrelationtooriginalpoints,linesandlevelsofreference specifiedinthecontractornotifiedengineer.Thecontractorshallberesponsibleforthe correctpositioningofallpartsoftheworkandshallrectifyanyerrorinthepositions,levels, dimensions,oralignmentofthework. (E)SafetyProceduresclause4.8PageNo.355 ContractorShall: i)Complywithallsafetyregulations. ii)Takecareofthesafetyofallpeopleentitledtobeonthesite. iii)Usereasonableeffortstokeepthesiteandworkclearofunnecessaryobstructionto avoiddangertothesepersons. iv)Providefencing,lighting,guarding,andwatchingoftheworkuntilthecompletionand takingovertheprojectbytheemployer. v)Providethetemporaryworks(includingroadways,footways,guard,andfences)which maybenecessary,becauseoftheexecutionoftheworksfortheuseandprotectionof thepublicandofownersandoccupiersofadjacentland. (F)AccessRouteclause4.15 Thecontractorshallalsoprovidethetrafficsafetyarrangementslikesignboard,speed limit,speedbreakers,diversionboard,etc. (G)TransportationofGoodsclause4.16 TheContractorshallberesponsibleforpacking,loading,transportingreceiving,unloading, storing,andprotectingallgoodsandotherthingsrequiredfortheworks. (H)Protectionoftheenvironmentclause4.18 Thecontractorshallprotecttheenvironmentonandoffthestaffsiteandavoidthe damageornuisanceetc.tothepersonsortothepropertyofthepublic. (I)Electricity,Water,andGasclauseno.4.19 Thecontractorshallberesponsiblefortheprovisionofallpower,water,andotherservices thathemayrequireforhisconstructionactivitiesandtotheextentdefinedinthe specificationsforthetest.However,thecontractorshallbeentitledtousethesupplyof power,water,andotherservicesavailableonsiteatthespecifiedrate. (J)Employer’sEquipmentandfreeissueMaterialclauseno.4.20pageNo.434 Noequipmentormaterialshallbeissuedtothecontractorbytheemployerforthe executionofworks. (K)EngagementofStaffandlabourclauseno.6.1 Thecontractorshallmakearrangementfortheengagementofallstaff,labourlocalor otherwiseandforthepayment,feeding,transportandappropriatehousing. (L)Delaydamagesclauseno8.7 Ifthecontractorfailstocompletetheprojectwithinthetimespecifiedinthecontract agreement,thenthecontractorshallpaythedelaydamagestotheemployerforthis default.Thedamageswillbedecidedaspercontractdata. (M)Completionofoutstandingworksandremedyingdefectsclauseno11.1&2 pageno.375 Thecontractorshallexecutealltheworkrequiredtoremedydefectsordamage,asmay benotifiedbytheemployerattheriskandcosttothecontractor. (N)AdvancePaymentclauseno14.2pageno388 Theemployershallmakeanadvancepaymentasaninterestfreeloanfromthe mobilizationandcashflowsupportwhenthecontractorsubmitsaguarantee. (O)IssueofInterimPaymentCertificateclauseno.14.2pageno.391 Noamountwillbecertifiedorpaiduntiltheemployerhasreceivedandapprovedthe performancesecurity.Thereaftertheengineershall,within28daysafterreceivinga ITAnos.231&232/AHD/2014 A.Ys.2009-10&2010-11 14 statementandsupportingdocuments,delivertotheemployerandtothecontractor interimpaymentcertificateafterdeterminingthefairamountdues. (P)Paymentofretentionmoneyclauseno14.9pageno392 WhentheTaking-OverCertificatehasbeenissuedfortheWorks,thefirsthalfofthe RetentionMoneyshallbecertifiedbytheEngineerforpaymenttotheContractor.Ifa Taking-OverCertificateisissuedforaSectionorpartoftheWorks,aproportionofthe RetentionMoneyshallbecertifiedandpaid.Thisproportionshallbehalf(50%)ofthe proportioncalculatedbydividingtheestimatedcontractvalueoftheSectionorpart,by theestimatedfinalContractPrice. PromptlyafterthelatestoftheexpirydatesoftheDefectsNotificationPeriods,the outstandingbalanceoftheRetentionMoneyshallbecertifiedbytheEngineerforpayment totheContractor.IfaTaking-OverCertificatewasissuedforaSection,proportionofthe secondhalfoftheRetentionMoneyshallbecertifiedandpaidPromptlyaftertheexpiry dateoftheDefectsNotificationPeriodfortheSection.Thisproportionshallbehalf(50%) oftheproportioncalculatedbydividingtheestimated2000tractvalueoftheSectionbythe estimatedfinalContractPrice. 11.16Onthedetailedanalysisoftheaboveproject,wefindthattheassesseemeetsthecriteria laiddownforthedeveloperasdiscussedabove.Assuch,theassesseewastomakedetailed drawings,designcalculations/fabricationetc.atitsowncost.Further,theassesseeisalso responsibleforarrangingmethodsoftheexecutionofworkalongwithdetaileddrawings,sketches, furnishingthedetailsofsufficientplants,equipment,andlabor.Theassesseehastoarrangethe landforatemporarysiteoffice,officelaboratory,parkingyard,storeyard,laborcamp,workshop etc.Theassesseewasdutyboundtoprotecttheenvironmentonandoffthestaffsiteandavoid thedamageornuisanceetc.tothepersonsortothepropertyofthepublic.Theassesseewasto maintainatitsowncostsufficientexperiencedsupervisorystaffrequiredfortheworkand arrangementoftheirhousing.Theassesseewastohavethefieldlaboratoryforthepurposeof testingmaterials.Theassesseehastoarrangeelectricpowerandwatersupply.Theassesseewas alsoundertheobligationtoprovidetrafficsafetyarrangementslikesignboard,speedlimitspeed breakers,diversionboard,etc.Besidestheabove,theassesseewastopaytheliquidateddamages incaseofdelayinthecompletionofprojectandotherdefaults. 11.17Thepurposeforwhichtheprovisionsofsection80IA(4)werebroughtunderthestatute wereachievedinthegivenfactsandcircumstances.Thus,thefactthattheassesseedeploysits resources(material,machinery,labouretc.)intheconstructionworkclearlyexhibitstherisks undertakenbytheassessee.Further,thetenderdocumentasdiscussedabovehasclearly demonstratedthevariousrisksundertakenbyit.Theassesseewastofurnishasecuritydepositto theemployerandindemnifyatthesametimeforanylosses/damagecausedtoanyproperty/lifein courseofexecutionofworks.Further,theassesseewasresponsibleforthecorrectionofdefects arisingintheworksatitsowncost.Forthatpurpose,theMPRDCLretainedthemoneypayableto theassesseeasameasuretoensurethequalityoftheworkandtomakeliabletheassesseeinthe eventofadefect,ifany.Thus,itcannotbesaidthattheassesseehadnottakenanyriskinthe givenfactsandcircumstancesespeciallywhentheassesseehasundertakentheprojectasawhole forthedevelopmentoftheroadrightfromthebeginningtilltheend.Thus,onperusalofthe termsandconditionsinthetenderdocumentsfurnishedbytheassessee,itisclearthatthe assesseewasnotaworkscontractorsimplybutadeveloperandhence,theexplanationtosection 80-IA(13)doesnotapplytotheassessee. 11.18Goingforward,wefindinthiscontext,theHon'blePuneTribunalinthecaseofB.T. Patil&SonsBelgaumConstructions(P.)Ltd.[2013]34taxmann.com97/59SOT61 (URO)afterreferringtodecisionoftheHon'bleBombayHighCourtinthecaseofCITv.ABG HeavyIndustriesLtd.[2010]322ITR323/189Taxman54haslaiddowncertainparametersfor contractorstobeeligiblefordeduction.Thesaidparametersforacontractortobeeligiblefor deductionareasfollows:— (a)Undertakingfinancialriskbymakinginvestment. (b)Shoulderingtechnicalrisk. ITAnos.231&232/AHD/2014 A.Ys.2009-10&2010-11 15 (c)Liableforliquidateddamages. (d)Employmentoftechnicalandadministrativequalifiedteam. 11.19Iftheaboveparametersaresatisfied,thecontractorswouldbeheldeligibleforthe deductionundersection80-IAoftheAct.Thus,theaboveparametersmayactasguidingfactors todecidewhetheracontractormaybeconsideredasadeemeddevelopereligiblefordeduction undersection80-IA(4)oftheAct.Admittedly,theassesseewasprovidingandundertakingtherisk forcarryingouttheactivityofdevelopmentoftheinfrastructurefacilityinthemannerasdiscussed above.Theassesseewasalsotakingtechnicalrisk,subjecttoliquidateddamages,providing technicalmanpower. 11.20Further,incaseofAsstt.CITv.PratibhaIndustriesLtd.[2012]28taxmann.com 246/[2013]141ITD151(Mum.),theHon'bleMumbaiTribunalheldthatwherethe assesseehadinvestedhisownfund,itwouldbeassumedthattheassesseewasactingasa developerandnotasacontractor.Relevantextractoftheabovedecisionisreproducedasunder: Therearelettersexchanged,writtenbytheassesseeandvariousGovernment departments,whichindicatethattheassesseewasawardedthejob,whereintheassessee hadplacedthebankguarantee,againstthetenderedcost,whichprovedbeyonddoubt thattheassessee,itselfwasdoingthedevelopmentofinfrastructurefacility,onbehalfof theGovernment,besidesplacingitsownfundsatriskandperil." 11.21Further,wedrawsupportbyplacingourrelianceontheJudgmentofHon’bleITATKolkata incaseofAsstt.CITv.SimplexInfrastuctureLtdLtd.I.T.A.No.01/Kol/2020videorder dated10/03/2021whereinitwasheldsunder: “Itisnotedthatinadevelopmentcontract,responsibilityisfullyassignedtothedeveloper forexecutionandcompletionofwork.Itisevidentthattheassessee,videtheagreements, hasclearlydemonstratedthevariousrisksundertakenbyit.Inalltheagreements, relevantportionsofwhicharereproducedsupra,theassesseehasundertakenhugerisks intermsofdeploymentoftechnicalpersonnel,plantandmachinery,technicalknowhow, expertiseandfinancialresources.Hence,undoubtedlyenteringintolawfulagreementsand therebybecomingacontractorshould,innoway,beabartotheonebeingadeveloper sincetheroleofadeveloperislargerthanthatofacontractor.Assuchitfollowsfromthe abovethattheassessee,whoisengagedindevelopingtheinfrastructuralfacility,is rightfullyentitledtothebenefitsofdeductionu/s.80IA(4)oftheAct” 11.22Inviewoftheabove,itcansafelybeconcludedthattheassesseehasundertakenprojects whichareinthenatureofinfrastructurefacilitiesinthecapacityofthedeveloperasadmittedby theld.CIT-A.Accordingly,weconcurwiththefindingsoftheLd.CIT(A)thattheassesseehas undertakentheprojectsofinfrastructurefacilityasenvisagedundertheprovisionsofsection80 IA(4A)oftheActinthecapacityofthedeveloper. 11.23Movingfurther,wenotethatthereisnoambiguitytothefactthattheworddeveloperand theworkscontracthasnowherebeendefinedundertheprovisionsoftheAct.Forthispurpose, therulesasapplicabletotheinterpretationofthestatuteshouldbeapplied.Oneoftherulesof interpretationistoanalyzetheprovisioninthelightoftheobjectforwhichitwasbroughtunder thestatute.InholdingsowerelyonthejudgementofHon’bleHighSupremeCourtinthecaseof NewIndiaAssuranceCompanyLtdvsNusliNevilleWadiaAndAnotherincivilappealno 5879of2007videorderdated31-12-2007whereinitwasheldasunder: “WithaviewtoreadtheprovisionsoftheActinaproperandeffectivemanner,weareof theopinionthatliteralinterpretation,ifgiven,maygiverisetoananomalyorabsurdity whichmustbeavoided.Soastoenableasuperiorcourttointerpretastatuteina ITAnos.231&232/AHD/2014 A.Ys.2009-10&2010-11 16 reasonablemanner,thecourtmustplaceitselfinthechairofareasonablelegislator/ author.Sodone,therulesofpurposiveconstructionhavetoberesortedtowhichwould requiretheconstructionoftheActinsuchamannersoastoseethattheobjectoftheAct fulfilled;whichinturnwouldleadthebeneficiaryunderthestatutoryschemetofulfillits constitutionalobligationsasheldbythecourtinteraliainAshokaMarketingLtd.” 11.24Inviewoftheabove,theexplanationbelowtosection80IA(13)shouldbereadinsucha waythattheobjectoftheprovisionsofsection80IA(4)oftheActshouldnotbedefeated.As discussedabove,thesolepurposeofthebenefitofdeductionundersection80IA(4)oftheActwas tobringthedevelopmentintheareaofinfrastructurefacilitiesforwhichthecountrywasin deficient.Thus,iftheliteralmeaningisdrawnfromthewordofthedeveloperandaccordinglythe deductionofthebenefitgivenundersection80IAoftheActisdenied,thentheobjectforwhich theprovisionsofsectionwerebroughtunderthestatutewillbedefeated.Therefore,theprovisions ofsection80IA(4)oftheActshouldbereadinsuchawaythattheobjectofthestatuteshould notbedefeated. 11.25Thenextaspectofthecaseisthattheimpugnedprojectfortheroaddevelopmentas discussedabovewasawardedbytheMPRDCL-anodalagencybeingawhollyownedundertaking oftheGovernmentofMadhyaPradesh.MPRDCLinitsbooksofaccountswillnotrecordthe paymentmadetotheassesseeintheformofexpenses.ItisbecauseMPRDCLagainstsuch expenditurehasnotshownanyincome.ItalsoappearsthatMPRDCLisnotclaiminganydeduction undersection80IA(4)oftheAct.Atthetimeofhearing,aquestionwasraisedtothelearnedDR buthefailedtoprovideanyinformationwithrespecttothedeductionclaimedbyMADCu/s80IA(4) oftheAct.Thus,thequestionariseswhowillclaimthedeductionundersection80IA(4)oftheAct. Assuch,weareoftheviewthattheprovisionsofsection80IA(4)shouldnotbereadinawayto makeitredundantorirrelevant.Accordingly,weareinclinedtograntthebenefittotheassessee undertheprovisionsofsection80IA(4)oftheAct. 11.26Movingforward,thereisnodisputetothefactthatthebenefitofdeductionundersection 80IA(4)oftheActwasdeniedtotheassesseebasedontheexplanationbroughtunderthestatute belowsub-section(13)ofsection80(IA)oftheActwhichhasbeenelaboratedinthepreceding paragraph.Atthisjuncture,letusunderstandtheroleoftheexplanationexplainingtheprovisions oftheAct.Inourconsideredopinionordinarily,anexplanationisintroducedbytheLegislaturefor clarifyingsomedoubtsorremovingconfusionwhichmaybepossiblefromtheexistingprovisions. Normally,therefore,anexplanationwouldnotexpandthescopeofthemainprovisionandthe purposeoftheexplanationwouldbetofillagapleftinthestatute,tosuppressamischief,toclear adoubtorasisoftensaidtomakeexplicitwhatwasimplicit.Further,theobjectofanexplanation toastatutoryprovisionis– (a)ToexplainthemeaningandintendmentoftheActitself, (b)Wherethereisanyobscurityorvaguenessinthemainenactment,toclarifythesameso astomakeitconsistentwiththedominantobjectwhichitseemstosub-serve, (c)ToprovideanadditionalsupporttothedominantobjectoftheActinordertomakeit meaningfulandpurposeful, (d)AnExplanationcannotinanywayinterferewithorchangetheenactmentoranypart thereofbutwheresomegapisleftwhichisrelevantforthepurposeoftheExplanation,in ordertosuppressthemischiefandadvancetheobjectoftheActitcanhelporassistthe Courtininterpretingthetruepurportandintendmentoftheenactment,and (e)Itcannot,however,takeawayastatutoryrightwithwhichanypersonunderastatutehas beenclothedorsetatnaughttheworkingofanActbybecomingahindranceinthe interpretationofthesame. 11.27Thereare,however,otherjudicialpronouncementsoftheHon’bleSupremeCourt suggestingthatthoughtherulethatanexplanationismeantonlyforfillingagapinthestatuteor removinganyambiguityorclearingamischief,suchruleofnormalapplicationisnotunknownto exceptions. ITAnos.231&232/AHD/2014 A.Ys.2009-10&2010-11 17 11.28Fromtheabove,itistranspiredthattheconditionofbeingdeveloperoftheinfrastructure facilitywasalreadyembeddedundertheprovisionsofsection80IAoftheAct.Inholdingso,we drawsupportandguidancefromthejudgmentofHon’bleGujaratHighCourtinthecaseofM/s KatiraconstructionVsUnionofIndiareportedin31taxmann.com250whereinitwasheldas under: “Inour,opinion,whattheexplanationaimstoachieveistoclarifythatdeductionunder section80IA(4)oftheActwouldnotbeavailableincaseofexecutionofworkscontract. Thefactthatsuchinterpretationoftheexistingprovisionsofsub-section(4)ofsection 80IAoftheAct,evenwithouttheaidoftheexplanationwaspossible,inouropinion,isnot disputable.Asnoted,sub-section(4)ofsection80IAevenaftertheamendmentinthe year2002envisageddeductionincaseofdevelopingoroperatingandmaintainingor developing,operatingandmaintaininganyinfrastructurefacility.Evenwithouttheaidof theexplanation,itwaspossibletocontendthatsuchexpressiondidnotincludean enterpriseexecutingaworkscontract.Particularly,bearinginmindtheobservationsmade bythisCourtinthecaseofRadheDevelopers(supra),therewouldcertainlybea demarcationbetweendevelopingthefacilityandexecutionofworkscontractawardedby anagencyengagedindevelopingsuchfacility.” 11.29RegardingthecontentionofthelearnedDRthattheassesseeforclaimingthededuction undersection80IA(4)oftheActmustderiveincomefromtheuseofsuchinfrastructurefacility, theargumentofthelearnedDRtoourmindistotallymisplaced.Itisforthereasonthattherole oftheassesseeinthegivencaseislimitedtotheextentofdevelopingtheinfrastructurefacility. UndertheoldprovisionsoftheAct,itcontainedtheconceptofbuilt,operate,maintained,transfer, whereintheassesseeafterdevelopingtheroadusedtooperatethoseroadsandusedtocollecttax fromthevehiclesusingtheinfrastructurefacilitytocompensateitsinvestment.Butallthese requirementshavebeendoneawaybytherevenueaselaboratedabove.Inholdingso,wedraw supportandguidancefromthejudgmentoftheHon’bleBombayHighCourtincaseofCITVs.GB HeavyIndustriesLtd.reportedin322ITR323whereinitwasheldasunder: “Moreover,asamatteroflaw,whattheconditionessentiallymeansisthatthe infrastructurefacilityshouldhavebeenoperationalafter1-4-1995.Aftersection80-IAwas amendedbytheFinanceActof2001,thesectionappliestoanenterprisecarryingonthe businessof(i)developing;or(ii)operatingandmaintaining;or(iii)developing,operating andmaintaininganyinfrastructurefacilitywhichfulfilscertainconditions.Thoseconditions are:(i)OwnershipoftheenterprisebyaCompanyregisteredinIndiaorbyaconsortium; (ii)AnagreementwiththeCentralorStateGovernment,localauthorityorstatutorybody; and(iii)Thestartofoperationandmaintenanceoftheinfrastructurefacilityonorafter1- 4-1995.Therequirementthattheoperationandmaintenanceoftheinfrastructurefacility shouldcommenceafter1-4-1995hastobeharmoniouslyconstruedwiththemain provisionunderwhichadeductionisavailabletoanassesseewhodevelops;oroperates andmaintains;ordevelops,operatesandmaintainsaninfrastructurefacility.Unlessboth theprovisionsareharmoniouslyconstrued,theobjectandintentunderlyingthe amendmentoftheprovisionbytheFinanceActof2001wouldbedefeated.Aharmonious readingoftheprovisioninitsentiretywouldleadtotheconclusionthatthedeductionis availabletoanenterprisewhich(i)develops;or(ii)operatesandmaintains;or(iii) develops,maintainsandoperatesthatinfrastructurefacility.However,thecommencement oftheoperationandmaintenanceoftheinfrastructurefacilityshouldbeafter1-4-1995.In thepresentcase,theassesseeclearlyfulfilledthiscondition” 11.30Inviewoftheabovediscussion,weareinclinedtoholdthattheassesseewhoisonly engagedintheactivityofdevelopmentofinfrastructurefacilityiseligibletoclaimthededuction u/s80IA(4)oftheAct. ITAnos.231&232/AHD/2014 A.Ys.2009-10&2010-11 18 11.31Likewise,thecontentionofthelearnedDRthattheassesseewasinreceiptofmoneyfrom theGovernmentagainstthedevelopmentoftheroadandthereforetheassesseeisnoteligiblefor deductionundersection80IA(4)oftheActisagainmisplacedinourconsideredopinion.The Hon’bleDelhiHighCourtinthecaseofCITVs.VRMIndiaLtdreportedin57taxmann.com325has heldasunder: “Sincetheassesseedevelopedaninfrastructurefacility/projectandwasnotrequiredto maintainoroperate,itwasentitledtocost,plusthemarginofincomeorprofit;notto expectthistreatmentwouldrenderonewhodevelopsaninfrastructurefacilityproject, unabletorealiseitscost.Iftheinfrastructurefacilityis,afteritsdevelopment,transferred totheGovernment,naturallythecostwouldbepaidbytheGovernment.Therefore,the merecircumstancethattheIndianRailwaysorDDApaidfordevelopmentofahousing projectcarriedoutbytheassessee,didnotmeanthattheassesseedidnotdevelopthe residentialcomplex.Iftherevenue'sinterpretationisaccepted,noenterprise,carryingon thebusinessofonlydevelopingtheinfrastructurefacility,wouldbeentitledtodeduction undersection80-IB(10).TheconclusionsoftheITATinthiscontextwererenderedafter adetailedanalysisofthefactsandthecontractsenteredintobytheassesseewithIRWO andDDA.ThenarrowgroundonwhichtheAOconcludedthattheprojectswere"owned" byIRWOorDDAandthattheassesseewasonlyaworkscontracts,wasunwarranted.” 11.32We,therefore,donothaveanydoubtregardingtheadmissibilityoftheclaimmadebythe assesseeandentertainthesamebygivingrelieftothateffect. 11.33FurthertheLd.DRvehementlyarguedonthejudgmentofjurisdictionalHighCourtinthe caseofKatiraConstructionVsUnionofIndiareportedin352ITR513whereinthesaidmatterwas decidedagainsttheassessee.Inourconsideredview,thematterbeforetheJurisdictionHighcourt wasthatofconstitutionalvalidityoftheinsertionofexplanationasmentionedhereinaboveand decidedthesameinfavouroftherevenuetothiseffectthatsuchexplanationbroughtwith retrospectiveeffectfrom01.04.2000bytheFinanceActNo.2of2009wasverywellwithinthe competenceofParliament.Assuchtherewasnoissueraisedwhethertheassesseeisactingasa developerorcontractorbeforetheHon'bleJurisdictionalHighCourtneither,thesaidissuehas beendecidedinthesaidjudgement. 11.34Theorganizationswhichhaveawardedthecontractare100%ownedbytheState Governmentandthereforeitcannotbesaidthattheseareprivateparties.Assuchtheorganization awardedthecontracttotheassesseearethearmsoftheStateGovernment. 11.35Atthetimeofhearing,boththelearnedDRandtheARbeforeussubmitted`thatprojects inrespectofwhichthedeductionwasclaimedbytheassesseewereofidenticalnature.Therefore, wehaveanalyzedonecontract/agreementwiththegovernmentonsamplebasis.However,the findingsgivenwithrespecttothecontractelaboratedaboveshallalsobeappliedinallthe contractswhichweresubjecttothedeductionundersection80-IA(4)oftheAct.Inviewofthe above,thegroundsofappealoftheRevenuewithrespecttotheadmissibilityoftheclaimofthe assesseeundersection80-IA(4)oftheActareherebydismissed. 7.9Inviewoftheaboveelaborateddiscussion,weherebyholdthatthe assesseehasundertakenthecanalanddamprojectasdeveloperofthe infrastructurefacilityandeligiblefordeductionundersection80IA(4)oftheAct. Atthetimeofhearing,theDRhasalsodidnotcontrovertthedetailedfinding givenbytheld.CIT-A.Therefore,wedonotfindreasontointerfereinthefinding ITAnos.231&232/AHD/2014 A.Ys.2009-10&2010-11 19 ofthelearnedCIT(A).Hence,thegroundofappealoftherevenueishereby dismissed. 7.10Intheresult,theappealoftherevenueisherebydismissed. ComingtoITANo.232/RJT/2014bytheRevenueforA.Y.2010-11 8.Attheoutset,wenotethattheissueraisedbytherevenueinthecaptioned appealfortheAY2010-11isidenticaltotheissueraisedbytheRevenueinITA No.231/RJT/2014fortheassessmentyear2009-10.Therefore,thefindingsgiven inITANo.231/RJT/2014shallalsobeapplicablefortheyearunderconsideration i.e.assessmentyear2010-11.TheissueraisedbytheRevenueforAY2009-10 hasbeendecidedbyusvideparagraphNo.7ofthisorderagainsttheRevenue. ThelearnedDRandtheARalsoagreedthatwhateverwillbethefindingsforthe assessmentyear2009-10shallalsobeappliedforyearunderconsiderationi.e. theassessmentyear2010-11.Hence,thegroundofappealfiledbytheRevenueis herebydismissed. 8.1IntheresultappealoftheRevenueisherebydismissed. 9.Inthecombinedresult,boththeappealsoftherevenuearehereby dismissed. OrderpronouncedintheCourton02/02/2024atAhmedabad. Sd/- Sd/-Sd/- (TRSENTHILKUMAR)(WASEEMAHMED) JUDICIALMEMBERACCOUNTANTMEMBER (TrueCopy) Ahmedabad;Dated02/02/2024 Manish