Appeal Details
Counselvise Citation
[2012] 140 COUNSELVISE.COM (IT) 59318 (ITAT-HYDERABAD)
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
10 year(s) 11 month(s) 13 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
16-03-2012
Appeal Filed By
Department
Order Result
Dismissed
Bench Allotted
A
Next Hearing Date
07-06-2011
Assessment Year
1996-1997
Appeal Filed On
02-04-2001
Judgement Text
IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SMT. ASHA VIJAYARAGHAVAN, JUDICIAL MEMBER I.T.A. NO. 996/HYD/2003 : A.Y. 2002-03 M/S. KMC CONSTRUCTIONS LTD. HYDERABAD PAN: AABCK6483B VS. ASST. COMMISSIONER OF INCOME- TAX, CIRCLE-2(2) HYDERABAD APPELLANT RESPONDENT I.T.A. NO. 338/HYD/2009 : A.Y. 2006-07 I.T.A. NO. 084/HYD/2010 : A.Y. 2007-08 M/S. KMC CONSTRUCTIONS LTD. HYDERABAD PAN: AABCK6483B VS. ASST. COMMISSIONER OF INCOME- TAX, CIRCLE-2(1) HYDERABAD APPELLANT RESPONDENT I.T.A. NO. 0430/HYD/2003 : A.Y. 2001-02 I.T.A. NO. 0558/HYD/2006 : A.Y. 2003-04 I.T.A. NO. 1027/HYD/2007 : A.Y. 2004-05 I.T.A. NO. 1223/HYD/2007 : A.Y. 2005-06 M/S. KMC CONSTRUCTIONS LTD. HYDERABAD VS. DY. COMMISSIONER OF INCOME- TAX, CIRCLE-2(1), HYDERABAD APPELLANT RESPONDENT I.T.A. NO. 233/HYD/2001 : A.Y. 1996-97 ADDL. COMMISSIONER OF INCOME-TAX (ASSTS), SPECIAL RANGE-2, HYDERABAD VS. M/S. KRISHNA MOHAN CONSTRUCTIONS LTD., HYDERABAD GIR NO.: K-1117/SR2 APPELLANT RESPONDENT I.T.A. NO. 969/HYD/2002 : A.Y. 2000-01 I.T.A. NO. 617/HYD/2003 : A.Y. 2001-02 DY. COMMISSIONER OF INCOME- TAX, CIRCLE-2(1), HYDERABAD VS. M/S. KMC CONSTRUCTIONS LTD. HYDERABAD APPELLANT RESPONDENT I.T.A. NO. 1079/HYD/2003 : A.Y. 2002-03 ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-2(2) HYDERABAD VS. M/S. KMC CONSTRUCTIONS LTD. HYDERABAD PAN: AABCK6483B APPELLANT RESPONDENT I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 2 ASSESSEE BY: SHRI S. RAMA RAO REVENUE BY: SHRI V. SRINIVAS & SHRI T. DIWAKAR PRASAD DATE OF HEARING: 02.02.2012 DATE OF PRONOUNCEMENT: 16.03.2012 O R D E R PER CHANDRA POOJARI, AM: THESE 11 APPEALS BY THE ASSESSEE AS WELL AS BY THE REVENUE ARE DIRECTED AGAINST THE DIFFERENT ORDERS OF THE CI T(A). CERTAIN ISSUES INVOLVED IN THESE APPEALS ARE COMMON IN NATURE. HE NCE THESE APPEALS ARE CLUBBED TOGETHER, HEARD TOGETHER AND DI SPOSED OF BY THIS COMMON ORDER FOR THE SAKE OF CONVENIENCE. 2. FIRST WE WILL TAKE UP REVENUE APPEAL IN I.T.A. NO. 233/HYD/2001 FOR ASSESSMENT YEAR 1996-97. THE ISSU E HEREIN IS WITH REGARD TO TREATMENT OF SALES TAX REFUND AS INC OME OF THE ASSESSEE. THE ASSESSING OFFICER TREATED THE REFUND OF SALES TAX AS REVENUE RECEIPT BY INVOKING THE PROVISIONS OF SECTI ON 41(1) OF THE INCOME-TAX ACT, 1961 AND TAXED ACCORDINGLY. THE CI T(A) HELD THAT THE ASSESSING OFFICER HAS SPECIFICALLY NOT BROUGHT INTO THE ASSESSMENT ORDER AS TO THE DEBIT OF A SPECIFIED AMO UNT IN A SPECIFIC YEAR. IN A GENERAL MANNER, THE ASSESSMENT ORDER SP EAKS OF THE CLAIM OF THE ASSESSEE IN THE EARLIER YEAR WHICH DOES NOT SHOW THE YEAR OF ASSESSMENT, THE AMOUNT ALLOWED BY THE DEPARTMENT WA RRANTING TAXATION OF THE SALES TAX REFUND IN THIS YEAR. SIN CE THE ASSESSEE HAS TAKEN INTO ACCOUNT THE SALES TAX REFUND FROM THE DE PARTMENTAL RECOVERIES AND DEDUCTED ONLY THE NET RECOVERIES, TH E ADJUSTMENT HAS ALREADY TAKEN PLACE WHILE ARRIVING AT THE GROSS BIL LS ON WHICH 11.5 PER CENT INCOME HAS BEEN ESTIMATED AND ACCORDING TO THE CIT(A) NO SEPARATE ADDITION IS WARRANTED. ACCORDING TO THE D R THE PROVISIONS OF SECTION 41(1) OF THE ACT ARE CLEARLY APPLICABLE AND HE SUBMITTED THAT THE ASSESSMENT ORDER TO BE SUSTAINED. ON THE OTHER HAND, THE LEARNED AR SUBMITTED THAT THE PROFIT OF THE ASSESSE E IS ESTIMATED AT 11.5% OF THE GROSS BILLS AFTER DEDUCTING THE DEPART MENTAL RECOVERIES I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 3 AND MATERIAL PURCHASES. THE DEPARTMENTAL RECOVERIES INCLUDE SALES TAX DEDUCTED BY THE DEPARTMENT. SALES TAX REFUNDED BY THE DEPARTMENT HAS BEEN REDUCED FROM THE SALES BY THE D EPARTMENT AND ONLY NET SALES TAX ALLOWED AS DEDUCTION WHILE PASSI NG THE ASSESSMENT ORDER U/S. 143(3) OF THE ACT AND ACCORDING TO HIM T HE SALES TAX REFUND SHOULD NOT BE ADDED AS ADDITIONAL INCOME. 3. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. THE SALES TAX REFUND AMOUNT, IF IT IS ALL OWED AS A DEDUCTION IN ANY EARLIER YEARS, THE SAME HAS TO BE TREATED AS INCOME OF THE ASSESSEE IN THIS ASSESSMENT YEAR ON RECEIPT OF THE SAME AMOUNT. IN OTHER WORDS, WHILE COMPUTING THE PROFITS AND GAINS OF THE ASSESSEE, AN ALLOWANCE OR DEDUCTION HAS BEEN MADE IN ANY ASSE SSMENT YEAR AND SUBSEQUENTLY IN ANY ASSESSMENT YEAR, THE ASSESS EE HAS RECEIVED THE SAME AMOUNT IN WHATEVER MANNER, THE SAME HAS TO BE CONSIDERED AS INCOME OF THE ASSESSEE IN THIS ASSESS MENT YEAR, IN VIEW OF THE PROVISIONS OF SECTION 41(1) OF THE I.T. ACT. ONCE IT IS FOUND, AS A FACT, THAT THE AMOUNT OF SALES TAX WAS CLAIMED BY THE ASSESSEE IN RESPECTIVE PROFIT & LOSS ACCOUNTS AND A LLOWED AS SUCH ACTUALLY BY THE REVENUE, THE ASSESSEE CANNOT GET OU T OF THE MISCHIEF OF SECTION 41(1) OF THE ACT. IN OTHER WORDS, IN OR DER TO BRING A SUM TO ASSESSMENT UNDER SECTION 41(1), IT HAS TO BE ESTABL ISHED THAT IT HAD BEEN EARLIER ALLOWED IN AN ASSESSMENT BY REFERRING TO THE SAME BUT NOT BY DRAWING INFERENCE. FOR THIS PURPOSE WE PLAC E RELIANCE ON THE JUDGEMENT OF SUPREME COURT IN THE CASE OF TIRUNELVE LI MOTOR BUS SERVICE CO. PVT. LTD. VS. CIT, 78 ITR 55. IN THE P RESENT CASE, AS HELD BY THE CIT(A), THE ASSESSING OFFICER HAS NOT SPECI FICALLY BROUGHT INTO THE FACT IN THE ASSESSMENT ORDER AS TO THE DEBIT OF A SPECIFIED AMOUNT IN A SPECIFIC YEAR. IN A GENERAL MANNER, THE ASSES SMENT ORDER SPEAKS OF THE CLAIM OF THE ASSESSEE IN THE EARLIER YEAR WH ICH DOES NOT SHOW THE YEAR OF ASSESSMENT, THE AMOUNT ALLOWED BY THE D EPARTMENT WARRANTING TAXATION OF THE SALES TAX REFUND IN THIS YEAR. BEING SO, WE ARE NOT IN A POSITION TO TAKE A CONTRARY VIEW IN TH IS MATTER. I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 4 ACCORDINGLY, WE CONFIRM THE ORDER OF THE CIT(A) ON THIS ISSUE. I.T.A. NO. 233/HYD/2001 BY THE REVENUE IS DISMISSED. 4. I.T.A. NOS. 430/HYD/2003, 996/HYD/03 AND 558/HYD/06 BY ASSESSEE ARE WITH REGARD TO CONFIRMING THE ESTIMATI ON OF COMMISSION FROM SUB-CONTRACT AT 4% / 12.5% OF THE GROSS RECEIP T. IN THIS CASE ASSESSEES BOOKS OF ACCOUNT WERE REJECTED BY THE AS SESSING OFFICER AND INCOME OF THE ASSESSEE FROM SUB-CONTRACT IS EST IMATED AT 4% / 12.5% OF GROSS CONTRACT RECEIPTS. 5. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL AVAILABLE ON RECORD. IN OUR OPINION, THE ESTIMATIN G OF INCOME AT 4% OF THE SUB CONTRACT FOR THE A.YS. 2001-2002 AND 200 2-03 AND AT 12.5% FOR THE A.Y 2003-04 IS VERY REASONABLE. THE TRIBUNAL IS CONSISTENTLY HOLDING THAT INCOME OF THE ASSESSEE AT 9% ON MAIN CONTRACT EXECUTED BY THE ASSESSEE, IT WOULD BE 8% O F GROSS RECEIPT IN CASE OF CONTRACT TAKEN BY THE ASSESSEE ON SUB-CONTR ACT BASIS AND 4% IN CASE OF CONTRACT GIVEN BY THE ASSESSEE TO THIRD PARTY ON SUB- CONTRACT BASIS AND THEREAFTER THE ASSESSEE IS ENTIT LED FOR NO DEDUCTION TOWARDS DEPRECIATION AS ALL OTHER DEDUCTI ONS DEEMED TO HAVE BEEN ALLOWED U/SS. 30 TO 38 OF THE ACT. FOR T HIS PURPOSE, WE PLACE RELIANCE ON THE ORDER OF THE TRIBUNAL IN THE CASE OF TEJA CONSTRUCTIONS VS. ACIT, 36 DTR 220 / 129 TTJ (HYD) (UO) 57. FURTHER AS NOTED BY THE CIT(A) IN HIS ORDER FOR THE A.Y. 2003-04 THE TRIBUNAL HAS ALREADY CONFIRMED THE APPLICATION OF N ET PROFIT AT 12.5% ON CONTRACT RECEIPT IN THE CASE OF THIS ASSESSEE FO R THE EARLIER YEARS. IN VIEW OF THIS DISCUSSION, WE CONFIRM THE ORDER OF THE CIT(A) FOR ALL THESE ASSESSMENT YEARS. THIS GROUND IS DISMISSED. 6. THUS, ASSESSEE APPEALS IN ITA NOS. 430/HYD/03 AND 996/HYD/03 ARE DISMISSED. 7. NEXT ISSUE IN ASSESSEE APPEAL IN ITA NO. 558/HYD/06 IS WITH REGARD TO TREATMENT OF RS. 1,24,03,563/- AS INCOME FROM OTHER SOURCES. I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 5 8. BRIEF FACTS OF THE ISSUE OF THAT THE ASSESSEE HAD O FFERED AN AMOUNT OF RS.1,08,07,045/- BEING INTEREST ON TDS, A S OTHER INCOME AS PER SCHEDULE-I FORMING PART OF THE PROFIT & LOS S ACCOUNT. HOWEVER, THE ASSESSING OFFICER HAS VERIFIED THE POS ITION AND FOUND THAT THE ASSESSEE WAS ALLOWED INTEREST OF RS. 1,24, 03,563/- U/S 244A ON ITS REFUND DURING THE IMMEDIATE PREVIOUS YEAR AN D ASSESSED THE SAME TO TAX AS INCOME FROM OTHER SOURCES. THE AS SESSEE CLAIMS EXPENDITURE TO EARN THIS INTEREST INCOME WHICH WAS DISALLOWED BY THE LOWER AUTHORITIES. AGAINST THIS, THE ASSESSEE IS I N APPEAL BEFORE US. 9. WE HAVE HEARD BOTH THE PARTIES ON THIS ISSUE. IN O UR OPINION THE ASSESSEE HAS NO REASON TO INCUR ANY EXPENDITURE TO EARN THIS INTEREST INCOME. ACCORDINGLY, WE DO NOT FIND ANY I NFIRMITY IN THE ORDERS OF THE LOWER AUTHORITIES AND THE SAME ARE CO NFIRMED. THIS GROUND OF THE ASSESSEE IS REJECTED. 10. NOW WE TAKE UP THE ISSUE RELATING TO ALLOWABILITY O F DEDUCTION U/S 80IA(4)(I) OF THE ACT ON THE PROFITS EARNED FROM THE DEVELOPMENT OF THE INFRASTRUCTURE PROJECTS UNDERTAKEN BY IT. THIS ISSUE IS COMMON IN REVENUE APPEALS IN ITA NOS. 969/HYD/02, 6 17/HYD/03 AND 1079/HYD/03 AND ASSESSEE APPEALS 558/HYD/06, 1027/HYD/07, 1223/HYD/07, 338/HYD/09 & 84/HYD/10. IN THE INITIAL ASSESSMENT YEARS I.E. 2000-01; 2001-02 AND 2002-03, THE ASSESSING OFFICER REJECTED THE CLAIM MADE BY THE AS SESSEE ON THE GROUND THAT THE ASSESSEE IS NOT THE OWNER OF THE IN FRASTRUCTURE FACILITY. IT IS SUBMITTED THAT THE OWNERSHIP MENTI ONED IN SECTION 80IA(4) REFERS TO THE ENTERPRISE CARRYING ON THE BU SINESS OF DEVELOPMENT AND NOT TO THE INFRASTRUCTURE FACILITY AS PRESUMED BY THE ASSESSING OFFICER. WHEN THE ASSESSEE FILED AN A PPEAL BEFORE THE LEARNED CIT (APPEALS), THE FIRST APPELLATE AUTHORIT Y AGREED WITH THE ASSESSEE AND HELD THAT THE COMPANY IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA(4A) OF THE ACT. AGAINST THESE CIT [A] ORDERS, FOR THOSE ASSESSMENT YEARS, THE DEPARTMENT IS IN APPEAL BEFOR E THIS TRIBUNAL. FOR THE LATER ASSESSMENT YEARS, THE ASSESSING OFFIC ER DISALLOWED THE I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 6 CLAIM HOLDING THAT THE INCOME FROM MERE WORKS CONT RACT WOULD NOT BE ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA (4) OF THE ACT BY REFERRING THE EXPLANATIONS INSERTED IN FINANCE ACT 2009 RETROSPECTIVELY. THE LEARNED CIT [A] CONFIRMED THE VIEW TAKEN BY THE ASSESSING OFFICER AND FOR THESE ASSESSMENT YEARS, T HE ASSESSEE IS IN APPEAL BEFORE US. 11. THE ASSESSEE IS A COMPANY WHICH DERIVES INCOME FROM CONSTRUCTION CONTRACT WORKS. FOR THE SAKE OF CONVEN IENCE, WE TAKE THE APPEAL PERTAINING TO THE ASSESSMENT YEAR 2007-0 8. THE ASSESSEE HAS FILED ITS RETURN OF INCOME ON 30-10-2007, SHOWI NG INCOME OF RS.16,51,57,700/- AFTER CLAIMING DEDUCTION OF RS.36 ,11,58,788/- UNDER SECTION 80-IA OF THE ACT. DURING THE ASSESSM ENT PROCEEDINGS, THE ASSESSING OFFICER HAS ASKED THE ASSESSEE TO FUR NISH THE DETAILS OF PROJECTS WHICH ARE EXECUTED BY IT DURING THE PREVIO US YEAR. IN RESPONSE TO THIS, THE ASSESSEE HAS FURNISHED THE LI ST OF THOSE PROJECT WORKS WHICH WERE EXECUTED DURING THE PREVIOUS YEAR AND IN RESPECT OF WHICH IT HAS CLAIMED DEDUCTION UNDER SECTION 80- IA OF THE ACT. DURING THE ASSESSMENT PROCEEDINGS, THE ASSESSING OF FICER HAS OBTAINED THE COPIES OF WORKS CONTRACT AGREEMENTS EN TERED INTO BY THE ASSESSEE IN RESPECT OF SUCH PROJECT WORKS AND EXAMI NED THE SAME FOR VERIFYING THE CLAIM OF THE ASSESSEE FOR DEDUCTI ON UNDER SECTION 80-IA OF THE ACT. REFERRING TO THE PROVISIONS OF SE CTION 80-IA OF THE ACT, AND THE BOARDS CIRCULAR NOS.717 DATED 14-8-19 95 AND NO.733 DATED 3-1-1996, IT WAS NOTED THAT DEDUCTION UNDER S ECTION 80IA OF THE ACT SHALL BE AVAILABLE TO AN ASSESSEE WHO HAS DEVELOPED INFRASTRUCTURE FACILITY AND HAS STARTED OPERATING A ND MAINTAINING SUCH INFRASTRUCTURE FACILITY. HOWEVER, AFTER EXAMI NING THE DETAILS FURNISHED AND VARIOUS DOCUMENTS FILED BY THE ASSESS EE, THE ASSESSING OFFICER FOUND THAT IT HAS NOT DEVELOPED ANY INFRAST RUCTURE FACILITY. THE ASSESSEE IS A CIVIL CONTRACTOR AND HAS ENTERED INTO AGREEMENTS WITH VARIOUS STATE GOVERNMENTS AND OTHER AUTHORITIE S ONLY FOR CARRYING OUT CIVIL CONSTRUCTION WORKS. HE FURTHER NOTED THAT THE ASSESSEE HAS FAILED TO SHOW EVEN A SINGLE INSTANCE OF OPERATING ANY I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 7 INFRASTRUCTURE FACILITY DURING THE PREVIOUS YEAR AN D STATED THAT IT HAS NOT FULFILLED THE CONDITIONS AS STIPULATED IN S ECTION 80 IA(4) OF THE ACT. THE ASSESSING OFFICER HELD THAT THE ASSESSEE I S NOT ENTITLED TO DEDUCTION UNDER SECTION 80-IA OF THE ACT. ACCORDING LY, THE ASSESSING OFFICER DISALLOWED THE CLAIM OF THE ASSESSEE FOR DE DUCTION UNDER SECTION 80-IA AND COMPLETED THE ASSESSMENT ACCORDIN GLY VIDE ORDER DATED 31-3-2009 PASSED UNDER SECTION 143(3) OF THE ACT. AGGRIEVED AGAINST THE ORDER OF THE ASSESSING OFFICER, THE ASS ESSEE WENT IN APPEAL BEFORE THE CIT (A). ON APPEAL, THE CIT (A) AFTER C ONSIDERING THE GROUNDS RAISED BEFORE HIM ELABORATELY, DISMISSED TH E APPEAL FILED BY THE ASSESSEE. FURTHER AGGRIEVED, THE ASSESSEE IS IN APPEAL BEFORE US. 12. THE LEARNED AUTHORISED REPRESENTATIVE OF THE ASSESS EE SUBMITTED THAT THE MAIN ISSUE INVOLVED IN THE APPEA LS BEFORE THIS TRIBUNAL IS ALLOWABILITY OF DEDUCTION UNDER SECTION 80IA(4)(I) OF THE ACT. THIS ISSUE IS COMMON FOR ALL THE ASSESSMENT Y EARS UNDER APPEAL. HE DEALT WITH THE INTRODUCTION AND CHANGES MADE BY THE LEGISLATURE TO SECTION 80IA(4) OF THE ACT TILL DATE . THE SAID SECTION IS MEANT FOR ALLOWING DEDUCTION IN RESPECT OF PROFITS AND GAINS FROM INDUSTRIAL UNDERTAKINGS OR ENTERPRISES ENGAGED IN I NFRASTRUCTURE DEVELOPMENT. THE ASSESSEE CLAIMED DEDUCTION AS IT I S ENGAGED IN DEVELOPMENT OF INFRASTRUCTURE AND AS IT SATISFIED A LL THE CONDITIONS MENTIONED THEREIN. THE PROVISIONS OF SECTION 80IA(4 )(I) AS INTRODUCED BY THE BY THE FINANCE ACT, 1999 AND AS AMENDED FROM TIME TO TIME ARE APPLICABLE TO THE ASSESSEE. 13. FROM A READING OF THE SECTION, IT IS CLEAR THAT THE DEDUCTION IS ALLOWABLE TO: A) ANY COMPANY INCORPORATED; B) WHICH ENTERED INTO AGREEMENT WITH GOVERNMENT; OR AN Y GOVERNMENT BODY; AND UNDERTAKES DEVELOPMENT OF INFR ASTRUCTURE FACILITY. 14. THE PURPOSE FOR WHICH THE SAID SECTION WAS AMENDED WITH EFFECT FROM THE ASSESSMENT YEAR 2000-01, CAN BE TRA CED TO A I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 8 BROCHURE ISSUED BY THE GOVERNMENT OF INDIA, MINISTR Y OF ROADS, TRANSPORT AND HIGH WAYS IN AUGUST, 2001. HE HAS TAK EN SUPPORT FROM THE AFORESAID BROCHURE, A COPY OF WHICH IS FIL ED WHICH IS KEPT ON RECORD. IN THE SAID BROCHURE, THE GOVERNMENT OF IND IA EXTRACTED SOME OF THE DECISIONS TAKEN BY IT TO BRING IN THE DEVELO PMENT OF INFRASTRUCTURE FACILITY IN THE COUNTRY. HE POINTED OUT THAT THE GOVERNMENT PROVIDED THE BENEFITS TO THE INDIAN ENTR EPRENEURS BY PROVIDING CONTRACT PACKAGES TO THE PRIVATE ENTERPRI SES. WHILE PROVIDING BENEFITS, THE GOVERNMENT SPECIFICALLY SPE CIFIED CERTAIN GRANTS ONLY TO BOT SCHEMES. FOR THE OTHER SCHEMES ALL THE OTHER BENEFITS ARE MADE AVAILABLE. THE CLASSIFICATION PRO VIDED IN THE BROCHURE CLEARLY INDICATES THAT THE SCHEMES OF PACK AGES ARE MEANT FOR ALL THE ENTERPRISES WHETHER ENGAGED IN THE DEVE LOPMENT OF INFRASTRUCTURE OR UNDER BOT. HENCE, IT CLEARLY INDI CATES THAT THE GOVERNMENT OF INDIA WITH A VIEW TO DEVELOP THE INFR ASTRUCTURE FACILITY PROVIDED VARIOUS INCENTIVES TO THE INDIAN CONCERNS FOR DEVELOPMENT OF SUCH INFRASTRUCTURE FACILITY. WITH A VIEW TO PROVID E THE EXEMPTIONS TO THE ENTREPRENEURS CARRYING ON SUCH ACTIVITY, THE LE GISLATURE INTRODUCED THE AMENDMENT TO SECTION 80IA(4) IN THE FINANCE BILL 1999 TO BE EFFECTIVE FOR AND FROM THE ASSESSMENT YE ARS 2000-01 AND ONWARDS TO FULFIL THE OBJECTIVE OF THE PRIME MINIST ER. THE PROVISIONS OF SEC.80IA(4) ARE MADE APPLICABLE TO ANY ENTERPRISE CARRYING ON THE BUSINESS OF (I) DEVELOPING, (II) MAINTAINING AND OP ERATING OR (III) DEVELOPING, MAINTAINING AND OPERATING OR DEVELOPMEN T, MAINTENANCE AND OPERATING ANY INFRASTRUCTURE FACILITY. BECA USE OF THE AMENDMENT, THE ENTERPRISES WHICH ARE ENGAGED IN ANY OF THE THREE ACTIVITIES BECAME ELIGIBLE FOR DEDUCTION COMPARED T O THE EARLIER PROVISION, WHICH WAS MADE APPLICABLE ONLY TO SUCH E NTERPRISES ENGAGED IN ALL THE THREE ACTIVITIES CUMULATIVELY. T HE PROVISIONS OF SUB SECTION (4A) WHICH WERE EARLIER APPLICABLE TO THE E NTREPRENEURS ENGAGED IN DEVELOPING, MAINTAINING AND OPERATING WA S DELETED WITH EFFECT FROM 01-04-2000, BUT IS INCORPORATED IN SECT ION 80IA(4) OF THE ACT. IT IS CLEAR THAT THE ENTERPRISES WHICH WERE DE VELOPING, OPERATING AND MAINTAINING AND DEVELOPING, OPERATING AND MAINT AINING WERE I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 9 ONLY ELIGIBLE FOR SUCH DEDUCTION UP TO THE ASSESSME NT YEAR 1999- 2000 BY VIRTUE OF THE PROVISIONS OF SECTION 80IA(4A ). WITH THE INTRODUCTION OF THE NEW SECTION 80IA(4) AMENDING TH E SUB SECTION (4) OF SECTION 80IA AND DELETING THE SUB SECTION (4A), THE LEGISLATURE PROVIDED DEDUCTION FOR ANY ENTERPRISE CARRYING ON T HE BUSINESS EITHER DEVELOPING OR OPERATING AND MAINTAINING OR DEVELOPM ENT, OPERATING AND MAINTAINING INSTEAD ALLOWING DEDUCTION ONLY TO THE ENTERPRISES ENGAGED IN ACTIVITY COVERING ALL THE THREE ACTIVITI ES TOGETHER. 15. ACCORDING TO AR THE PROVISION EXTENDED TO AN ENTERP RISE CARRYING ON ANY ONE OF THE THREE ACTIVITIES. IT MAK ES THE MATTERS MORE CLEAR THAT THE SUB SECTION (4) IS AMENDED AGAIN BY THE FINANCE ACT, 2001 WITH EFFECT FROM 01-04-2002.THE LEGISLATURE SP ECIFICALLY ADDED THE CONJUNCTION OR BETWEEN THE WORDS (DEVELOPING) , (OPERATING AND MAINTAINING) (DEVELOPING, OPERATING AND MAINTAINING ). IT MAKES IT CLEAR THAT THE PROVISION WOULD APPLY TO ANY ENTERPR ISE CARRYING ON THE BUSINESS OF DEVELOPING OR CARRYING ON THE BUSINESS OF OPERATING AND MAINTAINING OR CARRYING ON THE BUSINESS OF DEVELOPM ENT, OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY. THEREF ORE, THERE IS NO REQUIREMENT THAT ALL THE THREE ACTIVITIES SHOULD HA VE BEEN CARRIED ON BY A SINGLE ENTERPRISE SO AS TO ENABLE IT TO CLAIM DEDUCTION UNDER SECTION 80IA(4) OF THE ACT. THIS VIEW IS ALSO SUPPO RTED BY THE DECISION OF THE BOMBAY HIGH COURT IN THE CASE OF CIT VS. ABG HEAVY INDUSTRIES LTD (322 ITR 323). IT MENTIONED CLEARLY THAT THE THREE CONDITIONS DEVELOPMENT, OPERATION AND MAINTENANCE W ERE NOT INTENDED TO BE CUMULATIVE IN NATURE. THEREFORE, ANY ASSESSEE WHO HAS UNDERTAKEN ANY ONE OF THE ACTIVITY IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA (4) OF THE ACT. THE MUMBAI BENCH OF TH E ITAT IN THE CASE OF ACIT VS. BHARAT UDYOG LIMITED (118 ITD 336) ALSO HELD THAT AFTER THE AMENDMENT OF SECTION 80IA(4) IT IS APPLIC ABLE TO ENTERPRISES WHO ARE ENGAGED IN DEVELOPING INFRASTRUCTURAL FACIL ITY. EARLIER, THE MUMBAI BENCH IN THE CASE OF PATEL ENGINEERING LTD., VS. DICT REPORTED IN 94 ITD 411 ALSO OBSERVED THAT THE CIVIL CONTRACTORS WHO ARE DEVELOPING THE INFRASTRUCTURE FACILITY IS ELIGI BLE FOR DEDUCTION I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 10 UNDER SECTION 80IA(4) OF THE ACT. IT IS MENTIONED T HAT THE STATUTORY PROVISIONS AS CONTAINED IN 80IA (4) PROVIDES FOR DE VELOPMENT OF INFRASTRUCTURE FACILITY. THEREFORE, IT IS CLEAR THA T TO BE ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA (4), AN ENTERPRISE NEE D NOT NECESSARILY BE ENGAGED IN ALL THE THREE ACTIVITIES OF DEVELOPIN G, MAINTAINING AND OPERATING THE INFRASTRUCTURE. IT IS ENOUGH IF IT IS CARRYING ON THE BUSINESS OF EITHER DEVELOPING OR MAINTAINING AND OP ERATING OR DEVELOPING, MAINTAINING AND OPERATING THE INFRASTRU CTURE FACILITY. 16. HE SUBMITTED THAT THERE IS NO DISPUTE WITH REGARD T O THE MEANING OF THE INFRASTRUCTURE FACILITY USED UNDER S ECTION 80IA OF THE ACT. AN EXPLANATION IS INTRODUCED BELOW SUB-SECTION (4) OF SECTION 80IA WHICH READS AS UNDER; EXPLANATION FOR THE PURPOSE OF THIS CLAUSE, INFRASTRUCTURE FACILITY MEANS (A) A ROAD INCLUDING TOLL ROAD, A BRIDGE OR A RAIL SYST EM; (B) A HIGHWAY PROJECT INCLUDING HOUSING OR OTHER ACTIVITIES BEING AN INTEGRAL PART OF THE HIGHWAY PROJECT; C) A WATER SUPPLY PROJECT, WATER TREATMENT SYSTEM, IRRIGATION PROJECT, SANITATION AND SEWERAGE SYSTEM OR SOLID WASTE MANAGEMENT SYSTEM; D) A PORT, AIRPORT, INLAND WATERWAY OR INLAND PORT ; 17. HENCE, DEVELOPMENT OF A ROAD IS DEVELOPMENT OF INFR ASTRUCTURE FACILITY. SIMILARLY, THE WATER SUPPLY PROJECT OR IR RIGATION PROJECT ARE ALSO CALLED AS INFRASTRUCTURE FACILITY. THEREFORE, THERE CANNOT BE ANY DISPUTE WITH REGARD TO THE FACT THAT THE ASSESSEE H EREIN IS ENGAGED IN THE ACTIVITY OF DEVELOPING INFRASTRUCTURE FACILITY. THE WORD DEVELOP IS NOT DEFINED BY THE INCOME-TAX ACT. IT IS NECESSARY TO DEPEND UPON THE MEANING ASSIGNED TO IT BY VARIOUS DICTIONARIES. AS PER THE ACCURATE & RELIABLE DICTIONARY, THE MEANING OF THE WORD DEVELOP INCLUDES THE ACT OF MAKING SOME AREA OF LAND OR WAT ER MORE PROFITABLE OR PRODUCE OR USEFUL. THE MEANING GIVEN TO THE WORD DEVELOP AS I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 11 PER THE RANDOM HOUSE DICTIONARY OF THE ENGLISH LA NGUAGE INCLUDES CAUSING TO GROW, TO ELABORATE OR EXPAND IN DETAIL. SYNONYMS OF THE WORD DEVELOP ARE GIVEN TO BE STRENGTHENING, WIDEN ING, EXPANDING, ELABORATING, GROWING ETC. 18. HE ALSO TAKEN SUPPORT FROM THE CBDT CIRCULAR NO. 3 OF 2008 DATED 12-3-2008 (168 TAXMAN (STATUTE) 12,54) TO CLA RIFY THE NATURE OF THE WORD DEVELOPER. THE CLARIFICATION ISSUED BY TH E BOARD MAKES IT CLEAR THAT AN ASSESSEE WHO EXECUTES THE DEVELOPMENT WORK AND CARRIES OUT THE CIVIL CONSTRUCTION WORK IS A DEVELO PER. THE BOARD IS ALSO OF THE VIEW THAT THOSE PERSONS WORKING FOR OTH ERS ARE THE WORKS CONTRACTORS AND NOT THE DEVELOPERS. IN THE CASE OF THE ASSESSEE, THE ASSESSEE ITSELF UNDERTOOK THE WORK OF DEVELOPMENT A ND THEREFORE, IT IS A DEVELOPER, EVEN ACCORDING TO THE CIRCULAR ISSUED BY THE BOARD. IT IS SUBMITTED THAT IT IS CARRYING ON SUCH DEVELOPMENT A CTIVITY AND DERIVING INCOME. 19. HE DREW OUR ATTENTION TO THE VARIOUS ACTIVITIES UND ERTAKEN BY THE ASSESSEE WHICH ARE ENTITLED FOR DEDUCTION U/S 8 0IA OF THE ACT WHICH ARE AS FOLLOWS: S. NO. DESCRIPTION OF WORK ALONG WITH DATE OF AGREEMENT NAME OF THE EMPLOYER CLAUSE UNDER WHICH POSSESSION IS TAKEN OVER BY THE ASSESSEE CLAUSE UNDER WHICH POSSESSION IS HANDED OVER TO GOVT. CLAUSE NO. AND PERIOD OF MAINTENANCE 1. WIDENING AND STRENGTHENING OF CUDDAPAH-RENIGUNTA ROAD. AGREEMENT DATED 1.03.1999. ENGINEER-IN-CHIEF, PWD (ROADS & BUILDINGS), ADMN. AND EAP, GOVT. OF ANDHRA PRADESH. SUB-CLAUSE 42.1 OF AGREEMENT SUB CLAUSE 48.2 (A) OF AGREEMENT SUB CLAUSE 49.1 OF AGREEMENT. PERIOD OF MAINTENANCE (DLP) IS 12 MONTHS. 2. WIDENING AND STRENGTHENING OF PERICHERLA-THOKAPALLE ROAD. AGREEMENT DATED 3.03.2000. ENGINEER-IN-CHIEF, PWD (ROADS & BUILDINGS), ADMN. AND EAP, GOVT. OF ANDHRA PRADESH. SUB-CLAUSE 42.1 OF AGREEMENT SUB CLAUSE 48.2 (A) OF AGREEMENT SUB CLAUSE 49.1 OF AGREEMENT. PERIOD OF MAINTENANCE (DLP) IS 24 MONTHS. 3. WIDENING TO FOUR LANES AND STRENGTHENING OF EXISTING TWO LANE ROAD IN KM 27.80 TO KM 61.00 IN THE JAGATPUR- CHANDIKHOL SECTION OF NH-5 IN ORISSA. AGREEMENT DATED 09.12.1999. NATIONAL HIGHWAYS AUTHORITY OF INDIA, 1- A, EASTERN AVENUE, MAHARANI BAGH, NEW DELHI. SUB-CLAUSE 42.1 OF AGREEMENT SUB CLAUSE 48.2 (A) OF AGREEMENT SUB CLAUSE 49.1 OF AGREEMENT. PERIOD OF MAINTENANCE (DLP) IS 12 MONTHS. 4. WIDENING TO FOUR LANES AND STRENGTHENING OF EXISTING TWO LANE NATIONAL HIGHWAYS AUTHORITY OF INDIA, NEW DELHI. SUB-CLAUSE 42.1 OF AGREEMENT SUB CLAUSE 48.1 OF AGREEMENT SUB CLAUSE 49.1 OF AGREEMENT. PERIOD OF MAINTENANCE I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 12 CARRIAGEWAY OF UDAIPUR-RATANPUR- GANDHINAGAR SECTION OF NH-8-UG-1 (KM 278.000 TO 340.000) IN THE STATE OF RAJASTHAN. AGREEMENT DATED 05.10.2001. (DLP) IS 12 MONTHS. 5. UPGRADATION OF ROAD FROM SINDHANUR TO BUDUGUMPA CONTRACT NO. U-2, AGREEMENT DATED 19.12.2001. THE PROJECT DIRECTOR, PROJECT IMPLEMENTATION UNIT, KARNATAKA STATE HIGHWAYS IMPROVEMENT PROJECT, KR CIRCLE, BANGALORE. SUB-CLAUSE 42.1 OF AGREEMENT SUB CLAUSE 48.2 (A) OF AGREEMENT SUB CLAUSE 49.1 OF AGREEMENT. PERIOD OF MAINTENANCE (DLP) IS 12 MONTHS. 6. VIZAG WORKS PACKAGE RBERP-YGB-4 OF BLD. NO. 1/NCB/APERP AND OTHER 4 PACKAGES. AGREEMENT DATED 12.03.1999. ENGINEER-IN-CHIEF, PWD (ROADS & BUILDINGS), ADMN. AND EAP, HYDERABAD (AP) CLAUSE 21 OF THE AGREEMENT CLAUSE 56 OF THE AGREEMENT CLAUSE 35 OF AGREEMENT. PERIOD OF MAINTENANCE (DLP) IS 550 DAYS. 7. WIDENING AND STRENGTHENING OF VISAKHAPATNAM- ANANTHAGIRI-ARAKU ROAD IN VISAKHAPATNAM DIST. AGREEMENT DATED 12.12.2001. SUPERINTENDING ENGINEER (R&B), VISAKHAPATNAM SITE WAS HANDED OVER ON 12.12.2001. AS PER PARAGRAPH 5 OF ARTICLES OF AGREEMENT. PERIOD OF MAINTENANCE (DLP) IS 12 MONTHS. 8. WIDENING TO FOUR LANES BETWEEN KM 439/000 TO KM 477/000 OF BOMBAY-AHMEDABAD SECTION. AGREEMENT DATED 06.10.1997. CHIEF ENGINEER, NATIONAL HIGHWAY (PW) REGION, 5 TH FLOOR, KONKAN BHAVAN, NAVI MUMBAI. SUB CLAUSE 42.1 OF AGREEMENT SUB CLAUSE 48.1 OF AGREEMENT. SUB CLAUSE 49.1 OF AGREEMENT. PERIOD OF MAINTENANCE (DLP) IS 12 MONTHS. 9. WIDENING AND STRENGTHENING OF KODUMUR-YEMMIGANUR ROAD FROM KM 0/0 TO KM 10/270 AND 27/0 TO 32/430 AND DEVANAKONDA- PATHIKONDA ROADS FROM 0/0 TO 18/268 IN KURNOOL DIST. AGREEMENT DATED 01.03.1999. SUPERINTENDING ENGINEER (R&B), APHM & ECRP CIRCLE, NANDYAL. SITE WAS HANDED OVER ON 01.03.1999. PERIOD OF MAINTENANCE (DLP) IS 365 DAYS. 10. EXECUTING THE WORK OF IMPROVEMENTS TO HYDERABAD TO BIJAPUR ROAD FROM KM 80/0 TO 109/0 IN RANGA REDDY DIST. AGREEMENT DATED 03.03.1999. SUPERINTENDING ENGINEER (R&B), APHM & ECRP CIRCLE, WARANGAL. CLAUSE 21 OF THE AGREEMENT CLAUSE 35 OF AGREEMENT. PERIOD OF MAINTENANCE (DLP) IS 365 DAYS. 11. STRENGTHENING OF SH 151, 60A, 12 FROM LADVEL-DAKOR-GODHRA AND PAVING OF SHOULDERS (KM 18/700 TO KM 0/500 & KM 90/100 TO KM 135/700) AGREEMENT DATED 25.12.2002. SECRETARY, ROADS & BUILDINGS DEPT., 14/2, NEW SACHIVALAYA, GANDHINAGAR, GUJARAT. SUB CLAUSE 42.1 AS PER FIDIC SUB CLAUSE 48.1 AS PER FIDIC SUB CLAUSE 49.1 AS PER FIDIC. PERIOD OF MAINTENANCE (DLP) IS 12 MONTHS. 12. RENIGUNTA-GUNTAKAL SECTION REBUILDING OF SOUTH CENTRAL RAILWAY, CLAUSE 21.1 OF THE AGREEMENT CLAUSE 21.2 OF THE AGREEMENT CLAUSE 28.0 OF AGREEMENT. PERIOD I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 13 DOUBLE LINE BRIDGE NO. 393 ACROSS RIVER CHEYYUR. AGREEMENT DATED 02.06.2004. SECUNDERABAD. (SITE FACILITIES) OF MAINTENANCE (DLP) IS 6 MONTHS. 13. UPGRADATION OF ROAD FROM SINDHANUR TO BUDUGUMPA CONTRACT NO. U-8, AGREEMENT DATED 21.03.2003. THE PROJECT DIRECTOR, PROJECT IMPLEMENTATION UNIT, KARNATAKA STATE HIGHWAYS IMPROVEMENT PROJECT, KR CIRCLE, BANGALORE. SUB CLAUSE 41.1 OF AGREEMENT (NOTICE TO PROCEED). SUB-CLAUSE 48.2 (A) OF AGREEMENT SUB CLAUSE 49.1 OF AGREEMENT. PERIOD OF MAINTENANCE (DLP) IS 365 DAYS. 14. UPGRADATION OF ROAD PROJECT IN TAMIL NADU. AGREEMENT DATED 08.10.2004. GOVT. OF TAMIL NADU, PROJECT DIRECTOR, PROJECT IMPLEMENTATION UNIT, HIGHWAYS DEPT. SUB CLAUSE 42.1 OF AGREEMENT. SUB CLAUSE 48.2 (A) OF AGREEMENT SUB CLAUSE 49.1 OF AGREEMENT. PERIOD OF MAINTENANCE (DLP) IS 365 DAYS. 15. ALLAHABAD BYPASS PROJECT PACKAGE NO. ABP-03, AGREEMENT DATED 4.11.2004. NATIONAL HIGHWAYS AUTHORITY OF INDIA, NEW DELHI. SUB CLAUSE 42.1 OF AGREEMENT SUB CLAUSE 48.2 (A) OF AGREEMENT SUB CLAUSE 49.1 OF AGREEMENT. PERIOD OF MAINTENANCE (DLP) IS 365 DAYS. 16. IMPROVEMENTS TO EXISTING 4-LANE ROAD IN RAMNAGAR- CHENNAPATNAM TOWN LIMITS ON SH-17, AGREEMENT DATED 15.12.2005. KARNATAKA ROAD DEVELOPMENT CORPORATION LTD., GOVT. OF KARNATAKA ENTERPRISE. CLAUSE 2.17 OF THE AGREEMENT. CLAUSE 2.42 OF THE AGREEMENT. CLAUSE 2.43.1 OF AGREEMENT. PERIOD OF MAINTENANCE (DLP) IS 12 MONTHS. 17. WIDENING AND STRENGTHENING OF EXISTING NH FROM 2 LANE TO 4 LANE FROM KM 1040.30 TO KM 1013.00 OF NALBARI TO BIJNI SECTION NH-31 IN ASSAM. PKG. NO. AS- 07. AGREEMENT DATED 18.08.2005. NATIONAL HIGHWAYS AUTHORITY OF INDIA, NEW DELHI. SUB CLAUSE 42.1 OF AGREEMENT SUB CLAUSE 48.1 (A) OF AGREEMENT SUB CLAUSE 49.1 OF AGREEMENT. PERIOD OF MAINTENANCE (DLP) IS 365 DAYS. 18. WIDENING AND STRENGTHENING OF EXISTING NH FROM 2 LANE TO 4 LANE FROM KM 105.00 TO KM 183.00 OF DHARAMTTUL TO SONAPUR SECTION OF NH- 37 IN ASSAM. PKG. NO. AS-20. AGREEMENT DATED 18.08.2005. NATIONAL HIGHWAYS AUTHORITY OF INDIA, NEW DELHI. SUB CLAUSE 42.1 OF AGREEMENT SUB CLAUSE 48.1 (A) OF AGREEMENT SUB CLAUSE 49.1 OF AGREEMENT. PERIOD OF MAINTENANCE (DLP) IS 365 DAYS. 19. REHABILITATION AND UPGRADING OF KM 449.150 TO KM 509.000 OF NH-76 IN RAJASTHAN. PKG. NO. RJ-10. AGREEMENT DATED 12.08.2005. NATIONAL HIGHWAYS AUTHORITY OF INDIA, NEW DELHI. SUB CLAUSE 41.1 OF AGREEMENT (COMMENCEMENT OF WORK) SUB CLAUSE 48.2 OF AGREEMENT SUB CLAUSE 49.1 OF AGREEMENT. PERIOD OF MAINTENANCE (DLP) IS 365 DAYS. 20. ACCORDING TO AR AN ANALYSIS OF THE ABOVE WORKS UNDE RTAKEN BY THE ASSESSEE CLEARLY INDICATES THAT IT CARRIES ON T HE ACTIVITIES OF DEVELOPMENT OF INFRASTRUCTURE FACILITY. THE COUNSEL FOR THE ASSESSEE SUBMITTED DREW OUR ATTENTION TO ONE COPY OF THE COM PLETE AGREEMENT I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 14 ENTERED INTO BY IT WITH NHAI BY STATING THAT ALL TH E AGREEMENTS ARE SIMILAR. 21. IT IS SUBMITTED BY COUNSEL FOR ASSESSEE THAT, AS PE R THE AGREEMENT, THE POSSESSION OF THE SITE IS HANDED OVE R TO THE ASSESSEE BY THE GOVERNMENT. THE ASSESSEE TAKES POSSESSION AN D ACCESS TO THE PROPERTY AND THEREAFTER IT SHALL BE THE RESPONSIBIL ITY OF THE ASSESSEE TO DEVELOP THE SAID AREA INTO MORE USEFUL INFRASTRU CTURE FACILITY. IN THE PROCESS, EVERY ACT REQUIRED (WHETHER MENTIONED IN THE AGREEMENT OR NOT) IN CONVERTING THE AREA INTO MORE USEFUL ONE SHALL BE THAT OF THE ASSESSEE. THE ASSESSEE HAS TO UNDERTAKE THE RES PONSIBILITY OF MAINTENANCE OF THE EXISTING TRAFFIC AND THERE SHOUL D NOT BE INCONVENIENCE TO THE REGULAR TRAFFIC. THE DEVELOPED AREA AFTER COMPLETION OF THE DEVELOPMENT OF INFRASTRUCTURE IS HANDED OVER TO THE GOVERNMENT. AFTER HANDING OVER, THE ASSESSEE SHALL MAINTAIN THE INFRASTRUCTURE FOR A PERIOD OF 48 MONTHS AND ANY DE FECTS ARE TO BE RECTIFIED AND IT IS CLEAR THAT THE ASSESSEE IS CONV ERTING THE AREA ENTRUSTED TO IT INTO MORE USEFUL AND MORE PROFITABL E AREA AND HANDING OVER THE DEVELOPED ONE TO THE GOVERNMENT. T HEREFORE, THE ACTIVITY OF THE ASSESSEE IS TO DEVELOP AN EXISTIN G TWO LANE ROAD INTO FOUR LANE ROAD THEREBY MAKING THE ROAD MORE USEFUL AND PROFITABLE. 22. IT IS SUBMITTED THAT AS PER THE EXPLANATION INTRODU CED BY THE FINANCE ACT, 2007, ANY ASSESSEE WHO ENTERED INTO A CONTRACT WITH THE ENTERPRISE MENTIONED IN SUB-SECTION (4) WOULD NOT B E ELIGIBLE FOR DEDUCTION. IT CLEARLY INDICATES THAT ANY SUB-CONTRA CTOR WHO UNDERTAKES A PART OF THE WORK FROM THE UNDERTAKING WHICH WAS ALLOTTED THE WORK WOULD NOT BE ELIGIBLE FOR SUCH DE DUCTION. THE SAID EXPLANATION HAS NO APPLICATION TO THE ASSESSEE. THE ASSESSEE DID NOT CLAIM SUCH DEDUCTION OR ANY INCOME PERTAINING TO A SUB CONTRACT WORK UNDERTAKEN FROM THE ENTERPRISES REFERRED TO IN SECTION 80IA(4). THEREFORE, THE EXPLANATION INTRODUCED BY THE FINANC E ACT, 2007 SHALL NOT AFFECT THE CLAIM MADE BY THE ASSESSEE. THE EXPL ANATION INTRODUCED BY THE FINANCE ACT, 2009 ADDED THAT THOS E ENTERPRISES UNDERTAKING SIMPLE WORKS CONTRACTS BY ENTERING INTO AGREEMENTS I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 15 WITH THE ENTERPRISES OR WITH THE GOVERNMENT OR GOVE RNMENT ORGANIZATIONS. AS PER THIS EXPLANATION, ANY ENTERP RISES WHICH ENTER INTO A MERE WORKS CONTRACT EITHER WITH ANY OTHER EN TERPRISE OR GOVERNMENT OR GOVERNMENT CORPORATION SHALL NOT BE E LIGIBLE FOR THE DEDUCTION. IT IS MADE CLEAR THAT ANY ENTERPRISE, WH ICH ENTERED INTO DEVELOPMENT OF INFRASTRUCTURE, WOULD BE ELIGIBLE FO R DEDUCTION AND NOT THOSE ENTERPRISES, WHICH ENTER INTO CONTRACT FO R EXECUTING WORKS CONTRACTS. THE ASSESSEE HEREIN ENTERED INTO AGREEME NT FOR DEVELOPMENT OF INFRASTRUCTURE FACILITY AND NOT FOR A MERE WORKS CONTRACT. IT IS SUBMITTED THAT THIS EXPLANATION HA S TO BE READ IN THE CONTEXT OF THE APPLICATION OF THE MAIN PROVISIONS O F SECTION 80IA(4) OF THE ACT. FROM A READING OF SECTION 80IA (4)(I) OF THE ACT, IT IS CLEAR THAT THE DEDUCTION IS AVAILABLE FOR ANY COMPANY WHI CH ENTERS INTO AGREEMENT WITH ANY GOVERNMENT OR GOVERNMENT BODY. IT IS CLEAR THAT THE DEDUCTION IS AVAILABLE NOT FOR ANY PERSON BUT F OR THOSE COMPANIES ENTERING INTO AGREEMENT WITH THE GOVERNMENT OR OTHE R GOVERNMENT BODIES/CORPORATIONS. IT IS ALSO MADE CLEAR THAT THE DEDUCTION IS AVAILABLE FOR THE CORPORATE BODIES ENTERING INTO AG REEMENT WITH THE GOVERNMENT ORGANIZATIONS. THEREFORE, THE MAIN PROVI SION MAKES IT CLEAR THAT THE DEDUCTION IS AVAILABLE TO COMPANIES ENTERING INTO AGREEMENT WITH GOVERNMENT BODIES OR GOVERNMENT. THE REFORE, IT IS NOT CORRECT TO READ THE EXPLANATION TO MEAN THAT TH E GOVERNMENT BODY IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA O F THE ACT AND THE COMPANY ENTERING INTO AGREEMENT WITH SUCH GOVERNMEN T BODY IS NOT ELIGIBLE FOR DEDUCTION. 23. IN SO FAR AS THE MEANING OF THE WORD WORKS CONTRAC T IS CONCERNED, THE LD. AR PLACED RELIANCE ON THE JUDGEM ENT OF BOMBAY HIGH COURT IN THE CASE OF CIT VS. GLENMARK PHARMACE UTICALS LTD., REPORTED IN 324 ITR 199 WHEREIN HELD THAT IN A WORK S CONTRACT, THE CONTRACTEE WOULD PROVIDE THE MATERIAL AND ALL OTHER REQUIREMENTS IN THE PROCESS OF MANUFACTURE/PRODUCTION. THE CONTRACT OR MERELY CARRIES ON THE WORK WITH THE MATERIAL SUPPLIED BY T HE CONTRACTEE AND THE KNOWLEDGE SUPPLIED BY THE CONTRACTEE. FURTHER, IN A WORKS I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 16 CONTRACT, THE RISK IS UNDERTAKEN BY THE CONTRACTEE AND IN CASE OF DEVELOPMENT CONTRACT, THE CONTRACTOR UNDERTAKES THE RISKS INVOLVED. IN THE CASE OF THE ASSESSEE, IT WAS ALLOTTED A PREM ISES AND THE POSSESSION OF THE PREMISES WAS HANDED OVER TO THE A SSESSEE. IT WAS ASKED BY THE GOVERNMENT TO DEVELOP THE SAID AREA IN TO AN INFRASTRUCTURE FACILITY. ALL THE ACTIVITIES NECESSA RY IN THE PROCESS OF DEVELOPMENT AND THE LOSSES SUFFERED IN THE PROCESS, THE MATERIAL TO BE USED INCLUDING THE EXPERTISE SHALL BE OF THE ASS ESSEE. THE MAINTENANCE OF THE EXISTING FACILITY DURING THE PER IOD OF DEVELOPMENT ALSO SHALL BE OF THE ASSESSEE. THEREFORE, THE ASSES SEE IS A DEVELOPER AND NOT A WORKS CONTRACTOR. HE RELIED ON THE CIRCU LAR NO.4 OF 2010 DATED 18-05-2010, WHICH IS AFTER INTRODUCTION OF TH E EXPLANATION BY THE FINANCE ACT, 2009, FOR THE PROPOSITION THAT WID ENING OF EXISTING ROAD IS AN INFRASTRUCTURE FACILITY AND ANY ENTERPRI SE CARRYING ON THE ACTIVITY OF WIDENING OF AN EXISTING ROAD WOULD BE E LIGIBLE FOR DEDUCTION UNDER SECTION 80IA(4) OF THE ACT. 24. THE LEARNED COUNSEL FOR THE ASSESSEE RELIED ON THE FOLLOWING DECISIONS: 1) THE DECISION OF THE ITAT, PUNE BENCH A VIDE ORDER DATED 8.6.2011 IN THE CASE OF LAKSHMI CIVIL ENGINEE RING PVT. LTD., VS ADDL CIT, RANGE-II, KOLHAPUR. WHEREIN IT IS HELD THAT EVEN IF A PERSON IS A CONTRACTOR, IF ALL THE CONDITIONS MENTIONED IN SECTION 80IA(4) ARE FULFILL ED, THE ASSESSEE BECOMES ELIGIBLE FOR DEDUCTION. 2) THE DECISION OF THE ITAT, MUMBAI F-BENCH IN THE CASE OF PATEL ENGINEERING LTD. VS DEPUTY COMMISSIONER O F INCOME-TAX REPORTED IN 94 ITD 411 WHEREIN IT IS HE LD THAT THE TERM CONTRACTOR IS NOT ESSENTIALLY CONTR ADICTORY TO THE TERM DEVELOPER. IT WAS HELD THAT A PERSON WHO HAS UNDERTAKEN THE CONTRACT FOR DEVELOPMENT IS NOT ONLY I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 17 A CONTRACTOR BUT IS ALSO A DEVELOPER ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA(4) OF THE ACT. 3) DECISION OF THE MUMBAI BENCH OF THE ITAT IN TH E CASE OF ACIT VS BHARAT UDYOG LTD. REPORTED IN (2008) 24 SOT 412 WHEREIN IT IS HELD THAT AN ASSESSEE ENGAGED I N DEVELOPMENT OF INFRASTRUCTURE BUT NOT IN MAINTAINI NG AND OPERATING THE SAME WOULD BE ELIGIBLE FOR DEDUCT ION UNDER SECTION 80IA (4) THOUGH HE IS DESCRIBED AS A CONTRACTOR AND WAS PAID BY THE GOVERNMENT. 4) THE DECISION OF THE ITAT IN THE CASE OF METAL I NFRA PROJECTS LTD., VS. CIT REPORTED IN 26 DTR 359, WHER EIN IT IS HELD THAT SIMPLY BECAUSE THE AGREEMENT MENTIONED THE ASSESSEE AS CONTRACTOR, HE WOULD NOT CEASE TO B E THE DEVELOPER. 25. IT IS SUBMITTED BY THE AR THAT THE WORD CONTRACTOR USED IN THE AGREEMENTS ENTERED INTO WOULD NOT DEBAR THE ASS ESSEE FROM BEING A DEVELOPER. IN FACT THE ASSESSEE ENTERED INTO AGR EEMENT FOR DEVELOPMENT OF INFRASTRUCTURE FACILITY AND THEREFOR E, IT IS A CONTRACTOR. THEREFORE, THE AUTHORITIES ARE NOT JUS TIFIED TO HOLD THAT THE ASSESSEE IS NOT A DEVELOPER SIMPLY BECAUSE HE I S MENTIONED AS A CONTRACTOR IN THE AGREEMENT. THE REVENUE AUTHORITI ES CANNOT MAKE A DISTINCTION BETWEEN THE WORDS CONTRACTOR AND D EVELOPER. THE CONDITIONS MENTIONED IN THE INCOME-TAX ACT IN SEC. 80-IA ARE THAT THE ASSESSEE SHALL BE A COMPANY AND SHOULD HAVE ENT ERED INTO AN AGREEMENT WITH THE GOVERNMENT OR GOVERNMENT BODY FO R DEVELOPMENT OF THE INFRASTRUCTURE FACILITY. EVEN I F IT DID SO IN THE PROCESS OF FULFILLING THE CONTRACT, IT WOULD BE ELI GIBLE FOR DEDUCTION UNDER THE SAID SECTION. THEREFORE, IT WAS SUBMITTE D THAT BOTH THE ASSESSING OFFICER AND THE LEARNED COMMISSIONER OF I NCOME-TAX (APPEALS) ARE NOT CORRECT IN REJECTING THE CLAIM MA DE BY THE ASSESSEE FOR DEDUCTION UNDER SEC. 80IA(4) OF THE ACT. THE L OWER AUTHORITIES ARE I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 18 OF THE VIEW THAT SEPARATE BOOKS OF ACCOUNT WERE NOT MAINTAINED FOR EACH OF THE WORK. IN THIS REGARD IT IS SUBMITTED T HAT PROPER ACCOUNTS WERE MAINTAINED SEPARATELY FOR EACH WORK EXCEPT FOR THE HEAD OFFICE EXPENDITURE. FURTHER, IT IS HELD BY THE HONOURABLE ITAT IN THE CASE OF PATWA KINARIWALA ELECTRONICS VS. IAC REPORTED IN 51 TTJ 280, WHEREIN IT IS HELD THAT MAINTENANCE OF SEPARATE BOO KS IS NOT FATAL. A SIMILAR DECISION IS TAKEN BY THE ITAT IN THE CASE O F SHOGHI COMMUNICATIONS LTD., VS. DCIT REPORTED IN 9 SOT 489 . THE ITAT, CHENNAI BENCH IN THE CASE OF CAVINKARE (P) LTD., VS . ACIT REPORTED IN 16 DTR 322 HELD THAT SEPARATE BOOKS OF ACCOUNT FOR EACH UNIT NEED NOT BE MAINTAINED. HOWEVER, IT IS SUBMITTED THAT T HE ASSESSEE MAINTAINED SEPARATE BOOKS OF ACCOUNT AND CAN ARRIVE AT THE PROFIT FOR EACH OF THE UNIT. THE LOWER AUTHORITIES ARE OF THE VIEW THAT THE DEDUCTION IS ALLOWABLE ONLY WHEN THE ASSESSEE ENTER S INTO AGREEMENT WITH GOVERNMENT AND NOT WITH ANY OTHER BODY CORPORA TE. IN THIS REGARD, IT IS SUBMITTED THAT THE PROVISIONS OF SECT ION 80IA(4) MAKES IT CLEAR THAT AN AGREEMENT CAN BE ENTERED INTO BY THE ASSESSEE WITH EITHER THE GOVERNMENT OR THE GOVERNMENT ORGANIZATIO N OR A STATUTORY BODY. THE STATUTORY BODY INCLUDES ANY CORPORATION OR CORPORATE BODY INCORPORATED BY THE GOVERNMENT. IT IS SUBMITTE D THAT THE ASSESSEE TOOK POSSESSION OF THE UNDEVELOPED AREA AN D HANDED OVER THE DEVELOPED AREA. IN THE PROCESS, IT HAS UNDERTA KEN EVERY ACTIVITY INCLUDING THE RISKS INVOLVED IN THE PROCESS. IT HAS TO REIMBURSE LOSSES SUFFERED BY ANYONE INCLUDING THE GOVERNMENT AND THE PEOPLE, IF ANY ONE SUFFERS THE LOSS. IT CAN ALSO BE SEEN THAT ANY LOSS CAUSED BECAUSE OF THE NATURAL CALAMITIES ALSO HAS TO BE MADE GOOD BY THE ASSESSEE ONLY. IT HAD TO UNDERTAKE THE MAINTENANCE OF THE E XISTING ROAD, WHILE THE PROCESS OF DEVELOPMENT IS ON. IT CAN NEITHER S TOP THE TRAFFIC NOR STOP THE WORK. IN THE PROCESS, IF ANY OF THE VEHIC LE OR PERSON SUFFERS LOSS BECAUSE OF ANY REASON, IT SHALL BE THE RESPONS IBILITY OF THE ASSESSEE. EVERY LOSS IN THE PROCESS HAS TO BE THAT OF THE ASSESSEE ONLY. THERE IS NO SUCH MENTION IN THE PROVISIONS OF SEC. 80IA (4) THAT THE ASSESSEE SHOULD INVEST ITS OWN MONEY IN THE PRO CESS OF DEVELOPMENT. THE ONLY REQUIREMENT IS THAT THE ENTE RPRISE SHOULD BE I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 19 A COMPANY AND SUCH ENTERPRISE SHOULD BE IN THE BUSI NESS OF DEVELOPMENT OF INFRASTRUCTURE FACILITY. HOW THE FU NDS ARE POOLED FOR THE PURPOSE IS NOT MENTIONED IN THE ACT. THE DEPAR TMENT CANNOT INTRODUCE WORDS INTO THE ACT TO GIVE A DIFFERENT ME ANING. THEY HAVE TO READ THE PROVISIONS AS THEY EXIST IN THE ACT. A PLAIN READING OF THE PROVISIONS OF SECTION 80IA (4) DOES NOT INDICATE TH AT THE ASSESSEE TO BE ELIGIBLE FOR DEDUCTION SHOULD HAVE INTRODUCED IT S OWN FUNDS. VARIOUS COURTS HAVE HELD THAT THE PROVISIONS ALLOWI NG RELIEF SHOULD BE READ LIBERALLY AND NOTHING CAN BE ADDED TO THE WORD S USED IN THE ACT SO AS TO DISENTITLE AN ASSESSEE FOR THE RELIEF AND ALSO VARIOUS COURTS HAVE HELD THAT IT IS NOT OPEN FOR THE DEPARTMENT TO READ WHAT IS NOT THERE EITHER IN THE DOCUMENTS OR IN THE STATUTORY P ROVISION, FOR WHICH HE PLACED COPIES OF THE CASE LAWS IN THE PAPER BOOK SUBMITTED. 26. ON THE OTHER HAND, THE LEARNED DEPARTMENTAL REPRESE NTATIVE SUBMITTED WRITTEN SUBMISSIONS BASED ON THE ARGUMENT S PUT FORTH BEFORE US. HE RELIED ON THE ORDERS OF THE LOWER AU THORITIES AND SUBMITTED THAT TO BE ELIGIBLE FOR DEDUCTION UNDER S ECTION 80IA(4) OF THE ACT, ALL THE THREE CONDITIONS MENTIONED IN THE SUB-SECTION SHOULD BE CUMULATIVELY FULFILLED. ACCORDING TO HIM, THE AS SESSEE SHOULD HAVE BEEN ENGAGED IN DEVELOPMENT AND MAINTENANCE OF INFR ASTRUCTURE FACILITY. ACCORDING TO HIM, A MERE DEVELOPER IS NO T ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA (4) OF THE ACT. IN TH IS REGARD, HE REFERRED TO SUB-SECTION (2) OF SEC.80IA (4) AND ALS O SUB CLAUSE (C) OF THE SECTION 80IA(4) (I). THE WORDS USED IN SUB-CLA USE (C) STARTED OR STARTS OPERATING AND MAINTAINING INFRASTRUCTURE F ACILITY ON OR AFTER FIRST OF APRIL, 1995 WOULD APPLY ONLY TO THE SECOND TYPE OF ENTERPRISE WHO UNDERTAKES THE WORK OF MAINTAINING AND OPERATI ON. IT WOULD NOT APPLY TO A PERSON WHO IS ENGAGED IN DEVELOPING INFRASTRUCTURE FACILITY AS THE WORD DEVELOPED IS NOT USED IN THE SAID SUB CLAUSE. FURTHER, THIS IS ANALYSED BY VARIOUS COURTS. IT IS HELD CLEARLY THAT SUCH A PROVISION I.E. CLAUSE (C) WOULD APPLY ONLY T O SUCH ENTERPRISES ENGAGED IN MAINTAINING AND OPERATING THE INFRASTRUC TURE. THE BOMBAY HIGH COURT IN THE CASE OF CIT VS ABG HEAVY I NDUSTRIES I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 20 LTD.,[SUPRA] OBSERVED THAT THE REQUIREMENT THAT THE OPERATION AND MAINTENANCE OF THE INFRASTRUCTURE FACILITY CAME AFT ER FIRST OF APRIL, 1995 HAS TO BE HARMONIOUSLY CONSIDERED WITH THE MAI N PROVISION UNDER WHICH DEDUCTION IS AVAILABLE TO THE ASSESSE E WHICH DEVELOPS OR OPERATES, MAINTAINS AND DEVELOPS OR OPERATES AND MAINTAINS INFRASTRUCTURE FACILITY. THERE IS SIGNIFICANCE FOR CLAUSE-(C) IN SO FAR AS THE ENTERPRISES CARRYING ON BUSINESS OF DEVELOPING AND MAINTAINING AND OPERATING INFRASTRUCTURE FACILITY ARE CONCERNED . TO BE ELIGIBLE FOR DEDUCTION UNDER SUB-SECTION (4A), ANY ENTERPRISE HA S TO COMMENCE ITS OPERATION ON OR AFTER 01-04-1995. THIS CLARIFIE D THAT ANY ENTERPRISE COMMENCING ITS OPERATIONS PRIOR TO THE S AID DATE, BUT CONTINUING TO DO THE SAID ACTIVITY FOR THE ASSESSME NT YEARS 1996-97 AND ONWARDS WOULD NOT BE ELIGIBLE. AS SUBMITTED THA T SUB SECTION (4A) WAS REMOVED WITH EFFECT FROM THE ASSESSMENT YE AR 2000-01 BY THE FINANCE ACT, 1999. A NEW SUB SECTION (4) WAS IN TRODUCED BY THE SAID FINANCE ACT. SUB SECTION (4) EXTENDED DEDUCTIO N TO SUCH ENTERPRISES WHICH DEVELOP INFRASTRUCTURE OR WHICH M AINTAIN AND OPERATE INFRASTRUCTURE FACILITY OR WHICH DEVELOPS, MAINTAINS AND OPERATES AN INFRASTRUCTURE FACILITY. IT IS CLARIFIE D BY THE BOARD THAT SUB SECTION (4A) WAS DELETED AND THE DEDUCTION EARL IER AVAILABLE CONTINUES IN LIEU OF SUB SECTION (4) OF SECTION 80I A. THEREFORE, THE CONDITION MENTIONED IN SUB SECTION (4A) THAT AN ENT ERPRISE COMMENCING ITS ACTIVITY OF OPERATING, MAINTAINING T HE INFRASTRUCTURE FACILITY ON OR AFTER THE FIRST DAY OF APRIL, 1995 W OULD ONLY BE ELIGIBLE FOR DEDUCTION. THEREFORE, IT APPLIES TO THOSE ENTE RPRISES WHICH WERE EARLIER ELIGIBLE FOR DEDUCTION UNDER SUB SECTION (4 A) AND WHICH WILL BE CONTINUED TO BE ELIGIBLE FOR DEDUCTION UNDER SUB-SE CTION (4). SUCH PROVISION HAS NO APPLICATION TO THE CASE OF THE ASS ESSEE, WHICH BECAME ELIGIBLE FOR DEDUCTION UNDER SUB-SECTION (4) OF SEC. 80IA OF THE ACT. THEREFORE, SUB-CLAUSE (C) CAME INTO PLAY ONLY IN RESPECT OF THOSE CONCERNS WHICH CLAIMED DEDUCTION FOR MAINTAIN ING AND DEVELOPING THE INFRASTRUCTURE FACILITY AND NOT FOR THE ASSESSEE WHO ONLY DEVELOPS. THE MEANING OF THE WORD DEVELOPER AND THE ELIGIBILITY OF THE BUSINESS TO CLAIM DEDUCTION MEANT FOR DEVEL OPMENT OF I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 21 INFRASTRUCTURAL FACILITIES WITHIN THE MEANING OF S ECTION 80IA HAS TO BE SEEN IN THE CONTEXT OF THE GENESIS AND LEGISLATIVE HISTORY OF THE SECTION AS HELD BY THE SUPREME COURT IN THE CASE OF CIT VS. N.C. BUDDHIRAJA (204 ITR 412,433) THE PROVISION AS INTRO DUCED BY THE FINANCE ACT, 1991 AS AMENDED BY FINANCE ACT, 1996, FINANCE ACT, 1999, FINANCE ACT, 2001, UP TO FINANCE ACT 2007 AND FINANCE ACT, 2009 AND AS EXPLAINED BY CIRCULAR 794 DATED 9-8-200 0 CIRCULAR 779 DATED 14-9-1999 (240 ITR ST. 32), CIRCULAR 794 DATE D 9-8-2000, CIRCULAR 779 DATED 14-98-1999 (240 ITR ST. 32), CIR CULAR 794 DATED 19-8-2000, CIRCULAR 14/2001 (252 ITR ST. 98) AND CI RCULAR 3/2008 DATED 12-03-2008 (168 TAXMAN ST. 12,54) BRINGS OUT THE OBJECTIVES OF THE STATUTE AND EXPECTATIONS OF THE LAW-MAKERS I N BRINGING THE ENACTMENT. THE STATUTORY PROVISIONS AS WOULD BE AP PARENT FROM THE CIRCULARS AND EXPLANATORY NOTES REFERRED TO HEREIN- ABOVE SEEK TO INCORPORATE A QUID PRO QUO BETWEEN INTRODUCTION OF INVESTMENT AND ENTREPRENEURIAL RESOURCES FROM THE PRIVATE SECTOR A ND A TAX DEDUCTION FROM THE GOVERNMENT TO ENABLE RECOUPMENT OF EXPENDITURE INCURRED. THE BOT/BOOT MODELS SEEK TO AUGMENT INFR ASTRUCTURAL ASSETS IN ADDITION TO GOVERNMENTAL SPENDING AND NOT SIMPLY FEED ON GOVERNMENT EXPENDITURE. THE DEDUCTION UNDER SECTIO N 80IA IS, THEREFORE, AVAILABLE TO THE FORMER, AND NOT TO THE LATTER FORMS OF BUSINESS. THE DEDUCTION CLAIMED UNDER SECTION 80I A OF THE ACT AS PRESCRIBED IN SUB-SECTION (1) IS IN ACCORDANCE WIT H AND SUBJECT TO THE PROVISIONS OF THIS SECTION.... IN SUB SECTION (2), IT IS STATED THAT THE DEDUCTION IS AVAILABLE FOR THE SPECIFIED NUMBER OF YEARS BRINING FROM THE YEAR IN WHICH THE UNDERTAKING OR THE ENTER PRISE DEVELOPS AND BEGINS TO OPERATE ANY INFRASTRUCTURE FACILITY O R STARTS PROVIDING TELECOMMUNICATION SERVICES OR... IT IS CLEAR THERE FORE THAT THE DEDUCTION IS INEXTRICABLY CONNECTED TO THE COMMENCE MENT OF OPERATIONS OF THE INFRASTRUCTURE FACILITY. IT IS A PPARENT THAT THE FACILITY HAS TO BE CONCEIVED OF IN ITS TOTALITY BEC AUSE PART OF THE INFRASTRUCTURE FACILITY HAS NOT EXISTENCE INDEPENDE NT OF THE WHOLE. A CERTAIN NUMBER OF KILOMETRES OF A HIGHWAY OR IRRIGA TION CANAL HAS NO EXISTENCE BY ITSELF, AND IS INCAPABLE OF BECOMING O PERATIONAL WITHOUT I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 22 REFERENCE TO THE REST OF THE PROJECT, OF WHICH IT I S ONLY A PART. IT IS EVIDENT FROM THE AGREEMENTS FILED BY THE ASESSEE TH AT THE ASSESSEE UNDERTOOK TO EXECUTE THE WORK ON NHAIS SPECIFICATI ONS, AT RATES AGREED UPON, SUBJECT TO MEASUREMENT, WITHIN A PERIO D OF 36 MONTHS OF COMMENCEMENT. 27. HE SUBMITTED THAT AGREEMENT FILED BY THE ASSESEE I N THE PAPER BOOK WHEREIN THE DETAILS OF RATE ANALYSIS, BILL OF QUANTITIES ETC., MAKE IT CLEAR THAT THE ASSESSEE HAD NO AUTONOMY IN MATTERS OF DESIGN AND SPECIFICATION WHICH COMPLETELY VESTED WI TH THE EMPLOYER. THE ONLY LAWFUL ENTITLEMENT OF THE ASSESSEE WAS TO BE PAID FOR THE MEASUREMENT OF WORK COMPLETED AT RATES AGREED UPON. THE PARTIAL AND SECTIONAL NATURE OF THE PROPOSED WORK IS IMMEDI ATELY CLEAR FROM THIS NOTICE AND IT IS ALSO APPARENT FROM THIS THAT THE SECTION OF THE ROAD PROPOSED FOR IMPROVEMENT HAS NO INDEPENDENT EX ISTENCE CAPABLE OF SATISFYING THE REQUIREMENT OF SECTION 80 IA (2). THEREFORE, THIS PROJECT IS INCAPABLE OF COMMENCEMENT OF OPERAT IONS BY ITSELF, OR TO QUALITY THE LARGER INFRASTRUCTURE FACILITY OF WH ICH IT IS A PART. THE ASSESSEE ALSO GETS MOBILISATION ADVANCE AS WELL AS INTEREST-FREE ADVANCE FOR MACHINERY PURCHASE AND THERE IS NO ELEM ENT OF ENTREPRENEURIAL INITIATIVE OR FINANCIAL PARTICIPATI ON OF THE CONTRACTOR IN THIS KIND OF A PROJECT. THE SUCCESSFUL BIDDER M ERELY EXECUTES A GOVERNMENT CONTRACT AND GETS PAID FOR IT AT MUTUALL Y AGREED RATES AND THE NATURE OF RESPONSIBILITIES ASSUMED UNDER TH E OTHER CONTRACTS AS PER AGREEMENTS. IT IS FURTHER STATED THAT DUR ING THE HEARING, THE AUTHORISED REPRESENTATIVE OF THE ASSESSEE WAS AT PA INS TO EMPHASISE THAT THE ASSESSEE UNDERTOOK MAINTENANCE WORK AND WA S HENCE IN THE SAME LEAGUE AS A DEVELOPER. HOWEVER, IT IS CLEAR F ROM THE DOCUMENT AS FURNISHED IN THE PAPER BOOK THAT THE MAINTENANCE FUNCTION WAS ACTUALLY REMEDYING OF DEFECTS FOR A PRESCRIBED PERI OD. NO SEPARATE CHARGES HAVE BEEN COLLECTED AND THIS CANNOT BE SEEN AS A MAINTENANCE FUNCTION. 28. THE LD. DR SUBMITTED THAT ON THESE FACTS, HAVING RE GARD TO THE RESPONSIBILITIES ASSUMED UNDER THE AGREEMENT, THE A SSESSEE CANNOT I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 23 BE SEEN AS A DEVELOPER; INSTEAD IT PLAYS THE ROLE O F AN EXECUTOR/CONTRACTOR. THE CONTRACTS IN QUESTION ARE IN THE NATURE OF WORKS CONTRACTS, THE EXPLANATION INSERTED BELOW SEC TION 80IA (13) OF THE ACT WITH RETROSPECTIVE EFFECT FROM 1-4-2000 HAS OVER-RIDING INFLUENCE AND DEBARS THE ASSESSEES CLAIM. THE LAW ON THE SUBJECT OF APPLICATION OF A RETROSPECTIVE AMENDMENT IS CLEAR F ROM THE SPECIAL BENCH DECISION OF THE TRIBUNAL IN THE CASE OF AQUAR IUS TRAVELS P LTD. VS. ITO (111 ITD 53). SUCH PROVISIONS SHOULD BE AP PLIED IN PENDING PROCEEDINGS, EVEN WHEN THEY HAVE NOT BEEN INVOLVED EARLIER. AS MATTERS STAND, THEREFORE, THE MOST IMPORTANT QUESTI ON FOR EXAMINATION ON FACTS IS WHETHER THE BUSINESS AGREEM ENT IN QUESTION CAN BE TERMED A WORKS CONTRACT OR NOT. IF THE ANSW ER IS IN AFFIRMATIVE, NOTHING ELSE MATTERS BECAUSE THE EXPLA NATION TAKES OVER. IF NOT, THE OTHER FACTORS SUCH A DEVELOPMENT/OPERAT ION ETC., AND OTHER SPECIFIED CONDITIONS BECOME RELEVANT. RELIAN CE WAS PLACED IN THIS REGARD ON THE DECISION OF THE MUMBAI HIGH COUR T IN THE CASE OF GLENMARK PHARMA (324 ITR 199) WHICH DIGESTS THE CAS E LAW FOR ASCERTAINMENT OF WHETHER FACTS OF THE AGREEMENT WOU LD AMOUNT TO A CONTRACT FOR WORK OR FOR SALE. 29. HE PLACED RELIANCE ON THE DECISION OF JURISDICTIONA L HIGH COURT IN THE CASE OF DR. MRS. RENUKA DATLA VS. CIT (240 I TR 463) (AP), THE PROVISIONS GRANTING EXEMPTIONS HAVE TO BE STRICTLY CONSTRUED. IT WAS HELD BY THE SUPREME COURT IN THE CASE OF IPCA LABOR ATORY LIMITED VS. DCIT (SC) 266 ITR 521 THAT WHEN THERE IS NO AMB IGUITY, PROVISIONS CANNOT BE INTERPRETED TO CONFER A BENEFI T UPON THE ASSESSEE. THE PROVISION IS INCAPABLE OF APPLICATIO N TO THE FACTS OF THE ASSESSEES CASE BECAUSE THE ASSESSEE IS ONLY AN EXE CUTOR OF A CONTRACT, WHICH IS IN TURN, PART OF A LARGER PROJEC T UNDERTAKEN BY THE GOVERNMENT, OR ITS AGENCY. BY REFERRING TO THE TW O DECISIONS RELIED UPON BY THE LEARNED COUNSEL FOR THE ASSESEE, MUMBAI HIGH COURT IN THE CASE OF CIT VS. ABG HEAVY INDUSTRIES LIMITED R EPORTED IN 322 ITR 323 AND ITAT PUNE BENCH IN THE CASE OF LAXMI CI VIL ENGINEERING PVT. LTD., VS. ADDL. CIT KOLHAPUR (UNREPORTED/ITA N O.766/PN/09 I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 24 DATED 8-6-2011), IT IS SUBMITTED THAT THESE DECISIO NS SUPPORTED THE PROPOSITION THAT (I) THE ITATS DECISION IN THE CA SE OF B.T. PATIL & SONS, LARGER BENCH (MUMBAI) REPORTED IN 126 TTJ 577 IS NO LONGER GOOD LAW, AND (II) THE DISTINCTION BETWEEN DEVELOP ER AND CONTRACTOR IS NO LONGER RELEVANT IN THE CONTEXT OF CHANGED LAW EX PLAINED BY THE MUMBAI HIGH COURT IN THE CASE OF ABG HEAVY INDUSTRI ES (SUPRA) AND FOLLOWED WITHIN ITS JURISDICTION BY THE PUNE BENCH OF THE ITAT IN THE CASE OF LAXMI CIVIL ENGG. (SUPRA). IT IS SUBMITTED THAT SUCH RELIANCE IS NEITHER CORRECT NOR RELEVANT IN DECIDING THE ISS UES ON HAND. THIS POSITION IS ELABORATED IN THE FOLLOWING PARAS. IN THE CASE OF LAXMI CIVIL ENGG. PVT. LTD., THE ARGUMENT OF THE ASSESSEE THAT WAS ACCEPTED BY THE ITAT, PUNE BENCH IS BROADLY- THE ASSESSEE IS A CONTRACTOR, EVERY CONTRACTOR IS A DEVELOPER AS PER THE MUMBAI H IGH COURT DECISION IN THE CASE OF ABG HEAVY INDUSTRIES AND A DEVELOPER NEED NOT OPERATE AND MAINTAIN THE INFRASTRUCTURE FACILIT Y, AS HELD BY THE MUMBAI HIGH COURT IN THE CASE OF ABG HEAVY INDUSTRI ES. IT IS SUBMITTED THAT THE DECISION OF THE PUNE BENCH OF TH E ITAT IN THE CASE OF CIVIL ENGG. (SUPRA) IS OF NO HELP IN DECIDI NG THE ISSUES IN THE IMPUGNED APPEALS FOR THE REASON THAT THE TERMS AND CONDITIONS OF THE CONTRACTS AND THE NATURE OF OBLIGATIONS ASSUMED THERE-UNDER, BY THE BUSINESS ARE NOT DISCUSSED IN THE SAID ORDER. T HIS IS THE FACTUAL FULCRUM ON WHICH THE DECISION OF THE ITAT (LARGER B ENCH) IN B.T. PATIL AS WELL AS THE MUMBAI HIGH COURT IN ABG CASE WAS DE CIDED. WITHOUT SUCH DETAIL, THERE IS NO POINT OF COMPARABILITY BET WEEN THE PUNE BENCH DECISION AND THE OTHER CASES. THE UNANSWERED QUESTIONS EMERGING THERE-FROM ARE I) CAN WE ASSUME THAT THERE WAS A BOLT CONTRACT OR WAS IT A WORKS CONTRACT? II) CAN WE ASSUME THAT THE ASSESSEE TOOK OWNERSHIP CONT ROL OF THE ASSET CREATED? III) THE CIRCUMSTANCES UNDER WHICH THE ENTERPRISE IN ABG HEAVY INDUSTRIES BECAME AKIN TO A DEVELOPER, AND DO THEY OBTAIN IN THE CASE OF LCE? SUCH AS 10 YEAR OWNERSHIP; RETRANS FER; I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 25 ASSUMPTION OF ASSURED RESPONSIBILITY REGARDING OPER ATIONAL READINESS, ETC., NOTICED IN ABG HEAVY INDUSTRIES AR E NOT NOTICED IN THE FACTS OF THE CASE AS DIGESTED BY THE AFORE MENTIONED DECISION OF THE PUNE BENCH OF THE ITAT IN THE CASE OF LCE. IV) THE UNBUNDLING OF CONDITIONS OF DEVELOPMENT, OPERAT ION & MAINTENANCE, AND DEVELOPMENT OPERATION AND MAINTENA NCE, IN THE SENSE OF MAKING THEM NON CUMULATIVE BY AMENDMEN T OF LAW EFFECTIVE FROM 1-4-2002 IS NOT THE ONLY RELEVAN T ISSUE. THE LARGER ISSUE IS WHETHER THE ASSESSEE IS A DEVELOPER IN THE FIRST PLACE. V) IN THE CASE OF B.T. PATIL, THE CUMULATIVE OR NON CU MULATIVE SATISFACTION OF CONDITIONS IN SECTION 80IA(4)(I) WA S NEVER A MATERIAL FACT. THIS WAS SO NOT ONLY BECAUSE THE IM PUGNED APPEALS RELATED TO PRE 1-4-2002 PERIOD, BUT ALSO BE CAUSE THE MATTER WAS DECIDED ON THE PRELIMINARY ISSUE OF WHET HER THE ASSESSEE WAS A DEVELOPER OR NOT IN THE FIRST PLACE. VI) SOME OF THE ATTRIBUTES OF A DEVELOPER WERE DISCUSSE D IN THE CASE OF B.T. PATIL, NONE OF WHOM WERE ABSENT IN THE CASE OF ABG HEAVY INDUSTRIES. 30. THE DECISION OF THE MUMBAI HIGH COURT, THOUGH LATER IN TIME WAS DIFFERENT IN FACTS THAT THERE WAS NO OCCASION E VEN TO REFER TO THE ITATS DECISION IN THE CASE OF B.T. PATIL. THEREFO RE, IT CAN BE SAID THAT THE DECISION OF THE MUMBAI HIGH COURT IN THE C ASE OF ABG HEAVY INDUSTRIES WILL BE BINDING IN ITS JURISDICTION FOR INFRASTRUCTURE CONTRACT CASES, ONLY IN SO FAR AS THE FACTS OF THE CASE ARE COMPATIBLE. FOR THE SAME REASON, THERE CAN BE NO ADVERSE IMPLIC ATION FOR THE PRECEDENT VALUE OF THE B.T. PATIL CASE. AS SUBMI TTED HEREINABOVE, ON IMMEDIATE AND NECESSARY CONSEQUENCE OF THE RETRO SPECTIVE AMENDMENT INTRODUCED BY THE FINANCE ACT, 2009 INSER TING EXPLANATION BELOW SECTION 80 IA(13), IS THAT ANY BU SINESS TRANSACTED IN TERMS OF A WORKS CONTRACT STANDS DISQUALIFIED FR OM SEEKING I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 26 DEDUCTION UNDER SECTION 80I(A(4). THE DECISION OF THE MUMBAI HIGH COURT IN THE CASE OF ABG WOULD HAVE NO APPLICATION FROM THIS POINT OF VIEW ALSO. SINCE THE AGREEMENT IN ABG WAS A BOL T AGREEMENT AND NOT A WORKS CONTRACT THEIR LORDSHIPS HAD NO OCC ASION TO CONSIDER THE EXPLANATION INTRODUCED IN FINANCE ACT, 2009 WITH EFFECT FROM 1-4-2001. EVEN IF IT IS ASSUMED, HYPOTHETICAL LY, THAT THE AGREEMENT IN ABG WAS IN THE NATURE OF A WORKS CONTR ACT, OR THAT EVERY CONTRACTOR WAS A DEVELOPER, THE DECISION OF T HE MUMBAI HIGH COURT WITHOUT CONSIDERING THE EXPLANATION CANNOT O PERATE TO OVERRULE THE ITATS DECISION IN THE CASE OF B.T. PA TIL WHERE THE BENCH OF THE TRIBUNAL CONSIDERED THE EFFECT OF THE EXPLAN ATION AND IT WAS EXPLAINED BY THE HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF HYDERABAD CHEMICALS SUPPLIES LIMITED (ITA NO.352/HY D/2005 AND 6 OTHERS APPEALS DATED 21-1-2011, IN THE CONTEXT OF AN APPARENT CONFLICT BETWEEN A SPECIAL BENCH (AHMEDABAD) DECISI ON OF THE ITAT AND MADRAS HIGH COURT AT PARA-15 ON PAGE-8 AS FOLLO WS:- FURTHER, JUDGMENT OF HIGH COURT THOUGH NOT OF THE JURISDICTIONAL HIGH COURT, PREVAILS OVER AN ORDER O F THE SPECIAL BENCH EVEN THOUGH IT IS FROM THE JURISDICTI ONAL BENCH OF THE TRIBUNAL, HOWEVER, WHERE THE JUDGMENT OF THE NON JURISDICTIONAL HIGH COURT, THOUGH THE ONLY JUDGMENT ON THE POINT, HAS BEEN RENDERED WITHOUT HA VING BEEN INFORMED ABOUT CERTAIN STATUTORY PROVISIONS TH AT ARE DIRECTLY RELEVANT, IT IS NOT TO BE FOLLOWED. 31. WITHOUT PREJUDICE TO THE ARGUMENT THAT THE STAND TH AT THE MUMBAI HIGH COURTS ORDER IN ABG RUNS ON COMPLETELY DIFFERENT FACTS, IT IS RESPECTFULLY POINTED OUT THAT THIS DEC ISION CANNOT BE A BINDING PRECEDENT, IN ANY CASE, FOR THE ABOVE-CITED REASON ALSO AND THIS ISSUE CAN BE SEEN IN ANOTHER PERSPECTIVE. THE RE IS NOTHING IN THE CASE OF ABG HEAVY INDUSTRIES THAT SUPPORTS THE VIEW THAT THE DEVELOPER HAS TO BE SEEN DE HORS THE CONTRACT AND ITS STIPULATIONS. IN THE CASE OF ABG HEAVY INDUSTRIES THE REVENUE TOO K THE STAND THAT THE ASSESSEE WAS NOT A DEVELOPER BECAUSE IT WAS ONL Y A SUPPLIER OF THE EQUIPMENT. THIS DID NOT FIND FAVOUR BECAUSE IT WAS HELD THAT THE NATURE OF THE BUSINESS HAD TO BE SEEN IN TERMS OF T HE OBLIGATIONS I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 27 ASSUMED UNDER THE CONTRACT WHICH INCLUDED NOT ONLY SUPPLY AND INSTALLATION OF THE CRANES BUT ALSO TESTING, COMMIT MENT OF OPERATIONAL READINESS FOR A PERIOD OF TEN YEARS ON THE PAIN OF LIQUIDATED DAMAGES AND EVENTUAL RE-TRANSFER AFTER SUCH PERIOD. IN TH E CASE OF ABG HEAVY INDUSTRIES, THE CREATION OF CERTAIN STANDALON E PARTS OF THE PART COMPLEX QUALIFIED FOR BEING TERMED ON INFRASTRUCTUR E PROJECT BECAUSE THE BOARD CIRCULAR 793 DATED 23-6-2000 CLARIFIED TH AT PART OF THE PROJECT WOULD QUALIFY IF SO CERTIFIED BY THE PORT A UTHORITIES. THE CONTAINER HANDLING CRANES ASSEMBLY WAS CERTIFIED TO BE AN INTEGRAL PART OF THE PORT COMPLEX BY THE PORT AUTHORITY. TH IS IS CONTEXTUALLY VERY DIFFERENT FROM PARTS OF THE RUNNING LENGTH OF A HIGHWAY OR IRRIGATION CANAL BEING EXECUTED ON A RATE CONTRACT. THE DEPARTMENTS ARGUMENT THAT THE ASSESSEE DID NOT ACTUALLY OPERATE OR MAINTAIN THE FACILITY IN QUESTION WAS NOT UPHELD BECAUSE THE BEN EFITS OF THE SECTION WERE HELD TO BE AVAILABLE TO BOT/BOLT CONTR ACTS BY CBDT CIRCULARS, WHICH WERE ANY WAY BINDING ON THE IT AUT HORITIES. IN THE CASE OF THE PRESENT CASE, IT IS NOT EVEN CLAIMED BY THE ASSESSEE THAT THE WORK WAS CARRIED OUT UNDER A BOT/BOLT CONTRACT, OR THAT IT WAS NOT A WORKS CONTRACT. IT IS FURTHER SUBMITTED THAT THE DISTINCTION BETWEEN BUSINESS OF DEVELOPMENT OPERATION/MAINTENAN CE AND DEVELOPMENT/OPERATION/MAINTENANCE WAS REMOVED WITH THE CHANGE IN LAW EFFECTIVE FROM 1-4-2002, AND THAT THIS WAS E XPLAINED BY THE DECISION OF THE MUMBAI HIGH COURT IN THE CASE OF AB G HEAVY INDUSTRIES IS FALLACIOUS FOR THE FOLLOWING REASONS: THE MUMBAI HIGH COURT DECISION WAS RENDERED IN THE CONTEXT OF A BOLT CONTRACT, WHICH WAS IN ANY CASE CLARIFIED BY THE BOARD CIRCULAR TO QUALIFY FOR THE DEDUCTION UNDER SECTION 80IA. IT WAS NOTICED BY THEIR LORDSH IPS THAT THE SUBSEQUENT CHANGES IN THE LAW EFFECTIVE FROM 1- 4- 2002 MERELY MIRRORED THIS LIBERALISED OUTLOOK. THA T IS NOT THE SAME THING AS SAYING THAT A BUSINESS IN THE NAT URE OF A WORKS CONTRACT QUALIFIED FOR THE DEDUCTION IN SPI TE OF NOT OPERATING/MAINTAINING THE FACILITY. THE DECISION O F THE LARGER BENCH IN THE CASE OF B.T. PATIL WAS NOT UN-W ARE OF THE CHANGE IN LAW EFFECTIVE FROM 1-4-2002 AS WOULD BE EVIDENT FROM PARA 36 OF THE ORDER. THE CHANGE MAKI NG THE CONDITIONS OF DEVELOPMENT/OPERATION/MAINTENANCE NON I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 28 CUMULATIVE WAS NOT RELEVANT SINCE THE CASE RELATED TO PRE 1-4-2002 PERIOD. IN THE CASE OF B.T. PATIL, THE L ARGER BENCH ENUNCIATED CERTAIN TESTS TO DETERMINE WHETHER THE BUSINESS WAS ONE OF A DEVELOPER OR A MERE CONTRA CTOR. THE BRIEFLY STATED FACTS ARE AS FOLLOWS: THE DISTINCTION BETWEEN CREATION OF PRODUCT VS. REN DERING OF SERVICE (PARA -40), OWNER VS. EXECUTOR OF OWNER S PLAN WITH REFERENCE TO PROJECT SPECIFICATION (PARA-42), VESTING OF PROPERTY, SUBJECT TO RE-TRANSFER IF NEED BE (PARA 4 6) AND NEED FOR INTERPRETATION TO AVOID ABSURD RESULTS (PA RA 50). 32. IN VIEW OF THE TERMS OF THE RELEVANT CONTRACT, IT W AS POSSIBLE TO GIVE A FINDING THAT THE BUSINESS WAS NOT ONE OF DE VELOPMENT PER SE. THEREFORE, THE CHANGES IN LAW AFTER 1-4-2002 WERE N OT EVEN CALLED INTO PLAY IN THE CASE OF B.T. PATIL. IT IS FURTHE R SUBMITTED THAT THE MUMBAI HIGH COURTS DECISION IN THE CASE OF ABG HEA VY INDUSTRIES NOT ONLY RUNS ON DIFFERENT FACTS, IT DOES NOT EVEN REFER TO THE CASE OF B T PATIL. FURTHERMORE, THE MUMBAI HIGH COURTS STAN D THAT THE NATURE OF THE BUSINESS SHOULD BE SEEN IN THE CONTEX T OF THE OBLIGATIONS ASSUMED UNDER THE CONTRACT ONLY COMPLEM ENTS, NOT CONTRADICTS THE LARGER BENCHS DISTINCTION BETWEEN A DEVELOPER AND CONTRACTOR SIMPLICITER, AS NOTED HEREINABOVE. IT W OULD BE WRONG AND THEREFORE TO SUGGEST THAT THE CASE OF B.T. PATIL HA S BEEN IMPLIEDLY OVER-RULED BY THE HIGH COURTS DECISION. THE DEP ARTMENTAL REPRESENTATIVE ALSO PLACED RELIANCE ON ANOTHER DECI SION OF THE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF INDIAN HUME PIPE CO. LTD., VS. DCIT ITA NO.5172/MUM/2008, DATED 29-7-201 1 FOR ASSESSMENT YEAR 2004-05. THIS DECISION PRONOUNCED AFTER THE PUNE BENCH DECISION IN THE CASE OF LAXMI CIVIL ENGG. CON SIDERS THE TRIBUNAL DECISION OF B.T. PATIL AS WELL AS ITS JUR ISDICTIONAL HIGH COURT DECISION IN THE CASE OF ABG AND GOES ON TO HOLD THA T THE ASSESSEE IS NOT ENTITLED TO THE DEDUCTION UNDER SECTION 80IA (4 ) IN VIEW OF THE EXPLANATION INTRODUCED WITH RETROSPECTIVE EFFECT. 33. THE LEARNED DEPARTMENTAL REPRESENTATIVE RELIED UPON SUB- SECTION (2) OF SEC.80IA OF THE ACT AND SUBMITTED TH AT THE DEDUCTION UNDER SUB-SECTION (1) WOULD BE AVAILABLE FOR A PERI OD OF 10 I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 29 CONSECUTIVE ASSESSMENT YEARS OUT OF 15 YEARS BEGIN NING FROM THE YEAR IN WHICH AN UNDERTAKING OR ENTERPRISE DEVELOP S, BEGINS TO OPERATE ANY INFRASTRUCTURE FACILITY OR STARTS PROV IDING TELECOMMUNICATION SYSTEM. THEREFORE, HE IS OF THE VIEW THAT UNLESS OPERATION OF THE INFRASTRUCTURE FACILITY IS ALSO UN DERTAKEN; THE ASSESSEE WOULD NOT BE ELIGIBLE FOR DEDUCTION. IT IS SUBMITTED THAT THIS SECTION PROVIDES FOR AN OPTION TO THE ASSESSEE TO CHOOSE TO CLAIM DEDUCTION FOR ANY 10 YEARS OUT OF 15 YEARS COMMENCI NG FROM THE DATE OF COMMENCEMENT OF THE MAINTENANCE AND OPERATI ON. FOR THAT LIMITED PURPOSE OF FACILITATING AN ASSESSEE WHO BEC OMES ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA(4) IN CHOOSING THE PER IOD OF 10 YEARS, THE SAID PROVISION WAS INTRODUCED. THIS CANNOT BE CONSIDERED AS APPLICABLE TO EVERY ENTERPRISE ELIGIBLE FOR DEDUC TION UNDER SECTION 80IA. THIS WOULD APPLY TO AN ENTERPRISE WHICH REQU IRES CHOOSING THE PERIOD OF 10 YEARS DURING WHICH DEDUCTION IS TO BE CLAIMED. ONLY WHEN THE ASSESSEE HAS TO EXERCISE THE CHOICE, THIS SECTION COMES TO OPERATION. OTHER-WISE THIS SECTION WOULD NOT OPERA TE. 34. THE LEARNED DEPARTMENTAL REPRESENTATIVE REFERRED TO THE FINANCE BILL, 1995 AND THE CIRCULAR NO.717 DATED 14 .8.1995 REPORTED IN 215 ITR 70 (STATUTES). THE SAID CIRCULAR EXPLAI NED THAT AN ENTERPRISE WHICH IS ENGAGED IN THE BUSINESS OF DEVE LOPS, OPERATE AND MAINTAIN INFRASTRUCTURE FACILITY ALONE WAS ELIGIBLE FOR DEDUCTION. AN ENTERPRISE WHICH ONLY DEVELOPS INFRASTRUCTURE FACIL ITY WAS NOT ELIGIBLE FOR DEDUCTION UP TO THE ASSESSMENT YEAR 2000-01. TH E PROVISIONS OF SEC.80IA (4A) WERE MADE APPLICABLE ONLY TO THE ENTE RPRISE WHICH DEVELOP, MAINTAIN AND OPERATES INFRASTRUCTURE FACIL ITY. THE ASSESSEE DID NOT CLAIM DEDUCTION UNDER SECTION 80IA (4A) OF THE ACT. THEREFORE, NEITHER THE CIRCULARS ISSUED UP TO THAT DATE NOR TH E PROVISIONS OF THE LAW AS WERE EXISTED UP TO THE ASSESSMENT YEAR 1999- 2000 CAN BE APPLIED FOR THE PURPOSE OF DETERMINING THE ALLOWABI LITY OF DEDUCTION U/S 80IA(4) CLAIMED BY THE ASSESSEE HEREIN. THE LEA RNED DR REFERRED TO THE CIRCULAR REPORTED IN 240 ITR 32 (STATUTES). IN THE SAID CIRCULAR IT IS CLARIFIED BY THE CBDT THAT THE BENEFIT IN THE AMENDED PROVISIONS I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 30 OF SEC.80IA (4) WOULD EXTEND TO THOSE UNDERTAKINGS WHICH DEVELOP, OPERATE AND BUILD, OPERATE AND TRANSFER. IT IS ONL Y A CLARIFICATORY CIRCULAR. AS SUBMITTED EARLIER, SECTION 80IA (4) A ND SECTION 80IA (4A) WERE IN STATUTE. SUB-SECTION (4A) DEALING WITH THE DEDUCTION IN RESPECT OF BUSINESS OF DEVELOPMENT, OPERATION, MAIN TENANCE WAS DELETED. SUB-SECTION (4) WHICH WAS APPLICABLE TO HOTELS WAS SUBSTITUTED BY ANOTHER PROVISION WHICH ALLOW DEDUCT ION TO AN ENTERPRISE WHICH DEVELOPS OR OPERATES AND MAINTAINS OR DEVELOPS, OPERATES AND MAINTAINS. AT THAT STAGE, AN EXPLANAT ION WAS NEEDED TO BE PROVIDED TO MENTION THAT EARLIER SUB SECTION (4A ) IS RE-INTRODUCED AS A PART IN SUB SECTION (4) IN A DIFFERENT SHAPE. THEREFORE, A CLARIFICATION WAS NECESSARY AND THE SAID CLARIFICAT ION WAS ISSUED. IT IS ALSO SUBMITTED THAT THE DEVELOPMENT AND RISK ARE NOT UNDERTAKEN BY THE ASSESSEE. 35. IN THE REJOINDER, THE LEARNED COUNSEL FOR THE ASSES SEE SUBMITTED THAT THE ASSESSEE INTRODUCED HUGE MONEY I N ITS BUSINESS ACTIVITY AS ON 31-3-2007. THE OWN CAPITAL AND THE L OAN CAPITAL INTRODUCED BY THE ASSESSEE IS RS.342,56,11,907 (EXC LUDING THE MOBILIZATION ADVANCE RECEIVED FROM THE GOVERNMENT) AS AGAINST THE TURNOVER ACHIEVED AT RS. 660.80 CRORES. THIS WOULD MEAN THAT THE ASSESSEE INVESTED ITS OWN FUNDS IN PROCESS OF DEVEL OPMENT OF THE INFRASTRUCTURE FACILITY. THE ASSESSEE HAS TO WAIT F OR A PERIOD OF 56 DAYS/28 DAYS FOR THE PAYMENT AFTER SUBMISSION OF TH E BILL. FURTHER THE GOVERNMENT OF INDIA OBTAINED THE FINANCE FROM O UTSIDE THE COUNTRY FOR THE PURPOSE OF DEVELOPMENT OF INFRASTRU CTURE FACILITY. 36. THE ASSESSEE UTILIZED THE FUNDS EITHER OF ITS OWN O R BORROWED FROM OTHERS FOR THE PURPOSES OF UNDERTAKING THE DEV ELOPMENT ACTIVITY. THEREFORE, IT CANNOT BE SAID THAT THE ASSESSEE HAS NOT UTILIZED ITS OWN FUNDS. THE ASSESSEE ALSO UTILIZED ITS OWN TECHNICAL PERSONNEL AND UNDERTOOK RISK IN THE PROCESS OF THE BUSINESS ACTIV ITY. IT IS NOT CORRECT TO MENTION THAT THE ASSESSEE DID NOT INVEST ITS OWN FUNDS AND DID NOT EMPLOY ITS TECHNICAL PERSONNEL. THE REQUIRE MENT OF THE TENDER INCLUDES POSSESSION OF CAPITAL, CAPABILITY OF OBTAI NING LOANS FROM THE I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 31 BANKS OR FINANCIAL INSTITUTIONS AND THE AVAILABILIT Y OF THE TECHNICAL PERSONNEL. THE ASSESSEE WOULD BE A SUCCESSFUL BIDD ER ONLY WHEN SUCH REQUIREMENTS ARE FULFILLED. THE REQUIREMENTS OF THE TENDER DOCUMENTS ARE AVAILABLE AT PAGE 124 OF THE AGREEMEN T SUBMITTED BEFORE THE HONOURABLE ITAT. THE ASSESSEE UNDERTOOK ALL THE RISKS INVOLVED IN THE ACTIVITY. ACCORDING TO CLAUSE 20.1 , THE ASSESSEE HAS TO UNDERTAKE FULL RESPONSIBILITY FOR THE CARE OF WO RKS AND MATERIALS AND PLANT FOR INCORPORATION THEREIN FROM THE COMMEN CEMENT DATE TILL THE DATE OF TAKING OVER. CLAUSE NO.20.2 OF THE AGR EEMENT ALSO MENTIONS THAT LOSS OR DAMAGE HAPPENS TO THE WORK, O R ANY PART THEREOF OR MATERIALS OR PLANT SHALL BE THE RESPONSI BILITY OF THE ASSESSEE. CLAUSE NO.22.1 MENTIONS THAT THE ASSESSE E SHALL BE RESPONSIBLE FOR DEATH OR INJURY TO ANY PERSON OR LO SS OR DAMAGE TO ANY PROPERTY WHICH MAY ARISE IN CONSEQUENCE OF THE EXECUTION AND COMPLETION OF THE WORKS. THEREFORE, THE ASSESSEE I S LIABLE FOR RISKS. 37. HE SUBMITTED THAT THE LEARNED DR IS ALSO OF THE VIE W THAT THE MAINTENANCE UNDERTAKEN BY THE ASSESSEE AS PER THE CONTRACT IS ONLY AS A SORT OF WARRANTEE AND NOT THE MAINTENANCE AS M ENTIONED IN SEC.80-IA(4) OF THE I.T. ACT. IN THIS REGARD, IT I S SUBMITTED THAT THE ASSESSEE IS CLAIMING DEDUCTION AS A PERSON DEVELOPI NG THE INFRASTRUCTURE FACILITY AND NOT AS A PERSON MAINTAI NING SUCH INFRASTRUCTURE FACILITY. FURTHER, THE SAID CLAUSE WAS MENTIONED ONLY TO SHOW THAT THE ASSESSEE HAS UNDERTAKEN A JOB OF D EVELOPING THE ENTIRE INFRASTRUCTURE FACILITY AT THE PREMISES ALLO TTED TO IT AND HANDED IT OVER WITH A CONDITION THAT IT SHOULD BE MAINTAIN ED BY THE ASSESSEE FOR A CERTAIN SPECIFIED PERIOD. THIS ONLY INDICATE S THAT A COMPOSITE AGREEMENT IS ENTERED INTO FOR DEVELOPMENT OF THE IN FRASTRUCTURE FACILITY WITH A CLAUSE TO MAINTAIN THE SAID INFRAST RUCTURE FACILITY FOR A CERTAIN PERIOD. THE LEARNED DR MENTIONED THAT THE A SSESSEE WAS NOT PAID FOR ANY MAINTENANCE. IT IS TRUE THAT THERE I S NO PAYMENT FOR MAINTENANCE BUT STILL THE ASSESSEE HAS TO UNDERTAKE MAINTENANCE OF THE INFRASTRUCTURE FACILITY FOR A PERIOD AS MENTION ED IN THE AGREEMENT. THIS WOULD CLEARLY INDICATE THAT THE ASSESSEE IS A DEVELOPER AND NOT A I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 32 MERE ENGAGED IN WORKS CONTRACT. IN WORKS CONTRACT, THE PERSONAL UNDERTAKING THE WORK WOULD NOT BE RESPONSIBLE FOR A NY LOSS SUFFERED DURING THE PERIOD OF WORK; HE WOULD NOT BE RESPONSI BLE FOR MAINTENANCE OF THE INFRASTRUCTURE FACILITY DURING T HE COURSE OF DEVELOPMENT; HE WOULD NOT BE LIABLE FOR MAINTAINING THE WORK AFTERWARDS ALSO. THE ASSESSEE, ON THE OTHER HAND, IS MADE RESPONSIBLE FOR ALL SUCH ACTIVITIES. IT IS ALSO SUB MITTED THAT THE GOVERNMENT OF INDIA AUTHORIZED THE NHAI TO CALL FOR THE TENDERS FOR THE WORK. THE GOVT. OF INDIA RECEIVED A LOAN FROM O VERSEAS ECONOMIC CO-OPERATION FUND, TOWARDS THE COST OF DEVELOPMENT. ACCORDINGLY, A TENDER WAS ISSUED BY THE NHAI. SECTION 31 OF THE NHAI ACT EMPOWERS THE CENTRAL GOVERNMENT TO TEMPORARILY DIVE ST THE NHAI FROM DEVELOPMENT BY HANDING IT OVER TO ANY PERSON A UTHORIZED FOR THE PURPOSE. THE NHAI IS AUTHORIZED BY THE GOVERNMENT TO ENTRUST THE DUTY OF DEVELOPMENT OF PROJECT TO ANY OTHER ELIGI BLE PERSON. IN THE PROCESS, THE ASSESSEE BECAME THE SUCCESSFUL BIDDER AND UNDERTOOK THE WORK OF DEVELOPMENT. 38. FURTHER THE LD. AR SUBMITTED THAT THE LEARNED DR ME NTIONED THAT TAX WAS DEDUCTED AT SOURCE BY THE GOVERNMENT U NDER SEC. 194 C OF THE ACT AND THEREFORE, THE WORK UNDERTAKEN IS ONLY A WORKS CONTRACT AND NOT DEVELOPMENT. IN THIS REGARD THE A SSESSEE SUBMITTED THAT THE PROVISIONS OF SEC. 194 C MAKE IT CLEAR THA T DEDUCTION OF TAX HAS TO BE MADE FROM PAYMENTS MADE IN RESPECT OF AN Y WORKS. THE WORK ANY WORK DENOTES THE WORK OF DEVELOPMENT OF INFRASTRUCTURE FACILITY ALSO. THEREFORE, THE OBSERVATION OF THE L EARNED DR IS NOT CORRECT. FURTHER IT IS SUBMITTED THAT ALL THE WORKS WERE NOT ENTRUSTED BY THE NHAI ALONE. IT CAN BE SEEN FROM THE LIST AN NEXED THAT SOME OF THE WORKS WERE ENTRUSTED BY THE GOVERNMENT OF KARN ATAKA, GOVERNMENT OF ASSAM, RAILWAYS, GOVERNMENT OF RAJAST HAN, MINISTRY OF ROAD TRANSPORT, GOVERNMENT OF INDIA DIRECTLY AND GOVERNMENT OF GUJARAT DIRECTLY TO THE ASSESSEE. IN VIEW OF THE ABOVE, IT IS NOT CORRECT FOR THE LEARNED DR TO MENTION THAT NHAI IS THE DEVELOPER AND NOT THE ASSESSEE. IF THE ARGUMENT OF THE LEARNED D R WERE TO BE I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 33 CORRECT THE LEGISLATURE SHOULD HAVE CLEARLY MENTION ED THAT THE AUTHORITY WHICH IS RESPONSIBLE FOR DEVELOPMENT WOUL D BE ELIGIBLE FOR DEDUCTION UNDER SECTION 80-IA (4) OF THE I.T. ACT. SUCH A MENTION IS NOT THERE IN THE ACT AND ON THE OTHER HAND, IT IS M ENTIONED THAT ANY COMPANY IS ELIGIBLE FOR DEDUCTION. THEREFORE, THI S VIEW OF THE LEARNED DR IS NOT CORRECT. 39. THE LEARNED CIT DR REFERRED TO THE DECISION OF THE HONBLE SUPREME COURT IN THE CASE OF CIT VS. N.C. BUDHARAJA & CO., REPORTED IN 204 ITR 412. THE LEARNED CIT DR DISCUSSED THE OB JECT OF AMENDMENT MADE TO SEC.80IA BY THE FINANCE ACT, 1995 . FOR WHICH, IT IS SUBMITTED THAT THE DECISION OF THE SUPREME CO URT REFERRED TO BY THE LEARNED DR RELATES TO THE DEDUCTION ALLOWABLE F OR THE ASSESSMENT YEARS 1974-75 TO 1977-78 AND THE LEARNED DR ALSO DI SCUSSED THE AMENDMENT BY THE FINANCE ACT, 1995. THE CLAIM OF TH E ASSESSEE IS FOR THE ASSESSMENT YEAR 2000-01 AND AFTERWARDS. THE JUDGEMENT OF THE SUPREME COURT WAS DECIDING THE ISSUES AS PER TH E PROVISIONS EXISTED AT THE RELEVANT POINT OF TIME WHICH IS NOT APPLICABLE TO THE YEARS UNDER CONSIDERATION. THEREFORE, THE RELIANCE OF THE DR ON THE SAID DECISION IS MISPLACED. THE LEARNED CIT DR ALSO REFERRED TO THE CIRCULAR NO.779 DATED 14-09-1999. THE SAID CIRCULAR WAS ISSUED ONLY TO CLARIFY THAT THE ENTERPRISES WHICH WERE EARLIER ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA (4A) UP TO THE ASSESSMENT YEAR 1 999-2000 WOULD CONTINUE TO BE ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA(4) FOR THE ASSESSMENT YEAR 2000-01 AND ONWARDS. THIS CLARIFICA TION DOES NOT INDICATE THAT THE DEDUCTION UNDER SECTION 80IA(4) I S ALLOWABLE ONLY IN RESPECT OF THE ENTERPRISES CARRYING ON THE ACTIVITY OF OPERATING AND MAINTAINING. THE CIRCULAR NO.794 DATED 09-08-2000 R EFERRED TO BY THE LEARNED DR CLEARLY MENTIONS THAT THE BENEFITS U NDER SECTION 80IA (4) WERE EXTENDED TO WATER TREATMENT AND SOLID WAST E MANAGEMENT SYSTEM IN ORDER TO ATTRACT COMMERCIAL ENTERPRISES T O OPERATE SUCH FACILITIES. THIS CIRCULAR ALSO HAS NO APPLICATION F OR THE FACTS OF THE ASSESSEES CASE. THE CIRCULAR NO.14 OF 2001 REFERR ED TO BY THE LEARNED DR NOT ON THE POINT. IT ALSO CLARIFIES THE POSITION AS OBTAINING I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 34 PRIOR TO 1999-2000 AND LATER. IT DOES NOT APPLY TO THE YEARS UNDER CONSIDERATION. 40. THE LEARNED DR ALSO REFERS TO THE CIRCULAR NO.3 OF 2008 DATED 12-03-2008. IN THE SAID CIRCULAR IT WAS MADE CLEAR THAT THE BENEFIT UNDER SECTION 80IA IS ALLOWABLE IN A CASE WHERE A P ERSON MAKES INVESTMENT AND HE EXECUTES THE DEVELOPMENT WORK I.E . CARRYING OUT THE CIVIL CONSTRUCTION WORK. IN CONTRAST TO THIS, A PERSON WHO ENTERS INTO A CONTRACT WITH ANY OTHER PERSON FOR EXECUTING THE WORKS CONTRACT WILL NOT BE ELIGIBLE FOR THE TAX BENEFITS UNDER SECTION 80IA. IT IS SUBMITTED THAT THE ASSESSEE MAKES THE INVESTMENT ON ITS OWN IN SO FAR AS THE WORKS ARE CONCERNED AND ITSELF EXECUTES THE DEVELOPMENT WORK. THE CIRCULAR CLARIFIED THAT THE EXECUTION OF THE CIVIL WORK IS EQUAL TO DEVELOPMENT. THIS MAKES IT VERY CLEAR THA T THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA OF THE AC T AS THE ASSESSEE INVESTED ITS OWN FINANCE IN THE PROCESS OF DEVELOPM ENT AND UNDERTAKES THE DEVELOPMENT WORK ON ITS OWN WITH ALL THE RISKS INVOLVED. THEREFORE, THE CIRCULAR SUPPORTS THE CLAI M OF THE ASSESSEE THAT IT IS A DEVELOPER. 41. THE LEARNED DR REFERRED VARIOUS CIRCULARS AND MENTI ONS THAT THE ENTERPRISES WHICH CARRY ON THE ACTIVITY UNDER T HE CONCEPT OF BOT AND BOLT ALONE WILL BE ELIGIBLE FOR DEDUCTION. IN T HIS REGARD, IT IS SUBMITTED THAT THE PROVISIONS OF SECTION 80IA(4) MA KES THE MATTERS CLEAR THAT A PERSON WHO DEVELOPS OR OPERATES AND MA INTAINS OR DEVELOPS, OPERATES AND MAINTAINS WOULD BE ELIGIBLE FOR DEDUCTION. THE PROVISION ITSELF IS VERY CLEAR. IT IS APPLICABL E TO ANY ENTERPRISE CARRYING ON ANY ONE ACTIVITY. THE BOMBAY HIGH COURT IN THE CASE OF ABC INDUSTRIES CLARIFIED THAT ALL THE THREE ACTIVIT IES NEED NOT BE DONE AND THE ASSESSEE WOULD BE ELIGIBLE FOR DEDUCTION IF IT CARRIED ON EVEN A SINGLE ACTIVITY OUT OF THE ABOVE THREE ACTIVITIES . THEREFORE, THE PRESUMPTION OF THE DEPARTMENT THAT THE ASSESSEE WHO CARRY ON BOT/BOLT ALONE ARE ELIGIBLE FOR DEDUCTION IS NOT CO RRECT. THERE IS NO MENTION IN THE ENABLING SECTIONS THAT AN ASSESSEE T O BE ELIGIBLE FOR DEDUCTION SHOULD HAVE BEEN ENGAGED IN BOT/BOOT/BOLT SCHEMES. I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 35 42. THE LEARNED DR MENTIONS THAT THE MEANING OF THE WOR D DEVELOPER CANNOT BE ASCERTAINED FROM THE ACT. HE RELIED ON THE VARIOUS DECISIONS TO MENTION THAT THE INTERPRETATIO N MUST BE IN CONSONANCE WITH THE PURPOSE OF THE STATUTE. IN THIS REGARD, IT IS SUBMITTED THAT THE INTERPRETATION HAS TO BE IN CONS ONANCE WITH THE PURPOSE OF THE ACT. THE ASSESSEE ALREADY SUBMITTED THE CHANGES MADE TO THE PROVISIONS OF THE LAW AND ALSO DISCUSSE D VARIOUS AMENDMENTS BROUGHT IN BY THE LEGISLATURE. IT CAN BE UNDERSTOOD FROM THE ABOVE AND FROM THE READING OF THE PROVISIONS OF SECTION 80IA (4)(I) THAT AN ASSESSEE WHO ENTERS INTO AN AGREEMENT WITH GOVERNMENT FOR THE PURPOSE OF DEVELOPMENT OF INFRASTRUCTURE FACILI TY IS ELIGIBLE FOR DEDUCTION. IN SUCH CIRCUMSTANCES, THE MENTION BY TH E LEARNED DR THAT THE ENTIRE INFRASTRUCTURE FACILITY SHOULD BE I NVESTED BY THE ASSESSEE AND THAT IT SHOULD BE MAINTAINED BY THE AS SESSEE CLEARLY SHOWS THAT THE INTERPRETATION PROVIDED BY THE LEARN ED DR IS NOT IN CONSONANCE WITH THE PROVISIONS OF LAW AND, THEREFOR E, THE SAID DECISIONS FAVOUR THE ASSESSEE AND NOT THE DEPARTMEN T. THE LEARNED DR ALSO REFERRED TO THE OBSERVATIONS MADE BY THE SP ECIAL BENCH OF THE ITAT IN THE CASE OF B.T. PATIL AND SONS. IT IS SUBMITTED THAT THE SAID DECISION IS RECALLED AND THE OBSERVATIONS MADE CANNOT BE CONSIDERED. FURTHER, THE BOMBAY HIGH COURT IN THE CASE OF ABG HEAVY INDUSTRIES HELD THAT THE THREE CONDITIONS M ENTIONED IN SEC. 80IA(4) NEED NOT CUMULATIVELY BE FULFILLED. THEREF ORE, ANY OBSERVATION TO THE CONTRARY BY THE SPECIAL BENCH IS NOT RELEVAN T AT PRESENT. THE SUBMISSIONS OF THE LEARNED DR OF A BENCH ARE MOSTLY TO THE EFFECT THAT THE ASSESSEE IS NOT A DEVELOPER, BUT ONLY A WO RKS CONTRACTOR AND THAT THE ASSESSEES WHO ENGAGE THEMSELVES IN ALL TH E THREE ACTIVITIES ALONE WOULD BE ELIGIBLE FOR DEDUCTION UNDER SEC. 80 IA OF THE ACT. IT IS ALREADY SUBMITTED IN DETAIL THAT IT IS A DEVELOPER AND NOT ENGAGED IN THE WORKS CONTRACT ALONE AND THAT FOR THE PURPOSE O F BEING ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA OF THE ACT, ONE NEED N OT CARRY ON ALL THE ACTIVITIES OF DEVELOP, OPERATE AND MAINTENANCE. THE LEARNED DR ALSO REFERRED TO THE COPY OF THE AGREEMENT SUBMITTE D BEFORE THE I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 36 HONOURABLE ITAT. ACCORDING TO THE LEARNED DR, THE AGREEMENT USED THE WORD CONTRACT FOR COMPLETION OF WORKS AND T HE GOVERNMENT MADE PAYMENTS INCLUDING THE MOBILIZATION ADVANCE. THEREFORE, THE LEARNED DR IS OF THE VIEW THAT THE ASSESSEE IS ENGA GED IN MERE WORKS CONTRACT AND UNDERTOOK THE WORK ONLY WITH THE MONEY BELONGING TO THE GOVERNMENT. IN THIS REGARD, THE ASSESSEE ALREA DY SUBMITTED DETAILED EXPLANATION IN THE ABOVE MENTIONED PARAGRA PHS. THE LEARNED DR ALSO CONTENDED THAT ONLY A PART OF THE ENTIRE IN FRASTRUCTURE FACILITY IS DEVELOPMENT BY THE ASSESSEE AND THEREFO RE, THE INFRASTRUCTURE FACILITY CANNOT BE OPERATED. IN THI S REGARD, IT IS SUBMITTED THAT THE ENTIRE WORK OF DEVELOPMENT OF TH E ROAD FROM KM 27.80 TO KM 61.00 IS UNDERTAKEN BY THE ASSESSEE. T HE ASSESSEE DEVELOPED THE ENTIRE ROAD OF A DISTANCE OF 33.20 KM . THE WHOLE OF THE DEVELOPMENT ACTIVITY IN RESPECT OF THE SAID DIS TANCE IS ENTRUSTED TO THE ASSESSEE. NO PART OF SUCH ACTIVITY WAS ENTR USTED TO ANY OTHER CONCERN. 43. THE LEARNED DR IS NOT CORRECT TO MENTION THAT THE A SSESSEE UNDERTOOK THE WORK PARTIALLY. THE ENTIRE REACH WAS DEVELOPED BY THE ASSESSEE. THE ASSESSEE RELIES ON THE DECISION OF THE I.T.A.T. IN THE CASE OF PATEL ENGINEERING COMPANY REFERRED TO ABOVE . THE HONOURABLE ITAT OBSERVED THAT DEVELOPMENT OF ONE RE ACH IS ALSO ELIGIBLE FOR DEDUCTION UNDER SEC. 80IA OF THE ACT. 44. WE HAVE CONSIDERED THE ELABORATE SUBMISSIONS MADE B Y BOTH THE PARTIES AND ALSO PERUSED THE MATERIALS AVAILABL E ON RECORD. WE HAVE ALSO GONE THROUGH ALL THE CASE LAWS CITED BY B OTH THE PARTIES. WE FIND THAT THE PROVISIONS OF SECTION 80IA(4) OF T HE ACT WHEN INTRODUCED AFRESH BY THE FINANCE ACT, 1999, THE PRO VISIONS UNDER SECTION 80IA(4A) OF THE ACT WERE DELETED FROM THE A CT. THE DEDUCTION AVAILABLE FOR ANY ENTERPRISE EARLIER UNDER SECTION 80IA (4A) ARE ALSO MADE AVAILABLE UNDER SECTION 80IA (4) ITSELF. FU RTHER, THE VERY FACT THAT THE LEGISLATURE MENTIONED THE WORDS (I) DEVEL OPING OR (II) OPERATING AND MAINTAINING OR (III) DEVELOPING, O PERATING AND MAINTAINING CLEARLY INDICATES THAT ANY ENTERPRISE WHICH CARRIED ON I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 37 ANY OF THESE THREE ACTIVITIES WOULD BECOME ELIGIBLE FOR DEDUCTION. THEREFORE, THERE IS NO AMBIGUITY IN THE INCOME-TAX ACT. WE FIND THAT WHERE AN ASSESSEE INCURS EXPENDITURE ON ITS OWN FO R PURCHASE OF MATERIALS AND TOWARDS LABOUR CHARGES AND ITSELF EXECUTES THE DEVELOPMENT WORK I.E., CARRIES OUT THE CIVIL CONSTR UCTION WORK, IT WILL BE ELIGIBLE FOR TAX BENEFIT UNDER SECTION 80 IA OF THE ACT. IN CONTRAST TO THIS, A ASSESSEE, WHO ENTERS INTO A CONTRACT WIT H ANOTHER PERSON INCLUDING GOVERNMENT OR AN UNDERTAKING OR ENTERPRIS E REFERRED TO IN SECTION 80 IA OF THE ACT, FOR EXECUTING WORKS CONTR ACT, WILL NOT BE ELIGIBLE FOR THE TAX BENEFIT UNDER SECTION 80 IA OF THE ACT. WE FIND THAT THE WORD OWNED IN SUB-CLAUSE (A) OF CLAUSE (1) OF SUB SECTION (4) OF SECTION 80IA OF THE ACT REFER TO THE ENTERPRISE. BY READING OF THE SECTION, IT IS CLEAR THAT THE ENTERPRISES CARRYING ON DEVELOPMENT OF INFRASTRUCTURE DEVELOPMENT SHOULD BE OWNED BY THE C OMPANY AND NOT THAT THE INFRASTRUCTURE FACILITY SHOULD BE OWNE D BY A COMPANY. THE PROVISIONS ARE MADE APPLICABLE TO THE PERSON TO WHOM SUCH ENTERPRISE BELONGS TO IS EXPLAINED IN SUB-CLAUSE (A ). THEREFORE, THE WORD OWNERSHIP IS ATTRIBUTABLE ONLY TO THE ENTERP RISE CARRYING ON THE BUSINESS WHICH WOULD MEAN THAT ONLY COMPANIES A RE ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA(4) AND NOT ANY OTHER P ERSON LIKE INDIVIDUAL, HUF, FIRM ETC. 45. WE ALSO FIND THAT ACCORDING TO SUB-CLAUSE (A), CLAU SE (I) OF SUB SECTION (4) OF SECTION 80-IA THE WORD IT DENOTES THE ENTERPRISE CARRYING ON THE BUSINESS. THE WORD IT CANNOT BE RELATED TO THE INFRASTRUCTURE FACILITY, PARTICULARLY IN VIEW OF TH E FACT THAT INFRASTRUCTURE FACILITY INCLUDES RAIL SYSTEM, HIGHW AY PROJECT, WATER TREATMENT SYSTEM, IRRIGATION PROJECT, A PORT, AN AIRPORT OR AN INLAND PORT WHICH CANNOT BE OWNED BY ANY ONE. EVEN OTHERW ISE, THE WORD IT IS USED TO DENOTE AN ENTERPRISE. THEREFORE, T HERE IS NO REQUIREMENT THAT THE ASSESSEE SHOULD HAVE BEEN THE OWNER OF THE INFRASTRUCTURE FACILITY. 46. THE NEXT QUESTION IS TO BE ANSWERED IS WHETHER THE ASSESSEE IS A DEVELOPER OR MERE WORKS CONTRACTOR. THE REVENUE RELIED ON THE I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 38 AMENDMENTS BROUGHT IN BY THE FINANCE ACT 2007 AND 2 009 TO MENTION THAT THE ACTIVITY UNDERTAKEN BY THE ASSESS EE IS AKIN TO WORKS CONTRACT AND HE IS NOT ELIGIBLE FOR DEDUCTIO N UNDER SECTION 80IA (4) OF THE ACT. WHETHER THE ASSESSEE IS A DEV ELOPER OR WORKS CONTRACTOR IS PURELY DEPENDS ON THE NATURE OF THE W ORK UNDERTAKEN BY THE ASSESSEE. EACH OF THE WORK UNDERTAKEN HAS T O BE ANALYZED AND A CONCLUSION HAS TO BE DRAWN ABOUT THE NATURE O F THE WORK UNDERTAKEN BY THE ASSESSEE. THE AGREEMENT ENTERED INTO WITH THE GOVERNMENT OR THE GOVERNMENT BODY MAY BE A MERE WOR KS CONTRACT OR FOR DEVELOPMENT OF INFRASTRUCTURE. IT IS TO BE S EEN FROM THE AGREEMENTS ENTERED INTO BY THE ASSESSEE AND THE GOV ERNMENT. WE FIND THAT THE GOVERNMENT/GOVERNMENT BODY HANDED OVE R THE POSSESSION OF THE PREMISES OR THE EXISTING ROAD TO THE ASSESSEE TILL THE DEVELOPMENT OF INFRASTRUCTURE FACILITY. IT IS T HE ASSESSEES RESPONSIBILITY TO DO ANY ACT TILL THE POSSESSION OF PROPERTY IS HANDED OVER TO THE GOVERNMENT. IF THE EXISTING ROAD IS TO BE DEVELOPED INTO A FOUR LANE ROAD, THE FIRST PHASE IS TO TAKE OVER THE EXISTING AND DEVELOPED ROAD. SECONDLY, THE ASSESSEE HAS TO ARRA NGE FOR THE TRAFFIC AND SHALL FACILITATE THE PEOPLE TO USE THE FACILITY EVEN WHILE THE PROCESS OF DEVELOPMENT IS IN PROGRESS. ANY LOSS TO THE PUBLIC CAUSED IN THE PROCESS WOULD BE THE RESPONSIBILITY OF THE A SSESSEE. THE ASSESSEE HAS TO DEVELOP THE INFRASTRUCTURE FACILITY . IN THE PROCESS, ALL THE WORKS 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 THE CATTLE AND BULLOCK CARTS IN THE VILLAGE; P ROVISION FOR TRAFFIC WITHOUT ANY HINDRANCE, THE ASSESSEES DUTY IS TO DE VELOP INFRASTRUCTURE WHETHER IT INVOLVES CONSTRUCTION OF A PARTICULAR ITEM AS AGREED TO IN THE AGREEMENT OR NOT. THE AGREEMENT I S NOT FOR A SPECIFIC 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 BE BROUGHT IN BY THE ASSESS EE BY STICKING TO THE QUALITY AND QUANTITY IRRESPECTIVE OF THE COST O F SUCH MATERIAL. THE GOVERNMENT DOES NOT PROVIDE ANY MATERIAL TO THE ASSESSEE. IT PROVIDES THE WORKS IN PACKAGES AND NOT AS A WORKS C ONTRACT. THE I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 39 ASSESSEE UTILIZES ITS FUNDS, ITS EXPERTISE, ITS EMP LOYEES AND TAKES THE RESPONSIBILITY OF DEVELOPING THE INFRASTRUCTURE FAC ILITY. THE LOSSES SUFFERED EITHER BY THE GOVT. OR THE PEOPLE IN THE P ROCESS OF SUCH DEVELOPMENT WOULD BE THAT OF THE ASSESSEE. THE ASS ESSEE HANDS OVER THE DEVELOPED INFRASTRUCTURE FACILITY TO THE GOVERN MENT ON COMPLETION OF THE DEVELOPMENT. THEREAFTER, THE ASS ESSEE HAS TO UNDERTAKE MAINTENANCE OF THE SAID INFRASTRUCTURE FO R A PERIOD OF 12 TO 48 MONTHS. DURING THIS PERIOD, IF ANY DAMAGES A RE OCCURRED IT SHALL BE THE RESPONSIBILITY OF THE ASSESSEE. FURTH ER, DURING THIS PERIOD, THE ENTIRE INFRASTRUCTURE SHALL HAVE TO BE MAINTAINED BY THE ASSESSEE ALONE WITHOUT HINDRANCE TO THE REGULAR TRA FFIC. THEREFORE, IT IS CLEAR THAT FROM AN UN-DEVELOPED AREA, INFRASTRUC TURE IS DEVELOPED AND HANDED OVER TO THE GOVERNMENT AND AS EXPLAINED BY THE CBDT VIDE ITS CIRCULAR DATED 18-05-2010, SUCH ACTIVITY I S ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA(4) OF THE ACT. THIS CA NNOT BE CONSIDERED AS A MERE WORKS CONTRACT BUT HAS TO BE C ONSIDERED AS A DEVELOPMENT OF INFRASTRUCTURE FACILITY. THEREFORE, THE ASSESSEE IS A DEVELOPER AND NOT A WORKS CONTRACTOR AS PRESUMED BY THE REVENUE. THE CIRCULAR ISSUED BY THE BOARD, RELIED ON BY LEAR NED COUNSEL FOR THE ASSESSEE, CLEARLY INDICATE THAT THE ASSESSEE IS ELI GIBLE FOR DEDUCTION UNDER SECTION 80IA(4) OF THE ACT. THE DEPARTMENT IS NOT CORRECT IN HOLDING THAT THE ASSESSEE IS A MERE CONTRACTOR OF T HE WORK AND NOT A DEVELOPER. 47. WE ALSO FIND THAT AS PER THE PROVISIONS OF THE SECT ION 80IA OF THE ACT, A PERSON BEING A COMPANY HAS TO ENTER INTO AN AGREEMENT WITH THE GOVERNMENT. SUCH AN AGREEMENT IS A CONTRA CT AND FOR THE PURPOSE OF THE AGREEMENT A PERSON MAY BE CALLED AS A CONTRACTOR AS HE ENTERED INTO A CONTRACT. BUT THE WORD CONTRACT OR IS USED TO DENOTE A PERSON ENTERING INTO AN AGREEMENT FOR UNDE RTAKING THE DEVELOPMENT OF INFRASTRUCTURE FACILITY. EVERY AGR EEMENT ENTERED INTO IS A CONTRACT. THE WORD CONTRACTOR IS USED TO D ENOTE THE PERSON WHO ENTERS INTO SUCH CONTRACT. EVEN A PERSON WHO E NTERS INTO A CONTRACT FOR DEVELOPMENT OF INFRASTRUCTURE FACILITY IS A CONTRACTOR. I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 40 THEREFORE, THE CONTRACTOR AND THE DEVELOPER CANNOT BE VIEWED DIFFERENTLY. EVERY CONTRACTOR MAY NOT BE A DEVELOP ER BUT EVERY DEVELOPER DEVELOPING INFRASTRUCTURE FACILITY ON BEH ALF OF THE GOVERNMENT IS A CONTRACTOR. THEREFORE, THE FIRST A PPELLATE AUTHORITY RIGHTLY HELD THAT THE ASSESSEE IS ELIGIBLE FOR DEDU CTION UNDER SECTION 80IA (4) FOR THE ASSESSMENT YEARS 2000-01, 2001-02 AND 2002-03. 48. WE FIND THAT THE DECISION RELIED ON BY THE LEARNED COUNSEL FOR THE ASSESSEE IN THE CASE OF CIT VS. LAXMI CIVIL ENG INEERING WORKS [ITA NO. 766/PUN/09 DATED 8.6.2011] SQUARELY APPLIC ABLE TO THE ISSUE UNDER DISPUTE WHICH IS IN FAVOUR OF THE ASSES SEE WHEREIN IT WAS HELD THAT MERE DEVELOPMENT OF INFRASTRUCTURE FACILI TY IS AN ELIGIBLE ACTIVITY FOR CLAIMING DEDUCTION UNDER SECTION 80IA OF THE ACT AFTER CONSIDERING THE JUDGEMENT OF THE MUMBAI HIGH COURT IN THE CASE OF ABG HEAVY ENGINEERING [SUPRA].THE CASE OF ABG IS NO T THE PURE DEVELOPER WHEREAS, IN THE PRESENT CASE, THE ASSESSE E IS THE PURE DEVELOPER. WE ALSO FIND THAT SECTION 80IA OF THE A CT, INTENDED TO COVER THE ENTITIES CARRYING OUT DEVELOPING, OPERATI NG AND MAINTAINING THE INFRASTRUCTURE FACILITY KEEPING IN MIND THE PRE SENT BUSINESS MODELS AND INTEND TO GRANT THE INCENTIVES TO SUCH E NTITIES. THE CBDT, ON SEVERAL OCCASIONS, CLARIFIED THAT PURE DEV ELOPER SHOULD ALSO BE ELIGIBLE TO CLAIM DEDUCTION UNDER SECTION 80IA O F THE ACT, WHICH ULTIMATELY CULMINATED INTO AMENDMENT UNDER SECTION 80IA OF THE ACT, IN THE FINANCE ACT 2001, TO GIVE EFFECT TO THE AFORESAID CIRCULARS ISSUED BY THE CBDT. WE ALSO FIND THAT, TO AVOID MI SUSE OF THE AFORESAID AMENDMENT, AN EXPLANATION WAS INSERTED IN SECTION 80IA OF THE ACT, IN THE FINANCE ACT-2007 AND 2009, TO CL ARIFY THAT MERE WORKS CONTRACT WOULD NOT BE ELIGIBLE FOR DEDUCTIONS UNDER SECTION 80IA OF THE ACT. BUT, CERTAINLY, THE EXPLANATION CA NNOT BE READ TO DO AWAY WITH THE ELIGIBILITY OF THE DEVELOPER; OTHERWI SE, THE PARLIAMENT WOULD HAVE SIMPLY REVERSED THE AMENDMENT MADE IN TH E FINANCE ACT, 2001. THUS, THE AFORESAID EXPLANATION WAS INSE RTED, CERTAINLY, TO DENY THE TAX HOLIDAY TO THE ENTITIES WHO DOES ONLY MERE WORKS CONTACT OR SUB-CONTRACT AS DISTINCT FROM THE DEVELO PER. THIS IS CLEAR I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 41 FROM THE EXPRESS INTENSION OF THE PARLIAMENT WHILE INTRODUCING THE EXPLANATION. THE EXPLANATORY MEMORANDUM TO FINANCE ACT 2007 STATES THAT THE PURPOSE OF THE TAX BENEFIT HAS ALL ALONG BEEN TO ENCOURAGE INVESTMENT IN DEVELOPMENT OF INFRASTRUCTU RE SECTOR AND NOT FOR THE PERSONS WHO MERELY EXECUTE THE CIVIL CO NSTRUCTION WORK. IT CATEGORICALLY STATES THAT THE DEDUCTION UNDER SECTI ON 80IA OF THE ACT IS AVAILABLE TO DEVELOPERS WHO UNDERTAKES ENTREPREN EURIAL AND INVESTMENT RISK AND NOT FOR THE CONTRACTORS, WHO UN DERTAKES ONLY BUSINESS RISK. WE HAVE CAREFULLY GONE THROUGH THE V ARIOUS ACTIVITIES CARRIED ON BY THE ASSESSEE. AN ANALYSIS OF THE WORK S UNDERTAKEN BY THE ASSESSEE CLEARLY INDICATES THAT IT CARRIED ON T HE ACTIVITIES OF DEVELOPMENT OF INFRASTRUCTURE FACILITY. FOR CLARITY WE REPRODUCE ONE OF THE PROJECTED UNDERTAKEN BY THE ASSESEE. NATURE OF WORK : WIDENING TO FOUR LANES AND STRENGTHENING OF EXISTING TWO LANE CARRIAGEWAY IN KM. 27.80 TO KM. 61.00 JAGATPUR-CHANDIKHOL SECTION OF NATIONAL HIGHWAY NO.5 IN THE STATE OF ORISSA. THE SAID WORK IS FINANCED BY : OVERSEAS ECONOMIC CO-OPERATION FUND, JAPAN TO THE GOVERNMENT OF INDIA. THE GOVERNMENT OF INDIA AUTHORIZED TO GET THE WORK DONE BY INVITATION OF TENDER. THE SOURCE OF FUNDS AS MENTIONED IN THE TENDER (HEREIN DOCUMENT AFTER REFERRED TO AS THE FUND) : THE GOVERNMENT OF INDIA HAS RECEIVED A LOAN FROM THE OVERSEAS ECONOMIC COOPERATION FUND TOWARDS THE COST OF WIDENING TO FOUR LANES AND STRENGTHENING OF EXISTING TWO LANE CARRIAGEWAY IN KM. 27.80 TO KM 61.00 IN JAGATPUR-CHANDIKHOL SECTION OF NH-5 IN THE STATE OF ORISSA, AND INTENDS TO APPLY PART OF THE PROCEEDS OF THIS LOAN TO ELIGIBLE PAYMENTS UNDER THE CONTRACT (HEREINAFTER REFERRED TO AS THE CONTRACT) FOR WHICH THE NOTICE INVITING TENDERS HAS BEEN ISSUED BY THE EMPLOYER, AS AUTHORIZED BY THE GOVERNMENT OF INDIA. PAYMENT BY THE OVERSEAS ECONOMIC CO- OPERATION FUND(OECF) WILL BE MADE ONLY AT THE REQUEST OF THE GOVERNMENT OF INDIA AND UPON APPROVAL BY THE BANK IN ACCORDANCE WITH THE TERMS AND CONDITIONS OF THE LOAN AGREEMENT. EXCEPT AS THE BANK MAY I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 42 SPECIFICALLY OTHERWISE AGREE, NO PARTY OTHER THAN THE BORROWER SHALL DERIVE ANY RIGHTS FROM THE LOAN AGREEMENT OR HAVE ANY CLAIM TO THE LOAN PROCEEDS. SCOPE OF WORK THE WORK BROADLY COMPRISES OF - A) CONSTRUCTION OF ADDITIONAL TWO LANE CARRIAGEWAY BY THE SIDE OF EXISTING TWO LANE ROAD IN KM 27.80 TO 61.00 B) STRENGTHENING OF EXISTING PAVEMENT BY PROVIDING BITUMINOUS STRENGTHENING OVERLAYS C) PROVISION OF CENTRAL MEDIAN, PAVEMENT SHOULDERS AND SERVICE ROADS. D) IMPROVEMENT OF JUNCTIONS/ GEOMETRICS, PAVEMENT PROFILE CORRECTION, LANE MARKING AND PROVIDING ROAD SIGNAGES. E) REPAIR/REHABILITATION OF EXISTING BRIDGES. F) CONSTRUCTION/RECONSTRUCTION OF BRIDGES. G) IMPROVEMENT OF DRAINAGE SYSTEM, WIDENING/PROVIDING CULVERTS, CATTLE CROSSINGS ETC. H) OTHER MISCELLANEOUS ITEMS PERTINENT TO THE PROJECT. I) MAINTENANCE OF THE SAID INFRASTRUCTURE FOR A PERIOD OF 48 MONTHS (DURING THE PERIOD OF DEVELOPMENT OF 36 MONTHS AND DEFECT LIABILITY PERIOD OF 12 MONTHS) 49. FOR THIS PURPOSE, THE POSSESSION OF THE SITE IS HAN DED OVER TO THE ASSESSEE BY THE GOVERNMENT. THE ASSESSEE TAKES POSSESSION AND ACCESS TO THE PROPERTY AND THEREAFTER IT SHALL BE T HE RESPONSIBILITY OF THE ASSESSEE TO DEVELOP THE SAID AREA INTO MORE USE FUL INFRASTRUCTURE FACILITY. IN THE PROCESS, EVERY ACT REQUIRED (WHETH ER MENTIONED IN THE AGREEMENT OR NOT) IN CONVERTING THE AREA INTO MORE USEFUL ONE SHALL BE THAT OF THE ASSESSEE. THE ASSESSEE HAS TO UNDERT AKE THE RESPONSIBILITY OF MAINTENANCE OF THE EXISTING TRAFF IC AND THERE SHOULD NOT BE INCONVENIENCE TO THE REGULAR TRAFFIC. THE DE VELOPED AREA AFTER COMPLETION OF THE DEVELOPMENT OF INFRASTRUCTURE IS HANDED OVER TO THE GOVERNMENT. AFTER HANDING OVER, THE ASSESSEE SHALL MAINTAIN THE I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 43 INFRASTRUCTURE FOR A PERIOD OF 48 MONTHS AND ANY DE FECTS ARE TO BE RECTIFIED. 50. FROM THE ABOVE FACTS IT IS CLEAR THAT THE ASSESSEE IS CONVERTING THE AREA ENTRUSTED TO IT INTO MORE USEFUL AND MORE PROFITABLE AREA AND HANDING OVER THE DEVELOPED ONE TO THE GOVERNMEN T/GOVERNMENT BODIES. THEREFORE, THE ACTIVITY OF THE ASSESSEE IS TO DEVELOP AN EXISTING TWO LANE ROAD INTO FOUR LANE ROAD THEREBY MAKING THE ROAD MORE USEFUL AND PROFITABLE. 51. WITHOUT ANY DOUBT, THE LEARNED COUNSEL FOR THE ASSE SSEE CLEARLY DEMONSTRATED BEFORE US THAT THE ASSESSEE AT PRESENT HAS UNDERTAKEN HUGE RISKS IN TERMS OF DEPLOYMENT OF TECHNICAL PERS ONNEL, PLANT AND MACHINERY, TECHNICAL KNOW-HOW, EXPERTISE AND FINANC IAL RESOURCES. 52. THEREFORE, IN OUR CONSIDERED VIEW, THE ASSESSEE SHO ULD NOT BE DENIED THE DEDUCTION UNDER SECTION 80IA OF THE ACT AS THE CONTRACTS INVOLVE DEVELOPMENT/CONSTRUCTION, OPERATING/MAINTEN ANCE, FINANCIAL INVOLVEMENT, AND DEFECT CORRECTION AND LIABILITY PE RIOD, THEN SUCH CONTRACTS CANNOT BE CALLED AS SIMPLE WORKS CONTRACT . IN OUR OPINION THE CONTRACTS WHICH CONTAIN ABOVE FEATURES ARE TO B E SEGREGATED AND ON THESE CONTRACTS DEDUCTION U/S. 80-IA HAS TO BE G RANTED AND THE OTHER AGREEMENTS WHICH ARE IN THE NATURE OF PURE WO RKS CONTRACTS HIT BY THE EXPLANATION TO SECTION 80IA(13), THOSE WORKS ARE NOT ENTITLE FOR DEDUCTION U/S 80IA OF THE ACT. THE PROFIT FROM SUCH IS TO BE COMPUTED BY ASSESSING OFFICER ON PRO-RATA BASIS OF TURNOVER. THE ASSESSING OFFICER IS DIRECTED TO EXAMINE ACCORDINGL Y AND GRANT DEDUCTION ON ELIGIBLE TURNOVER AS DIRECTED ABOVE. IT IS NEEDLESS TO SAY THAT DEDUCTION U/S 80IA WAS GRANTED IN SIMILAR CASE BY THE CHENNAI BENCH OF THE TRIBUNAL AND DEDUCTION U/S. 80IA WAS G RANTED IN THE CASE OF M/S. CHETTINAD LIGNITE TRANSPORT SERVICES ( P) LTD., IN ITA NO. 2287/MDS/06 ORDER DATED 27 TH JULY, 2007 FOR THE ASSESSMENT YEAR 2004-05. LATER IN ITA NO. 1179/MDS/08 VIDE ORDER D ATED 26 TH FEBRUARY, 2010 THE TRIBUNAL HAS TAKEN THE SAME VIEW BY INTER-ALIA HOLDING AS FOLLOWS: I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 44 7. MOREOVER, THE REASONS FOR INTRODUCING THE EXPLANATION WERE CLARIFIED AS PROVIDING A TAX BENEF IT BECAUSE MODERNISATION REQUIRES A MASSIVE EXPANSION AND QUALITATIVE IMPROVEMENT IN INFRASTRUCTURES LIKE EXPRESSWAYS, HIGHWAYS, AIRPORTS, PORTS AND RAPID UR BAN RAIL TRANSPORT SYSTEMS. FOR THAT PURPOSE, PRIVATE SECTOR PARTICIPATION BY WAY OF INVESTMENT IN DEVELOPMENT O F THE INFRASTRUCTURE SECTOR AND NOT FOR THE PERSONS WHO M ERELY EXECUTE THE CIVIL CONSTRUCTION WORK OR ANY OTHER WO RK CONTRACT HAS BEEN ENCOURAGED BY GIVING TAX BENEFITS . THUS THE PROVISIONS OF SECTION 80IA SHALL NOT APPLY TO A PERSON WHO EXECUTES A WORKS CONTRACT ENTERED INTO W ITH THE UNDERTAKING OR ENTERPRISE REFERRED TO IN THE SE CTION BUT WHERE A PERSON MAKES THE INVESTMENT AND HIMSELF EXECUTES THE DEVELOPMENT WORK, HE CARRIES OUT THE C IVIL CONSTRUCTION WORK, HE WILL BE ELIGIBLE FOR THE TAX BENEFIT UNDER SECTION 80IA. 53. THE ABOVE ORDER WAS FOLLOWED IN SUBSEQUENT ASSESSME NT YEARS 2007-2008 & 2008-09 IN ITA NOS. 1312 & 1313/MDS/201 1 VIDE ORDER DATED 18.11.2011 IN THE CASE OF THE SAME ASSE SSEE. 54. IT IS ALSO PERTINENT TO MENTION HEREIN THAT THIS TR IBUNAL IN SIMILAR CIRCUMSTANCES, IN THE CASE OF M/S. GVPR ENG INEERS LTD. HYDERABAD IN ITA NO. 347/H/08 VIDE ORDER DATED 29 TH FEBRUARY 2012 HAS TAKEN SIMILAR VIEW AND GRANTED DEDUCTION U/S 80 IA OF THE ACT. WE ALSO CAME ACROSS AN ORDER OF THIS TRIBUNAL ON T HIS ISSUE IN THE CASE OF R.R. CONSTRUCTIONS WHEREIN THE CHENNAI BEN CH OF THE TRIBUNAL IN ITS ORDER DATED 3.10.2011 IN I.T.A. NO. 2061/MDS/2010 FOR ASSESSMENT YEAR 2007-08 CONFIRMED THE GRANTING OF DEDUCTION U/S. 80IA WHILE HOLDING AS FOLLOWS: 3. WE HAVE HEARD RIVAL SUBMISSIONS AND HAVE CAREFULLY PERUSED THE ENTIRE RECORD. THE FIRST ISSU E OF THE APPEAL IS REGARDING CLAIM OF DEDUCTION UNDER SECTIO N 80IA(4) OF THE ACT. THE CASE OF THE REVENUE IS THAT THE ASSESSEE IS A WORKS CONTRACTOR AND NOT A DEVELOP ER AS STIPULATED UNDER SECTION 80IA(4) OF THE ACT. THE SE CTION 80IA(4) APPLIES TO ANY ENTERPRISE, WHICH CARRIES ON THE BUSINESS OF (I) DEVELOPING OR (II) OPERATING AND MA INTAINING OR (III) DEVELOPING, OPERATING AND MAINTAINING ANY INFRASTRUCTURE FACILITIES, WHICH FULFIL ALL THE ABO VE I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 45 CONDITIONS. THERE CANNOT BE ANY QUESTION OF PROVIDI NG A CONDITION FOR SUCH AN ENTERPRISE TO START OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY 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 THREE TY PES OF ACTIVITIES. WHEN AN ASSESSEE IS ONLY DEVELOPING AN INFRASTRUCTURE FACILITY PROJECT AND IS NOT MAINTAIN ING NOR OPERATING IT, OBVIOUSLY SUCH AN ASSESSEE WILL BE PA ID FOR THE COST INCURRED BY IT; OTHERWISE, HOW WILL THE PE RSON, WHO DEVELOPS THE INFRASTRUCTURE FACILITY PROJECT, R EALIZE ITS COST? IF THE INFRASTRUCTURE FACILITY, JUST AFTER IT S DEVELOPMENT, IS TRANSFERRED TO THE GOVERNMENT, NATU RALLY THE COST WOULD BE PAID BY THE GOVERNMENT. THEREFORE , MERELY BECAUSE THE TRANSFEREE HAD PAID FOR THE DEVELOPMENT OF INFRASTRUCTURE FACILITY CARRIED OUT BY THE ASSESSEE, IT CANNOT BE SAID THAT THE ASSESSEE DID N OT DEVELOP THE INFRASTRUCTURE FACILITY. IF THE INTERPR ETATION DONE BY THE ASSESSING OFFICER IS ACCEPTED, NO ENTER PRISE 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 DEVELOP THE INFRASTRUCTURE FACILITY IS NOT PAID BY THE GOVERNMENT, THE ENTIRE COST OF DEVELOPM ENT WOULD BE A LOSS IN THE HANDS OF THE DEVELOPER AS HE IS NOT OPERATING THE INFRASTRUCTURE FACILITY. THE LEGISLAT URE HAS PROVIDED THAT THE INCOME OF THE DEVELOPER OF THE INFRASTRUCTURE PROJECT WOULD BE ELIGIBLE FOR DEDUCT ION, IT PRESUPPOSES THAT THERE CAN BE INCOME TO DEVELOPER I .E. TO THE PERSON WHO IS CARRYING ON THE ACTIVITY OF ONLY DEVELOPMENT INFRASTRUCTURE FACILITY. OSTENSIBLY, A DEVELOPER WOULD HAVE INCOME ONLY IF HE IS PAID FOR THE DEVELOPMENT OF INFRASTRUCTURE FACILITY, FOR THE SIM PLE REASON THAT HE IS NOT HAVING THE RIGHT/AUTHORIZATIO N TO OPERATE THE INFRASTRUCTURE FACILITY AND TO COLLECT TOLL THERE FROM, HAS NO OTHER SOURCE OF RECOUPMENT OF HIS COST OF DEVELOPMENT. WHILE FILING THE RETURN, THE ASSESSEE HAD MADE CLAIM UNDER SECTION 80IA(4) OF THE ACT. 4. THE ASSESSEE HAS ALSO PRODUCED ALL SIX AGREEMEN TS REGARDING SIX PROJECTS UNDERTAKEN BEFORE THE ASSESS ING OFFICER, WHOSE COPIES ARE AVAILABLE BEFORE US ALSO. IT IS A FACT THAT EVEN AFTER TAKING A CONTRACT FROM THE GOVERNMENT, IF THE ASSESSEE DEVELOPS INFRASTRUCTUR E FACILITIES, IT WOULD BE REGARDED AS A DEVELOPER A ND NOT AS A WORKS CONTRACTOR. THE ASSESSEE FIRM HAS CARRIED ON ENTIRE CONSTRUCTION/DEVELOPMENT OF THE INFRASTRUCTU RE FACILITIES AND SATISFY ALL THE CONDITIONS OF SECTIO N I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 46 80IA(4)(I)(A). IT IS UNDENIABLE FACT THAT THE ASSES SEE HAS TAKEN DEVELOPMENT OF INFRASTRUCTURE FACILITY AGREEM ENT FROM THE STATE GOVERNMENT/LOCAL AUTHORITY. A CONTRA CTOR WHO DEVELOPS THE INFRASTRUCTURE FACILITY BECOMES A DEVELOPER TO CLAIM EXEMPTION UNDER SECTION 80IA(4). THE HONBLE BOMBAY BENCH OF ITAT WHILE DECIDING THE CAS E OF PATEL ENGINEERING 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 SECTI ON 80IA(4). 5. WE HAVE ALSO TAKEN A SIMILAR VIEW IN ITA NO. 554/MEDS/2010 IN THE CASE OF EAST COAST CONSTRUCTIO NS & INDUSTRIES LTD V. DCIT VIDE ORDER DATED 13.09.201 1 AND RELEVANT PARAS FROM 9 TO 14 ARE REPRODUCED HEREUNDE R: 9. AFTER CONSIDERING THE RIVAL SUBMISSIONS, WE CAN SAFELY SAY THAT THE BENEFIT OF SECTION 80IA IS AVAILABLE ONLY TO A DEVELOPER WHO CARRIES ON BUSINESS OF DEVELOPING OF INFRASTRUCTURE FACILITY . A PERSON WHO ENTERS INTO CONTRACT WITH ANOTHER PERSON FOR EXECUTING WORKS CONTRACTS IS NOT ELIGIBLE FOR SUCH A BENEFIT. EXPLANATION TO SECTION 80IA WAS INSERTED BY FINANCE ACT, 2007 WITH RETROSPECTIVE 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 JUDICIAL DECISION ON THIS ISSUE. THUS, WE CAN UNEQUIVOCALLY NOW SAY THAT ANY UNDERTAKING OR ENTERPRISE WHICH EXECUTES THE INFRASTRUCTURE DEVELOPMENT PROJECT, AS REFERRED TO IN SUB-SECTION(4) AS A WORKS CONTRACT AWARDED BY ANY PERSON INCLUDING THE CENTRAL OR STATE GOVERNMENT, IS 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 BENEFIT IN ASSESSMENT YEAR 2003-04 BY THE DEPARTMENT ON IDENTICAL 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 DEVELOPMENT OF INFRASTRUCTURE FACILITY. IT IS ONLY WITH EFFECT FROM 1.4.2000, TH IS SECTION WAS DIVIDED INTO TWO PORTIONS 80IA AND I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 47 80IB. SECTION 80IA(4) PRESCRIBES ABOUT THE DEDUCTION AVAILABLE TO A DEVELOPER WHO DEVELOPS INFRASTRUCTURE FACILITIES. IN VIEW OF THE AMENDMENT 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 HEREBY DECLARED THAT NOTHING CONTAINED IN THIS SECTION(I.E. 80IA) SHALL APPLY TO A PERSON WHO EXECUTES A WORKS CONTRACT ENTERED INTO WITH THE UNDERTAKING OR ENTERPRISE, AS THE CASE MAY BE. IN CONTRAST TO THIS, A PERSON WHO ENTERS INTO A CONTRACT WITH ANOTHER PERSON (I.E., UNDERTAKING OR ENTERPRISE REFERRED TO IN SECTION 80-IA) FOR EXECUT ING WORKS CONTRACT, WILL NOT BE ELIGIBLE FOR TAX BENEFI T UNDER SECTION 80- IA. 10. WE HAVE FOUND THAT THE ASSESSEE-COMPANY IS A WORKS CONTRACTOR, WHO HAS ENTERED INTO AGREEMENT WITH THE LOCAL BODIES TO EXECUTE CERTAIN PART OF TH E WORK AWARDED TO IT THROUGH CONTRACT FOR INFRASTRUCTURE FACILITY. IT IS TRUE THAT WHERE A PERSON WHO MAKES INFRASTRUCTURE AND HIMSELF EXECUTES DEVELOPMENT WORK AND CARRIES OUT CIVIL WORK WILL BE ELIGIBLE FOR TAX BENEFIT U/S 80IA OF T HE ACT. IN CONTRAST TO THIS, A PERSON WHO ENTERS INTO A CONTRACT WITH ANOTHER PERSON FOR EXECUTING WORKS CONTRACT, WILL NOT BE ELIGIBLE FOR TAX BENEFIT U/S 80IA. IT WAS CLARIFIED BY THE CIRCULAR NO. 3 OF 200 8 DATED 12.3.2008 THAT THE PROVISIONS OF SECTION 80IA SHALL NOT APPLY TO A PERSON WHO EXECUTES ONLY WORK CONTRACTS AND ONLY THOSE WHO MAKE THE DEVELOPMENT 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 ASSESSEE-COMPANY FULFILS ALL THE RELEVANT CONDITIONS. THE FACTS OF T HIS CASE GO TO PROVE THAT THE ASSESSEE IS A DEVELOPER OF INFRASTRUCTURE FACILITIES. THE REASONS FOR OUR ABOVE CONCLUSION ARE GIVEN IN THE FOLLOWING PARAS. FIRSTLY, THE ASSESSEE-COMPANY NOT ONLY DESIGNS BUT I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 48 ALSO CREATES NEW PRODUCTS. THE ASSESSEE HAD UNDERTAKEN FOUR PROJECTS DURING THE 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 OF ANY WORK RELATING TO CONSTRUCTION, REPAIR, OR MAINTENANCE OF ANY BUILDING OR SUPERSTRUCTURE, DAM, WEIR, CANAL, RESERVOIR, TANK, LAKE, ROAD, WELL, BRIDGE, CULVERT, FACTORY, WORKSHOP, POWERHOUSE, 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 O F ITS STAGES ENTERED INTO BY THE STATE GOVERNMENT OR BY AN OFFICIAL OF THE STATE GOVERNMENT OR PUBLIC UNDERTAKING AND INCLUDES AN AGREEMENT FOR THE SUPPLY OF GOODS OR MATERIAL AND ALL OTHER MATTERS RELATING TO EXECUTION OF ANY OF THE SAID WORKS. THE CASE OF ACIT VS INDWELL LIANINGS PVT. LTD (SUPRA), ON WHICH THE ASSESSING OFFICER HAS PLACED RELIANCE IS ALSO RELEVANT AND WE EXTRACT CERTAIN RELEVANT PORTION OF THIS DECISION FOR READY REFERENCE: VIDE FINANCE ACT, 2007, AN EXPLANATION WAS INSERTED WITH RETROSPECTIVE EFFECT FROM APRIL, 2000 AFTER SUB-SECTION (13) OF SECTION 80- IA, WHICH READS AS UNDER : 'FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLARED THAT NOTHING CONTAINED IN THIS SECTION SHALL APPLY TO A PERSON WHO EXECUTES A WORKS CONTRACT ENTERED INTO WITH THE UNDERTAKING OR ENTERPRISE, AS THE CAS E 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 ACTIVITI ES PERFORMED EITHER THROUGH UNIFIED OPERATION OR COMMON CONTROL BY ANY PERSON OR PERSONS FOR A COMMON BUSINESS PURPOSE. I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 49 THE MENS LEGIS WITH REFERENCE TO DEVELOPER OF INFRASTRUCTURE FACILITY CAN BE GATHERED FROM THE MEMORANDUM EXPLAINING THE PROVISIONS 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 ZONES. THE TAX BENEFIT WAS INTRODUCED FOR THE REASON THAT INDUSTRIAL MODERNIZATION REQUIRES A PASSIVE EXPANSION OF, AND QUALITATIVE IMPROVEMENT IN, INFRASTRUCTURE (VIZ., EXPRESSWAYS, HIGHWAYS, AIRPORTS, PORTS AND RAPID URBAN RAIL TRANSPORT SYSTEMS) WHICH WAS LACKING IN OUR COUNTRY. THE PURPOSE OF THE TAX BENEFIT HAS ALL ALONG BEEN FOR ENCOURAGING PRIVATE SECTOR PARTICIPATION BY WAY OF INVESTMENT IN DEVELOPMENT OF THE INFRASTRUCTURE SECTOR AND NOT FOR THE PERSONS WHO MERELY EXECUTE THE CIVIL CONSTRUCTION WORK OR ANY OTHER WORKS CONTRACT. ACCORDINGLY, IT IS PROPOSED TO CLARIFY THAT THE PROVISIONS OF SECTION 80-IA SHALL NOT APPLY TO A PERSON WHO EXECUTES A WORKS CONTRACT ENTERED INTO WITH THE UNDERTAKING OR ENTERPRISE REFERRED TO IN THE SAID SECTION. THUS, IN A CASE WHERE A PERSON MAKES THE INVESTMENT AND HIMSELF EXECUTES THE DEVELOPMENT WORK, I.E., CARRIES OUT THE CIVIL CONSTRUCTION WORK, HE WILL BE ELIGIBLE FOR TAX BENE FIT UNDER SECTION 80- LA. IN CONTRAST TO THIS, A PERSON WHO ENTERS INTO A CONTRACT WITH ANOTHER PERSON (I.E., UNDERTAKING OR ENTERPRISE REFERRED TO IN SECTION 80-IA) FOR EXECUTING WORKS CONTRACT, WILL NOT BE ELIGIBLE FOR TAX BENEFIT UNDER SECTION 80- I A. THIS AMENDMENT WILL TAKE RETROSPECTIVE EFFECT FROM APRIL I, 2000 AND WILL ACCORDINGLY APPLY IN RELATIO N TO THE ASSESSMENT YEAR 2000-01 AND SUBSEQUENT YEARS.' IT IS MADE ABUNDANTLY CLEAR THAT THE PRESCRIPTION OF SECTION 80- IA SHALL NOT APPLY TO A PERSON WHO EXECUTES WORK CONTRACTS ENTERED INTO WITH AN UNDERTAKING OR ENTERPRISE. THUS, IN A CASE WHERE A PERSON WHO MAKES INVESTMENT AND HIMSELF I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 50 EXECUTES DEVELOPMENT WORKS AND CARRIES OUT CIVIL WORKS, WILL BE ELIGIBLE FOR TAX BENEFIT UNDER SECTI ON 80- IA OF THE ACT. IN CONTRAST TO THIS, A PERSON WH O ENTERS INTO A CONTRACT WITH ANOTHER PERSON FOR EXECUTING WORKS CONTRACT WILL NOT BE ELIGIBLE FOR T HE TAX BENEFIT UNDER SECTION 80-IA OF THE ACT. IN THE PRESENT CASE, WE FIND THAT THE ASSESSEE WAS DOING ONLY CONTRACT WORKS OF IN SITU CEMENT LINING FOR WATER SUPPLY PROJECT OF THE GUJARAT WATER SUPPLY AND SEWERAGE BOARD. AS SUCH, THE BENEFIT OF SECTION 80-IA CANNOT BE EXTENDED TO THE ASSESSEE. THE DECISIONS RELIED UPON BY THE ASSESSEE WERE RENDERED PRIOR TO THE AMENDMENT AND AS SUCH NOT RELEVANT FOR DECIDING THIS ISSUE. WE, THEREFORE, RESTORE THE ORDER OF THE ASSESSING OFFICER AND REVERSE 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 REND ERED IN THE CASE OF LAXMI CIVIL ENGG. P. LTD VS ADDL. CI T, ORDER DATED 8.6.2011 ARE BEING EXTRACTED HEREIN BELOW: 5. WE HEARD BOTH THE PARTIES AND PERUSED THE ORDERS OF THE REVENUE. THE CONTENTIOUS ISSUES BEFOR E US ARE (I) WHETHER THE CONTRACTOR IS SYNONYMOUS WITH THE DEVELOPER WITHIN THE MEANING OF SECTION 80IA (4)(I) OF THE ACT; (II) WHETHER THE CONDITION PLACED IN CLAUSE (C) IS APPLICABLE TO THE CASE OF A DEVELOPER, WHO IS NOT CARRYING ON BUSINESS OF OPERATING AND MAINTAINING THE INFRASTRUCTURAL FACILITIES. IN OUR OPINION, THE ANSWER TO THESE QUESTION ARE PROVIDED BY THE JUDGMENT OF THE BOMBAY HIGH COURT IN THE CASE 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 COMPLETENESS, THE SAID PARAGRAPH IS REPRODUCED AS UNDER:- '22. THE SUBMISSION WHICH WAS URGED ON BEHALF OF THE REVENUE IS THAT CLAUSE (III) OF SUB-SECTION (4A ) OF SECTION 80-LA, ONE OF THE CONDITIONS IMPOSED WAS THAT THE ENTERPRISE MUST START OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY ON OR AFTER 1ST 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 I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 51 WAS NOT OPERATING AND MAINTAINING THE FACILITY, HE DID NOT FULFIL THE CONDITION. THE SUBMISSION IS FALLACIOUS BOTH IN FACT AND IN LAW. ' THAT THE ASSESSEE WAS MAINTAINING THE FACILITY IS NOT IN DISPUTE. THE FACILITY WAS COMMENCED AFTER 1S T APRIL, 1995. THEREFORE, THE REQUIREMENT WAS MET IN FACT. MOREOVER, AS A MATTER OF LAW, WHAT THE CONDITION ESSENTIALLY MEANS IS THAT THE INFRASTRUCTURE FACILITY SHOULD HAVE BEEN OPERATIONA L AFTER 1ST APRIL, 1995. AFTER SECTION 80IA WAS AMENDED BY THE FINANCE ACT, 2001, THE SECTION APPLIES TO AN ENTERPRISE CARRYING ON THE BUSINESS O F (I) DEVELOPING; OR (II) OPERATING AND MAINTAINING; OR (III) DEVELOPING, OPERATING AND MAINTAINING ANY INFRASTRUCTURE FACILITY' WHICH FULFILS CERTAIN CONDITIONS. THOSE CONDITIONS ARE (I) OWNERSHIP OF T HE ENTERPRISES BY A COMPANY REGISTERED IN INDIA OR BY A CONSORTIUMS; (II) AN AGREEMENT WITH THE CENTRAL O R STATE GOVERNMENT, LOCAL AUTHORITY OR STATUTORY BODY ; AND (III) THE START OF OPERATION AND MAINTENANCE OF THE INFRASTRUCTURE FACILITY SHOULD COMMENCE AFTER 1 ST APRIL, 1995. THE REQUIREMENT THAT OPERATION AND MAINTENANCE OF THE INFRASTRUCTURE FACILITY SHOULD COMMENCE AFTER 1ST APRIL, 1995 HAS TO BE HARMONIOUSLY CONSTRUED WITH THE MAIN PROVISION UNDER WHICH DEDUCTION IS AVAILABLE 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 ENTIRETY 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 THE INFRASTRUCTURE FACILITY SHOULD BE AFTER 1' APRIL, 1995. IN THE PRE SENT CASE THE ASSESSEE CLEARLY FULFILLED THIS CONDITION '. BEFORE THE AMENDMENT THAT WAS BROUGHT ABOUT BY PARLIAMENT BY FINANCE ACT, 2001 WE HAVE ALREADY NOTED THAT THE CONSISTENT LINE OF CIRCULARS OF THE BOARD POSTULATED THE SAME POSITION. THE AMENDMENT MADE BY PARLIAMENT TO S. 80-IA(4) OF THE ACT, SET THE MATTER BEYOND ANY CONTROVERSY BY STIPULATING THAT THE THREE CONDITIONS FOR I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 52 DEVELOPMENT, OPERATION AND MAINTENANCE WERE NOT INTENDED TO BE CUMULATIVE IN NATURE 6. THE ABOVE JUDGMENT OF THE HON'BLE HIGH COURT IS DELIVERED IN THE CASE OF ABG HEAVY ENGG LTD (SUPRA), WHO IS A CONTRACTOR FOR THE INP 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 OPERATE AND MAINTAIN THE INFRASTRUCTURE. IT IS FURTHER EVIDENT THAT THE HARMONIOUS READING IS NECESSARY AND MANDATORY IN VIEW OF HIGH COURT'S JUDGMENT IN THE CASE OF AN ENTERPRISE CARRYING ON BUSINESS OR DEVELOPING WHICH IS THE CASE OF THE ASSESSEE, ALL THE CONDITIONS REFERRED TO CLAUSE (I) OF SECTION 80IA (4) SHOULD R EFER TO THE CONDITIONS AS APPLICABLE TO THE DEVELOPER. I N OTHER WORDS, THE DEVELOPER WHO IS ONLY DEVELOPING THE INFRASTRUCTURE FACILITIES SINCE HE DOES NOT OPERATE AND MAINTAIN INFRASTRUCTURAL FACILITIES, CANNOT BE EXPECTED TO FULFIL THE CONDITION AT SUB CLAUSE ( C) WHICH IS AN IMPOSSIBILITY AND THE REQUIREMENTS TO FULFIL THE SAID CONDITION SHALL AMOUNT TO ABSURDITY AND THEREFORE UNCALLED FOR. THEREFORE, WE FIND REQUIREMENT OF HARMONIOUS READING OF SUB-CLAUSE (C) VIS--VIS OF CLAUSE (I) O F SECTION 80IA (4) OF THE ACT. THUS, THE DISCUSSION I N HIGH COURT'S DECISION IN PARAGRAPH-22 EXTRACTED ABOVE, IS DIRECTLY APPLICABLE TO THE FACTS OF THE C ASE AND EVENTUALLY IS ENTITLED FOR THE DEDUCTION UNDER SECTION 80IA (4) OF THE ACT. ACCORDINGLY, THE MODIF IED GROUND, WHICH IS COMMON IN ALL THE FOUR APPEALS IS ALLOWED IN FAVOUR OF THE ASSESSEE. 12. LET US REMIND OURSELVES THAT THE HON'BLE SUPREM E COURT IN THE CASE OF BAJAJ TEMPO LTD VS CIT, 196 IT R 188, HAS ORDAINED THAT TAXING STATUTE GRANTING INCENTIVE S FOR PROMOTING GROWTH AND DEVELOPMENT SHOULD BE LIBERALL Y CONSTRUED. 13. NOW, THE QUESTION ARISES AS TO WHETHER THE TERM CONTRACTOR IS NOT ESSENTIALLY CONTRADICTORY TO TH E TERM DEVELOPER. IN FACT, IN EVERY DEVELOPMENT THE TERM DEVELOPER WILL DEFINITELY BE A WORKS CONTRACTOR BUT EVERY WORKS CONTRACTOR MAY NOT BE A DEVELOPER. A DEVEL OPER IS A SPECIFIC KIND OF WORKS CONTRACTOR TO BE ELIGIBLE FOR DEDUCTION U/S 80IA(4) WHO FULFILS ALL THE CONDITION S I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 53 NAMELY, IF THE ASSESSEE DEVELOPS THE INFRASTRUCTURE FACILITY IF IT OPERATES THE INFRASTRUCTURE FACILITY AND IF I T 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 AVAIL ABLE TO AN ENTERPRISE WHO DEVELOPS OR OPERATES AND ALSO MAINTAINS; OR DEVELOPS, MAINTAINS AND OPERATES THAT INFRASTRUCTURE FACILITY. THE PROVISION FOR GIVING T HE IMPUGNED INCENTIVES HAS BEEN EXAMINED, RE-EXAMINED, MODIFIED AND AMENDED AFTER GIVING CONSCIOUS AND DELIBERATE DISCUSSIONS BY THE CONCERNED LAW MAKERS. TO OUR GREAT CHAGRIN EVEN AFTER THIS CONSCIOUS EXERCI SE 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 BE EN EXCLUDED FROM THE SCOPE OF THIS PROVISION. AND RIGH TLY SO, BECAUSE WHAT INFRASTRUCTURE IS REQUIRED IN PUBLIC D OMAIN IS THE OUTLOOK/DUTY OF A LOCAL AUTHORITY OR OF A CENTRAL/STATE GOVERNMENT. WHEN A CERTAIN INFRASTRUC TURE IS NEEDED, THE CONCERNED AUTHORITIES HAVE A BROADER PICTURE IN THEIR MIND AIMING AT ACQUIRING CERTAIN F ACILITY FOR WHICH INFRASTRUCTURE DEVELOPMENT IS REQUIRED. SO, T O SAY, WHEN ANY ASSESSEE/ENTERPRISE AGREES UNDER A CONTRAC T 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, A GAIN THIS PROVISION IN SO FAR AS THE CONDITIONS REQUIRED TO B E FULFILLED TO BE ELIGIBLE FOR THIS INCENTIVE HAD TO BE PROVIDE D BY THE JURIDICAL FORUMS DEALING WITH THIS ISSUE. AFTER IN- DEPTH DELIBERATIONS, DISCUSSIONS AND EXAMINATION 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 STA TE, IN CASE IT CONSTRUCTS THE INFRASTRUCTURE FACILITY, OPE RATES IT AND ALSO MAINTAINS THE SAME, IT WOULD BE ELIGIBLE F OR 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 FLYOVE R, BRIDGE UNDERPASS, SEWERAGE, WATER SUPPLY ETC. FOR VARIOUS LOCAL BODIES, RAILWAYS, CENTRAL/STATE GOVERNMENTS. IN FAC T, AS PER THE TERMS OF AGREEMENT, EVEN THE INITIAL PROPOS ALS FORMULATED BY THE DEPARTMENT WHICH ARE STATED TO BE TENTATIVE, THE ASSESSEE HAS THE LIBERTY TO MAKE DIF FERENT PROPOSALS WITHOUT DETRIMENTAL TO THE GENERAL FEATUR ES OF THE DEPARTMENTAL PROPOSAL, LIKE ROAD LEVEL/BOTTOM O F DECK LEVEL, MFL, SILL LEVEL, LINEAR WATER WAY, WIDTH OF THE I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 54 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, DELIVERED AND MAINTAINED AND SECURITY IS ALSO MAINT AINED THEREAFTER. SO, THIS IS A CASE OF TRANSFER OF PROPE RTY IN CHATTEL AND NOT A CONTRACT 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 CAS E OF ACIT VS BHARAT UDYOG LTD, F BENCH OF ITAT MUMBAI, HAS CONCLUDED THAT ANY ASSESSEE WHO IS ENGAGED IN DEVELOPING THE INFRASTRUCTURE FACILITY AND ALSO OPE RATING AND MAINTAINING THE SAME, IS ENTITLED TO THE BENEFI T OF DEDUCTION U/S 80IA(4). A COPY OF THIS DECISION IS E NCLOSED AT PAGE 139 OF THE PAPER BOOK. IN THE CASE OF PATEL ENGINEERING LTD VS DY. CIT, 84 TTJ (MUMBAI) 646 [CO PY ENCLOSED AT PAGE NO. 145 OF THE PAPER BOOK], IT HAS BEEN HELD THAT A PERSON, WHO ENTERS INTO A CONTRACT WITH ANOTHER PERSON WILL BE TREATED AS A CONTRACTOR UNDOUBTEDLY; AND THAT ASSESSEE HAVING ENTERED INTO AN AGREEMENT WITH THE GOVERNMENT OF MAHARASHTRA AND AL SO WITH APSEB FOR DEVELOPMENT OF THE INFRASTRUCTURE PR OJECTS, IS OBVIOUSLY A CONTRACTOR BUT DOES NOT DEROGATE TH E ASSESSEE FROM BEING A DEVELOPER AS WELL. THE TERM CONTRACTOR IS NOT NECESSARILY CONTRADICTORY TO TH E TERM DEVELOPER. ON THE OTHER HAND, RATHER SECTION 80IA (4) ITSELF PROVIDES THAT ASSESSEE SHOULD DEVELOP THE INFRASTRU CTURE FACILITY AS PER THE AGREEMENT WITH THE CENTRAL GOVERNMENT, STATE GOVERNMENT OR A LOCAL AUTHORITY. SO, ENTERING INTO A LAWFUL AGREEMENT AND THEREBY BECOMI NG A CONTRACTOR SHOULD IN NO WAY BE A BAR TO THE ONE BEI NG A DEVELOPER. THE ASSESSEE HAS DEVELOPED INFRASTRUCT URE FACILITY AS PER THE AGREEMENT WITH MAHARASHTRA GOVERNMENT/APSEB, THEREFORE, MERELY BECAUSE IN THE AGREEMENT FOR DEVELOPMENT OF INFRASTRUCTURE FACILIT Y THE ASSESSEE IS REFERRED TO AS A CONTRACTOR OR BECAUSE SOME BASIC SPECIFICATIONS ARE LAID DOWN, IT DOES NOT DET RACT THE ASSESSEE FROM THE 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 EXACTLY IDENTICAL TO THE FACTS OF THAT CASE RENDERED BY ITAT MUMBAI B ENCH IN WHICH UNDER IDENTICAL FACTS AND CIRCUMSTANCES, T HE 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 TRANSFERRE D THE I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 55 INFRASTRUCTURE FACILITY DEVELOPED BY IT BY HANDING OVER THE POSSESSION THEREOF TO THE CONCERNED AUTHORITY AS RE QUIRED BY THE AGREEMENT. THE HANDING OVER OF THE POSSESSIO N OF DEVELOPED INFRASTRUCTURE FACILITY/PROJECT IS THE TR ANSFER OF THE INFRASTRUCTURE FACILITY/PROJECT BY THE ASSESSEE TO THE AUTHORITY. THE HANDING OVER OF THE INFRASTRUCTURE FACILITY/PROJECT BY THE DEVELOPER TO THE GOVERNMENT OR AUTHORITY TAKES PLACE AFTER RECOUPMENT OF THE DEVEL OPERS COSTS WHETHER IT BE BT OR BOT OR BOOT BECAUSE IN BOT AND BOOT THIS RECOUPMENT IS BY WAY OF COLLE CTION OF TOLL THERE FROM WHEREAS IN BT IT IS BY WAY OF PERIODICAL PAYMENT BY THE GOVERNMENT/AUTHORITY. THE LAND INVOL VED IN INFRASTRUCTURE FACILITY/PROJECT ALWAYS BELONGS T O THE GOVERNMENT/LOCAL AUTHORITY ETC., WHETHER IT BE THE CASE OF BOT OR BOOT AND IT IS HANDED OVER BY THE 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 ALSO AVAILABLE TO THIS ASSESSEE WHICH HA S UNDERTAKEN WORK OF A MERE DEVELOPER. RATHER, THE STATUTORY PROVISION AS CONTAINED IN SECTION 80IA WH ICH PROVIDES FOR DEDUCTION OF INFRASTRUCTURE FACILITY N O WAY PROVIDES THAT ENTIRE INFRASTRUCTURE FACILITY PROJEC T HAS TO BE DEVELOPED BY ONE ENTERPRISE. THUS, AS PER SECTION 8 0IA THE ASSESSEE SHOULD DEVELOP THE INFRASTRUCTURE FACI LITY AS PER THE AGREEMENT WITH THE 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 STATED, THE DECISION OF ACIT VS BHARAT UDYOG LTD, 118 ITD 336 AND PATEL ENGINEERING 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, WIDENIN G OF EXISTING ROADS CONSTITUTES CREATION OF NEW INFRASTR UCTURE FACILITY FOR THE PURPOSE OF SECTION 80IA(4)(I) . TH E ASSESSEE IS NOT REQUIRED TO DEVELOP THE ENTIRE ROAD IN ORDER TO QUALIFY FOR DEDUCTION U/S 80IA AS HAS BEEN HELD BY THE HON'BLE BOMBAY HIGH COURT IN THE CASE OF CIT VS ABG HEAVY INDUSTRIES LTD, 322 ITR 323. THE NEWLY INSERT ED 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 OT HER PARTY THE SUB-CONTRACTOR. THE AMENDMENT AIMS AT DENYING DEDUCTION TO THE SUB CONTRACTOR WHO EXECUTE S A WORK CONTRACT WITH THE ENTERPRISE AS HELD BY THE IT AT, JAIPUR A BENCH IN THE CASE OF OM METAL INFRA PROJ ECTS LTD VS CIT-I, JAIPUR, IN I.T.A. NO. 722 & 723/JP/2008 D ATED I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 56 31.12.2008. THE RELIANCE BY THE LD. CIT(A) ON THE D ECISION OF ITAT, CHENNAI BENCH IN THE CASE OF ACIT VS INDWE LL LIANINGS PVT. LTD, 313 ITR(AT) 118, HAS BEEN ENLARG ED IN ITS FINDING BY THE ITAT, MUMBAI F BENCH IN ITS DE CISION RENDERED IN THE CASE OF ACIT VS BHARAT UDYOG LTD , BY HOLDING THAT SUCH A DEDUCTION IS ONLY TO BE DENIED TO A SUB-CONTRACTOR AND NOT A MINI CONTRACTOR. SIMILAR V IEW HAS BEEN TAKEN BY THE ITAT CHENNAI BENCH IN THE CASE OF ACIT VS SMT. C. RAJINI (SUPRA) IN WHICH BOTH OF US CONSTITUTED THE BENCH. IN THIS DECISION THE DEFINIT ION AND DIFFERENCE BETWEEN WORKS CONTRACTOR AND A DEVELOPER HAS BEEN EXAMINED IN DETAIL. THE MAIN THRUST OF THE DEC ISION IS THAT A DEVELOPER NEED NOT BE THE OWNER OF THE LAND ON WHICH DEVELOPMENT IS MADE. ALTHOUGH THAT DECISION W AS RENDERED IN THE CONTEXT OF A DEVELOPER OF BUILDINGS AND THE DEDUCTION WAS IN RESPECT OF 80IB(10), BUT THE DEFIN ITION OF DEVELOPER GIVEN IN THAT CASE IS ALSO RELEVANT FOR THIS PURPOSE. MOREOVER, WE ARE IN AGREEMENT THAT IN INCE NTIVE PROVISIONS, THE CONSTRUCTION SHOULD BE LIBERALLY GI VEN AS HELD BY THE HON'BLE SUPREME COURT RENDERED IN THE C ASE OF BAJAJ TEMPO LTD VS CIT, 196 ITR 188. THUS, WHEN THE ASSESSEE MAKES INVESTMENT AND HIMSELF EXECUTES DEVELOPMENT WORK AND CARRIES OUT CIVIL WORKS, HE IS ELIGIBLE FOR TAX BENEFIT U/S 80IA OF THE ACT. ACCOR DINGLY, WITH THE FOREGOING DISCUSSION, WE HOLD THAT THE ASS ESSEE 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 VALID MERIT IN THE REVENUES APPEAL . ACCORDINGLY, THE APPEAL STANDS DISMISSED. 55. FURTHER, WE MAKE IT CLEAR THAT WHERE THE ASSESSEE H AS CARRIED OUT THE DEVELOPMENT OF INFRASTRUCTURE WORK IN CONSO RTIUM OR JOINTLY WITH ANY OTHER AGENCY AND NOT AS A SUB-CONTRACTOR, THEN ALSO THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S 80IA OF THE ACT. THE SAME PRINCIPLE IS APPLICABLE IN RESPECT OF WORK ALLOTTED BY GOVERNMENT CORPORATION TO THE ASSESEE. BEING SO, WE ARE INCLIN ED TO PARTLY ALLOW THE GROUND RELATING TO CLAIMING OF DEDUCTION U/S. 8 0IA.OF THE ACT. 56. IN THE RESULT, DEPARTMENTAL APPEALS IN I.T.A. NO. 2 33/HYD/01, 969/HYD/02, 617/HYD/03 AND 1079/HYD/03 ARE DISMISSE D. THE I.T.A. NO. 84/HYD/2010 & ORS M/S. KMC CONSTRUCTIONS LTD. ======================= 57 ASSESSEES APPEALS IN ITA NOS. 430/HYD/03 AND 996/H YD/03 ARE ALSO DISMISSED. ASSESSEES APPEALS IN ITA NOS. 558 /HYD/06, 1027/HYD/07, 1223/HYD/07, 338/HYD/09 AND 84/HYD/10 ARE PARTLY ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON 16 TH MARCH, 2012. SD/- (ASHA VIJAYARAGHAVAN) JUDICIAL MEMBER SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED THE 16 TH MARCH, 2012 COPY FORWARDED TO: 1. M/S. KMC CONSTRUCTIONS LTD., C/O. SHRI S. RAMA R AO, ADVOCATE, 102, SHRIYA'S ELEGANCE, D. NO. 3-6-643, S T. NO. 9, HIMAYATNAGAR, HYDERABAD 2. M/S. KRISHNA MOHAN CONSTRUCTIONS LTD., C/O. SHRI S. RAMA RAO, ADVOCATE, 102, SHRIYA'S ELEGANCE, D. NO. 3-6-6 43, ST. NO. 9, HIMAYATNAGAR, HYDERABAD 3. ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-2(1), H YDERABAD. 4. ASST. COMMISSIONER OF INCOME-TAX, CIRCLE-2(2), H YDERABAD. 5. DY. COMMISSIONER OF INCOME-TAX, CIRCLE-2(1), HYD ERABAD. 6. ADDL. COMMISSIONER OF INCOME-TAX (ASSTS), SPECIA L RANGE-2, HYDERABAD. 7. THE CIT(A)-III 8. THE CIT-2, HYDERABAD. 9. THE CIT, AP-1, HYDERABAD 10. THE DR A BENCH, ITAT, HYDERABAD TPRAO
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