Nila Bauart Engineering Limited, Baroda V. The ACIT., Circle-4, Baroda

ITA 2485/AHD/2010

• Counselvise Citation: [2017] 128 COUNSELVISE.COM (IT) 6258 (ITAT-AHMEDABAD)
• Duration Of Justice: 6 year(s) 8 month(s) 2 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 13-04-2017
• Appeal Filed By: Assessee
• Order Result: Partly Allowed
• Bench Allotted: D
• Next Hearing Date: 27-03-2017
• Assessment Year: 2003-2004
• Appeal Filed On: 10-08-2010
• Result in Favour of: Partly Allowed
• Court: TRIBUNAL
• Department Lawyers: VIJAY KUMAR SINGH SR DR
• Keywords: Reopening of assessment; Business expenditure; Difference of opinion; Change of opinion; Revenue expenditure; Capital expenditure
• Section: 147

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD , , BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER 1. ./ I.T.A. NO.2485/AHD/2010 2. ./ I.T.A. NO.2486/AHD/2010 ( ASSESSMENT YEARS :2003-04 & 2004-05 RESPECTIVELY ) NILA BAURAT ENGINEERING LTD. 611, YASHKAMAL BUILDING SAYAJIGUNJ, BARODA / VS. THE ACIT CIRCLE-4 BARODA # ./ ./ PAN/GIR NO. : AAACN 7066 N ( #& / APPELLANT ) .. ( '#& / RESPONDENT ) #&( / APPELLANT BY : MS.URVASHI SHODHAN & SHRI PARIN SHAH, ARS '#& )( / RESPONDENT BY : SHRI VIJAY KUMAR SINGH, SR.DR *+ ), / DATE OF HEARING 11/04/2017 -./0 ), / DATE OF PRONOUNCEMENT 13/ 04 /2017 / O R D E R PER PRADIP KUMAR KEDIA, AM: THE CAPTIONED TWO APPEALS BY THE ASSESSEE ARE DIR ECTED AGAINST THE SEPARATE ORDERS OF THE COMMISSIONER OF INCOME TAX(A PPEALS)-III, BARODA [CIT(A) IN SHORT] IDENTICALLY DATED 31/05/2010 FOR THE ASSESSMENT YEARS (AYS) 2003-04 & 2004-05. ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 2 - 2. SINCE COMMON ISSUES ARE INVOLVED IN BOTH THESE APPEALS, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY WA Y OF THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 3. WE SHALL FIRST TAKE UP ITA NO.2485/AHD/2010 AY 2003-04 AS A LEAD CASE FOR THE PURPOSE OF DETERMINATION OF ISSUE S INVOLVED. 4. IN ITS MAIN GROUND OF APPEAL, THE ASSESSEE HAS A SSAILED THE ORDER OF THE CIT(A) WHEREIN THE ACTION OF THE ASSESSING OFFI CER (AO) IN DISALLOWING THE DEDUCTION OF RS.13,71,617/- CLAIMED BY THE ASSESSEE UNDER S.80IA OF THE INCOME TAX ACT, 1961 (HEREINAFT ER REFERRED TO AS 'THE ACT') WAS CONFIRMED. THE ASSESSEE ALSO RAISED ADD ITIONAL GROUNDS OF APPEAL IN TERMS OF RULE 11 OF THE ITAT RULES, 1963 WHEREBY THE VALIDITY OF REOPENING OF ASSESSMENT BY THE AO WAS ALSO PUT U NDER CHALLENGE. 4.1 THE ORIGINAL GROUND AND THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS EXTRACTED HEREUNDER:- ORIGINAL GROUND THE LEARNED CIT(A) HAS GROSSLY ERRED IN LAW AND ON FACTS IN CONFIRMING ACTION OF THE ASSESSING OFFICER IN DISAL LOWING THE DEDUCTION OF RS.13,71,617/- CLAIMED U/S.80IA OF THE ACT AND ORIGINALLY ALLOWED TO THE ASSESSEE IN ORDER U/S.143 (3) OF THE ACT. ADDITIONAL GROUND ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 3 - LD. CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING THE VALIDITY OF THE REOPENING OF THE ASSESSMENT BY AO ON THE BASIS OF OBSERVATION OF HONBLE ITAT IN ORDER OF THIRD PARTY. LD.CIT(A) OUGHT TO HAVE HELD THE ASSESSMENT VOID AB INITIO & BAD IN LAW BAS ED ON CHANGE OF OPINION WHEN FULL INFORMATION WITH RESPECT TO DE DUCTION CLAIMED U/S.80IA WAS BEFORE AO AND DISCUSSED IN ORDER U/S.1 43930 OF THE ACT. 5. THE ADDITIONAL GROUNDS FILED UNDER RULE 11 OF IT AT INVOLVES EXAMINATION OF LEGAL QUESTION ON FACTS AVAILABLE ON RECORD. ACCORDINGLY, WE ADMIT THE SAME FOR ADJUDICATION. 6. BRIEFLY STATED, THE ASSESSEE IS A LIMITED COMPAN Y ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION AND INSTALLATION OF VARIOUS INDUSTRIAL PROJECTS ON CONTRACT BASIS. THE ASSESSEE FILED RET URN OF INCOME FOR THE IMPUGNED AY 2003-04 DECLARING INCOME AT RS.20,92,31 7/-. THE RETURN OF THE ASSESSEE WAS SUBJECTED TO SCRUTINY ASSESSMEN T. AS A SEQUEL THERETO, THE ASSESSMENT ORDER UNDER S.143(3) WAS F RAMED ASSESSING THE INCOME AT RS.78,10,220/- AFTER MAKING VARIOUS DISAL LOWANCES VIDE ORDER DATED 27/03/2006. AFTER THE COMPLETION OF THE ASSE SSMENT, THE CASE WAS REOPENED UNDER S.147 OF THE ACT BY ISSUANCE OF NOT ICE UNDER S.148 OF THE ACT DATED 26/03/2009 TO THE ASSESSEE. WHILE FRAMIN G THE RE-ASSESSMENT DATED 19/11/2009, THE AO REJECTED DEDUCTION CLAIMED UNDER S.80IA(4) OF THE ACT. THE ASSESSEE CHALLENGED THE AFORESAID RE- ASSESSMENT ORDER BEFORE THE CIT(A). HOWEVER, THE CIT(A) SUSTAINED T HE DISALLOWANCES OF DEDUCTION UNDER S. 80IA OF RS.13,71,617/- MADE BY THE AO. ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 4 - 7. AGGRIEVED THERETO, THE ASSESSEE IS IN APPEAL BEF ORE THE TRIBUNAL. 8. THE LD.AR FOR THE ASSESSEE MS.URVASHI SHODHAN AT THE OUTSET SUBMITTED THAT THE REASSESSMENT ORDER FRAMED BY THE AO SUFFERS FROM JURISDICTIONAL DEFECT AND THEREFORE THE REASSESSM ENT ORDER FRAMED IN PURSUANCE THEREOF IS VITIATED AND IS A NULLITY. TH E LD.AR IN THE SAME VAIN ALSO SUBMITTED THAT THE DENIAL OF DEDUCTION UN DER S.80IA(4) CLAIMED BY THE ASSESSEE IS ALSO NOT JUSTIFIED ON MERITS. 8.1. THE LD.AR AT THE FURTHER OUTSET ADVERTED OUR ATTENTION TO THE REASONS RECORDED FOR RE-OPENING OF COMPLETED ASSESS MENT FOR AY 2003- 04 AND SUBMITTED THAT THE IMPUGNED ACTION OF THE A O IS MERELY OWING TO CHANGE OF OPINION WHICH IS NOT PERMISSIBLE IN LAW . THE LD.AR SUBMITTED THAT THE ASSESSMENT IN THIS CASE WAS COMP LETED UNDER S.143(3) WHEREIN THE CLAIM OF DEDUCTION OF THE ASSESSEE UNDE R S.80IA WAS EXAMINED AND CLAIM OF THE ASSESSEE OF RS.18,37,099/ - WAS REVISED AT RS.13,71,617/- AFTER APPLICATION OF MIND. THEREAF TER, THE AO CLAIMS TO HAVE RECEIVED INFORMATION FROM ANOTHER AO AT JAIPUR HAVING JURISDICTION OVER A CONCERN NAMELY, M/S.RAMESHWARAM TOLLS PVT.LT D. (RTPL) ALLEGING THAT THE ASSESSEE HEREIN NILA BAUART ENGI NEERING LTD. (NBEL) HAS TRANSFERRED ITS INFRASTRUCTURE FACILITY (SIROHI ROAD PROJECT) TO RTPL WITH EFFECT FROM 18/11/2001 RELEVANT TO AYS 2002-03 , 2003-04 & 2004- ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 5 - 05. BASED ON INFORMATION SUPPLIED, THE AO HEREIN OB SERVED THAT RTPL HAS ALSO PARALLELY CLAIMED DEDUCTION UNDER S.80IA(4 ) OF THE ACT ON THIS INFRASTRUCTURE FACILITY. THE AO ACCORDINGLY FOUND THAT BOTH THE ASSESSEE AS WELL AS RTPL ARE CLAIMING EXEMPTION ON THIS FACI LITY SIMULTANEOUSLY WHICH IS PATENTLY WRONG. THE AO NOTED THAT ITAT JA IPUR BENCH WHILE DECIDING THE APPEAL IN THE CASE OF RTPL HELD THAT R TPL WAS ENTITLED TO DEDUCTION UNDER S.80IB AND NOT THE ASSESSEE. THE L D.AR IN THIS CONTEXT REITERATED WITH FORCE THAT THE CLAIM OF DEDUCTION W AS SPECIFICALLY EXAMINED BY THE AO IN THE COURSE OF THE ORIGINAL AS SESSMENT PROCEEDINGS AND A PORTION OF THE TOTAL CLAIM WAS DISALLOWED AFT ER EXAMINING THE CLAIM OF DEDUCTION IN DETAIL. THE LD.AR ACCORDINGLY SUBM ITTED THAT THE AO HAVING EXAMINED THE ISSUE OF CLAIM OF DEDUCTION AS STATED AFORESAID COULD NOT HAVE REOPENED THE ASSESSMENT AS IT IS A CASE O F MERE CHANGE OF OPINION. THE LD.AR EXHORTED THAT IT IS WELL-SETT LED THAT A COMPLETED ASSESSMENT CANNOT BE REOPENED ON A MERE CHANGE OF O PINION. IT WAS THUS SUBMITTED THAT THE ISSUANCE OF NOTICE UNDER S.148 I S A BAD IN LAW AND THE ASSUMPTION OF JURISDICTION CONSEQUENT THEREUPON SUF FERS FROM THE VICE OF ILLEGALITY. 8.2. THE LD.AR NEXT CONTENDED THAT FINDINGS RECORDE D IN THE ASSESSMENT OF ONE PARTY (RTPL) IS NOT BINDING IN TH E PROCEEDINGS OF ANOTHER ASSESSEE NOTWITHSTANDING SOME PLEA OR FINDI NG WERE FOUND RECORDED IN THE ASSESSMENT OF THE ANOTHER ASSESSEE FOR OR AGAINST THE ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 6 - INTEREST OF THE PRESENT ASSESSEE. IT IS ALWAYS OPE N FOR THE REVENUE TO REACH A DIFFERENT CONCLUSION IN THE TWO ASSESSMENT PROCEEDINGS ON THE BASIS OF MATERIAL PLACED IN RESPECTIVE PROCEEDINGS. FOR THIS PROPOSITION, THE LD.AR RELIED UPON THE DECISION OF THE HONBLE G UJARAT HIGH COURT IN THE CASE OF CHANDRAVADAN R.PATEL VS ACIT IN CIVIL A PPLICATION NO.657 OF 1999, ORDER DATED 03/08/1999 (COPY PLACED IN FIL E). AS A COROLLARY, THE LD.AR FOR THE ASSESSEE PRESSED THAT THE DECISION IN THE APPEAL OF RTPL CANNOT ADVERSELY IMPACT THE CASE OF THE ASSESSEE HE REIN WHICH WAS RENDERED WITHOUT HEARING THE ASSESSEE AN AFFECTED PARTY. THE LD.AR THUS CONTENDS THAT THE REOPENING OF THE ASSESSMENT OF THE ASSESSEE BASED ON THE ORDER OF THE ITAT JAIPUR IN THE CASE OF RTPL WITHOUT HEARING THE ASSESSEE IS NOT A VALID FOUNDATION FOR REOPENING TH E ASSESSMENT. 8.3. ON MERITS, THE LD.AR ADVERTED OUR ATTENTION T O VARIOUS CLAUSES OF AGREEMENT ENTERED INTO BY ASSESSEE WITH GOVERNMENT OF RAJASTHAN AND CONTENDED THAT RELEVANT INFRASTRUCTURE FACILITY HAS BEEN CONSTRUCTED, DEVELOPED AND MAINTAINED BY THE ASSESSEE FOR WHICH LOAN WAS OBTAINED BY THE ASSESSEE AND BANK GUARANTEE WAS FURNISHED TO THE GOVERNMENT OF RAJASTHAN. THE TOLL TAX HAS BEEN COLLECTED BY RTPL IN THE CAPACITY OF AN AGENT TO THE ASSESSEE. REFERRING TO VARIOUS CLAU SES OF THE AGREEMENT, THE LD.AR HARPED THAT THE CONTROL OVER THE FACILITY CONTINUED WITH THE ASSESSEE. THE LD.AR SUBMITTED WITH VEHEMENCE THAT AGREEMENT FOR DEVELOPMENT OPERATION AND MAINTENANCE OF INFRASTRUC TURE FACILITY WITH ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 7 - GOVERNMENT OF RAJASTHAN HAS NOT BEEN ASSIGNED OR TR ANSFERRED TO RTPL AT ALL NOR COULD HAVE BEEN, AS THERE WAS NOT POWER AVAILABLE TO THE ASSESSEE FOR ASSIGNMENT OR TRANSFER OF THE FACILITY TO ANY THIRD PARTY IN VIEW OF SPECIFIC CLAUSE NO.13 OF THE AGREEMENT WITH GOVERNMENT OF RAJASTHAN. THE LD.AR POINTED OUT THAT RTPL COULD N OT BE CONSTRUED AS THE OWNER OF THE INFRASTRUCTURE FACILITY IN VIEW OF THE TERM OF AGREEMENT BETWEEN THE ASSESSEE AND RTPL. IT WAS ARGUED THAT IT IS THE ASSESSEE WHICH HAS ENTERED INTO AN AGREEMENT WITH GOVERNMENT OF RAJASTHAN. THE RTPL HAS BEEN MERELY ASSIGNED WORK OF COLLECTION OF TOLL AND THEY ARE MERELY RENDERING THE AFORESAID SERVICES FOR AND ON BEHALF OF THE ASSESSEE. THE AGREEMENT WITH RTPL AS TOLL COLLECTION AGENT WA S INITIALLY ENTERED FOR ONE YEAR IN THE FIRST INSTANCE AND THEREAFTER R ENEWED YEAR-AFTER-YEAR KEEPING IN MIND THEIR SATISFACTORY PERFORMANCE. TH E LD.AR THUS SUBMITTED THAT THE ASSESSEE ENJOYS COMPLETE COMMAND OVER THE INFRASTRUCTURE FACILITY WITHOUT ANY DEMUR. MOREOVE R, THE LAND FOR LABOUR COLONY, STAFF QUARTERS AND OTHER EXPENSES HAVE BEEN BORNE BY THE ASSESSEE. THE LD.AR ALSO ADDED THAT CERTAIN OPERAT IVE EXPENSES HAVE ALSO BEEN INCURRED BY THE ASSESSEE TOWARDS THE AFOR ESAID INFRASTRUCTURE FACILITY WHICH PROVES THEIR CASE FOR ELIGIBILITY OF DEDUCTION UNDER S.80IA(4) AS A RIGHTFUL CLAIMANT. THE LD.AR ACCORD INGLY CONTENDED THAT MERELY ON THE BASIS OF CERTAIN OBSERVATIONS OF THE ITAT IN THE CASE OF RTPL WHILE PASSING THE ORDER WITHOUT HAVING THE BEN EFIT OF REPRESENTATION FROM THE ASSESSEE, THE CLAIM OF ASSE SSEE CANNOT BE DENIED. ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 8 - 8.4. THE LD.AR SUBMITTED IN CONCLUSION THAT THE A SSESSEE IS ENTITLED TO RELIEF ON BOTH COUNTS, ONE TOWARDS LACK OF JURISDIC TION UNDER SECTION 147 OF THE ACT, AND OTHER, ON MERITS AS CLAIMED. 9. THE LD.DR MR.VIJAY KUMAR SINGH, ON THE OTHER HAN D, RELIED UPON THE ORDER OF THE CIT(A) AND SUBMITTED IN FURTHERANC E THAT THE ITAT JAIPUR IN THE CASE OF RTPL HAS CLEARLY FOUND AS A M ATTER OF FACT THAT IT WAS ASSESSEE THEREIN WHICH WAS ENTITLED FOR CLAIM O F DEDUCTION UNDER S.80IA(4) OF THE ACT FOR THE IMPUGNED INFRASTRUCTUR E FACILITY. THUS, IN THE LIGHT OF THE DECISION OF THE ITAT, THE BENEFIT OF DEDUCTION HAS ALREADY BEEN ACCORDED TO RTPL WHICH WILL OPERATE IN EXCLUSION TO NBEL. THE LD.DR SUBMITTED THAT BOTH ASSESSEE AS WE LL AS RTPL CANNOT CLAIM THE DEDUCTION IN RESPECT OF THE SAME INFRASTR UCTURE FACILITY AS IT WILL AMOUNT TO DOUBLE DEDUCTION ON THE SAME FACILITY TO TWO PARTIES. SUCH ACT WOULD BE INHERENTLY OPPOSED TO SCHEME OF THE ACT. HE ACCORDINGLY SUBMITTED THAT NO INTERFERENCE WITH THE ORDER OF CI T(A) IS CALLED FOR. 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. THE FIRST ISSUE IN STAKE RAISED BY THE ASSESSEE IS TOWARDS VA LIDITY OF ASSUMPTION OF JURISDICTION UNDER S.147/148 OF THE ACT. THE ISSUE CONCERNS CONFERMENT OF JURISDICTION AND THUS GOES TO THE ROOT OF MATTER AND THUS ASSUMES PRIMACY IN THE MATTER OF DELIBERATION. ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 9 - 10.1. WE NOTE THAT THE ASSESSMENT OF THE ASSESSEE W AS REOPENED ON THE BASIS OF DECISION OF THE COORDINATE BENCH OF ITAT J AIPUR IN THE CASE OF RTPL WHEREBY IT WAS FOUND THAT RTPL IS ELIGIBLE FOR CLAIM OF DEDUCTION UNDER S.80IA(4) OF THE ACT IN RESPECT OF THE IMPUGN ED INFRASTRUCTURE FACILITY (SIROHI PROJECT). THE ASSESSEE HAS ALSO C LAIMED THE DEDUCTION UNDER S.80IA(4) IN RESPECT OF THE SAME FACILITY. T HEREFORE, BASED ON THE FINDING OF FACT RENDERED BY THE TRIBUNAL IN RESPECT OF THE GIVEN INFRASTRUCTURE FACILITY, THE VIEW TAKEN BY THE AO T HAT THE ASSESSEE HAS WRONGLY CLAIMED DEDUCTION UNDER S.80IA(4) AND CONSE QUENTLY CHARGEABLE INCOME HAS ASSESSMENT HAS PRIMA-FACIE TANGIBLE BASIS INDEED. NO DOUBT, THE AO DID EXAMINE THE CLAIM OF THE DEDUCTION UNDER S.80IA(4) IN THE ORIGINAL ASSESSMENT IN THE LIGHT OF FACTS AVAILABL E BEFORE IT. THIS WAS, HOWEVER, WITHOUT THE KNOWLEDGE OF THE FACT THAT DED UCTION HAS BEEN CLAIMED AND ALLOWED IN THE HANDS OF THIRD PARTY NAM ELY RTPL. IN THESE CIRCUMSTANCES, IT CANNOT BE SAID THAT AO HAD FORMED AN OPINION THAT IT WAS THE ASSESSEE AND NOT THE THIRD PARTY WHICH W AS ELIGIBLE FOR DEDUCTION UNDER S.80IA(4) OF THE ACT. IN THE ABSEN CE OF OPINION FORMED IN THIS REGARD AT THE FIRST INSTANCE, THERE IS NO C ASE FOR ANY CHANGE OF OPINION. THUS, THE PLEA RAISED ON BEHALF OF ASSESS EE FINDS NO RESONANCE ON THIS SCORE. IT IS APPARENT THAT THE AO HAS ACCEP TED THE CLAIM OF AFORESAID DEDUCTION IN SYNC WITH THE SCOPE OF ASSE SSMENT WITHOUT EXAMINING THE ELIGIBILITY OR OTHERWISE IN THE HANDS OF SOME OTHER PARTY. WHEN SEEN IN PERSPECTIVE, FRESH MATERIAL/INFORMATIO N COMING TO THE ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 10 - POSSESSION OF THE AO WHICH SEEKS TO UNEARTH VITAL I NFORMATION TOWARDS DOUBLE CLAIM OF DEDUCTION BASED ON OPINION OF FINAL FACT FINDING AUTHORITY WOULD GIVE PRIMA-FACIE CAUSE TO BELIEVE THAT CHARGE ABLE INCOME HAS ESCAPED ASSESSMENT. IN THE CIRCUMSTANCES, THE FORM ATION OF BELIEF ON ESCAPEMENT OF CHARGEABLE INCOME IS CLEARLY HELD IN GOOD FAITH AND NOT MERELY A PRETENSE. THE INFORMATION IN THE FORM OF ORDER OF ITAT ON THE SAME INFRASTRUCTURE FACILITY CLEARLY ESTABLISHES RA TIONAL CONNECTION AND LIVE LINK BETWEEN THE REASON AND FORMATION OF BELIE F. 10.2. IT IS TRITE THAT S.147 ENVISAGE HOLDING OF B ELIEF NEED TO BE ONLY PRIMA-FACIE AND NEED NOT BE INFALLIBLE OR CONCLUSIVE SO LONG A S BASED ON GERMANE AND RELEVANT MATERIAL. THE SUFFICIENCY OR CORRECTNESS OF THE REASON OR CAUSE IS NOT A THING TO BE CONSIDERED AT THE INITIAL STAGE OF REOPENING ACTION. IT IS OPEN TO ASSESSEE TO PROVE THAT ASSUMPTION OF FACTS MADE IN THAT NOTICE IS EXTRANEOUS AT THE TIME OF AS SESSMENT. USEFUL REFERENCE MAY BE MADE TO THE DECISION IN RAYMOND WO OLLEN MILLS LTD. VS. ITO (1999) 236 ITR 34(SC) & ACIT VS. RAJESH JH AVERI STOCK BROKERS PVT.LTD. (2007) 291 ITR 500 (SC) IN THIS RE GARD. THEREFORE, WE FAIL TO COMPREHEND THE PLEA OF THE ASSESSEE QUESTI ONING THE JURISDICTION ASSUMED BY THE AO ON THE GROUND OF CHANGE OF OPINIO N. 10.3. THE RELIANCE PLACED ON THE DECISION OF HON BLE GUJARAT HIGH COURT IN THE CASE OF CHANDRAVADAN R.PATEL (SUPRA) IS GROS SLY MISPLACED. IN THAT ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 11 - CASE, THE APPLICANT SOUGHT TO BE IMPLEADED AS A PAR TY IN THE PROCEEDINGS IN THE CASE OF ONE CR PATEL INSTEAD OF MERELY AN IN TERVENER. IN THIS CONTEXT, THE HONBLE GUJARAT HIGH COURT OBSERVED TH AT THERE IS NO ROOM FOR THIRD PARTIES TO INTERVENE IN THE PROCESS OF AS SESSMENT EXCEPT IF THEY ARE PERSONS REQUIRED AS WITNESS FOR ELICITING THE E VIDENCE. IT WAS ALSO OBSERVED THAT FINDINGS RECORDED IN THE ASSESSMENT O F ONE PARTY IS NOT BINDING IN THE PROCEEDINGS AGAINST ANOTHER ASSESSEE . IT IS ALWAYS OPEN FOR THE REVENUE TO REACH A DIFFERENT CONCLUSION IN THE TWO ASSESSMENT PROCEEDINGS ON THE BASIS OF MATERIAL PLACED IN RESP ECTIVE PROCEEDINGS. IT WAS HELD THAT FOR THE PURPOSES OF JURISDICTION OF T HE AUTHORITY, THE STRANGERS HAVE NO ROLE TO PLAY. ON THIS BACKGROUND , THE APPLICANT OF THE PETITIONER SEEKING TO BE IMPLEADED AS A PARTY TO TH E MATTER WAS REJECTED. WE FAIL TO VISUALIZE HOW SUCH OBSERVATIONS PROHIBIT THE AO TO TAKE COGNIZANCE OF JUDICIAL ORDER PASSED IN THE CASE OF THIRD PARTY HAVING THE DIRECT BEARING ON THE SUBJECT MATTER OF ASSESSMENT. AT THE TIME OF ASSUMPTION OF JURISDICTION UNDER S.147 OF THE ACT W HAT IS IMPERATIVE IS RELEVANCY OF MATERIAL TO TRIGGER BELIEF CONTEMPLATE D UNDER S.147 AND NOT THE MERITS OR DEMERITS OF RESPECTIVE CLAIM. THE AO IS NOT EXPECTED TO EMBARK RIGOROUS ENQUIRY ON THE MATERIAL AT PRE-REAS SESSMENT STAGE AS LONG AS REASONS AVAILABLE ARE CAPABLE OF GIVING REA SONABLE BASIS TO HOLD BELIEF OF ESCAPEMENT. THIS VIEW HAS BEEN ENDORSED BY HONBLE SUPREME COURT CONSISTENTLY NOTED ABOVE. THE RIGHT TO OPPOR TUNITY BY ASSESSEE WOULD ARISE ONLY IN THE COURSE OF ASSESSMENT WHERE IT IS NATURALLY OPEN TO ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 12 - ASSESSEE TO REBUT THE INITIAL BELIEF OF THE AO. THE PLEA OF THE ASSESSEE THUS IS WITHOUT ANY FORCE. 10.4. NO OTHER GROUND HAS BEEN MARSHALED TO IMPE ACH THE VALIDITY OF ACTION UNDER S.147 OF THE ACT ON BEHALF OF THE ASSE SSEE. WE THUS FIND NO CASE FOR ALLEGED TRANSGRESSION OF AUTHORITY CONFERR ED UPON AO UNDER S.147 OF THE ACT. 10.5. CONSEQUENTLY, THE ADDITIONAL GROUND RAISED BY THE CHALLENGING THE VALIDITY OF REOPENING IS DISMISSED. 11. WE SHALL NOW ADDRESS THE MAIN GROUND RAISED BY THE ASSESSEE TOWARDS ELIGIBILITY OF CLAIM OF DEDUCTION UNDER S.8 0IA(4) OF THE ACT ON MERITS. 11.1. THE SUBSTANTIVE PLEA ON BEHALF OF THE ASSESSE E IS THAT THE ASSESSEE WAS ENTRUSTED WITH THE CONSTRUCTION OF INFRASTRUCTU RE FACILITIES (SIROHI ROAD PROJECT) ON BUILD, OPERATE AND TRANSFER BAS IS (BOT BASIS) AT ITS OWN COST IN THE STATE OF RAJASTHAN. THE ASSESSEE H AS DEVELOPED FINANCE FOR CONSTRUCTION OF THE PROJECT AND BUILT IT THROUG H ITS OWN RESOURCES AND WAS ENTITLED FOR RECOVERY OF INVESTMENT SO MADE I N THE PROJECT THROUGH LEVY OF TOLL ON THE USAGE OF ROAD PROJECT. THE AGRE EMENT WITH THE ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 13 - GOVERNMENT OF RAJASTHAN FOR THIS PURPOSE IS SPECIFI ED TO BE NEARLY 5 YEARS. 11.2. AT THIS STAGE, WE TAKE NOTE OF CLAUSE NO.1 3 OF THE AGREEMENT ENTERED INTO BY THE ASSESSEE WITH GOVERNMENT OF RAJ ASTHAN HEAVILY RELIED UPON BY THE ASSESSEE. IT READS AS UNDER:- (13) THE LESSEE WILL NOT ASSIGN THE DEMISED PRO PERTY OR TRANSFER THE BENEFIT OF THE LEASE TO ANY THIRD PART Y. LESSEE WILL ALSO NOT MORTGAGE THE DEMISED LAND TO ANY FINANCI AL INSTITUTION OR INDIVIDUAL FOR RAISING CAPITAL FOR CONSTRUCTION OF THE PROJECT OR FOR ANY OTHER PURPOSE. 11.3. WE ALSO SIMULTANEOUSLY TAKE NOTE OF THE AGREE MENT ENTERED INTO BY THE ASSESSEE DATED 10/11/2001 WITH RTIL. AS PER AF ORESAID AGREEMENT, RTIL ARE SPECIALIZED TOLL COLLECTION CONTRACTORS W HO HAVE BEEN AWARDED THE RIGHT TO COLLECT THE TOLL AT THE PROJECT SITE F OR A PERIOD OF ONE YEAR AS AGAINST THE RIGHT VESTED WITH THE ASSESSEE BY GOVER NMENT OF RAJASTHAN FOR A PERIOD OF FIVE YEARS. AS PER THE AFORESAID AGREEMENT, THE RTIL HAS BEEN APPOINTED AS COLLECTING AGENTS OF THE ASSESSE E FOR COLLECTION OF TOLL FROM TRAFFIC-LINE THROUGH THE SAID INFRASTRUCTURE F ACILITIES AT A LUMP-SUM CONSIDERATION OF RS.328 LAKHS. AS PER AGREEMENT, R PTL IS UNDER CONTRACTUAL OBLIGATION TO PAY THE AFORESAID AMOUNT TO THE ASSESSEE IRRESPECTIVE OF ACTUAL TOLL COLLECTION BY THEM. TH US, ON HOLISTIC READING OF THE AGREEMENT BETWEEN THE GOVERNMENT OF RAJASTHAN A ND THE ASSESSEE ON ONE HAND AND ANOTHER AGREEMENT BETWEEN THE ASSESSE E AND RTPL ON THE ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 14 - OTHER HAND, THERE IS NO MANNER OF DOUBT THAT IT IS THE ASSESSEE WHO WAS THE DEVELOPER OF THE INFRASTRUCTURE FACILITY. 11.4. AT THIS JUNCTURE, WE ALSO SIMULTANEOUSLY TAK E NOTE OF CERTAIN OBSERVATIONS MADE BY THE COORDINATE BENCH OF ITAT I N THE CASE OF ITO VS. RTPL IN ITA NO.464/JP/2008 FOR AY 2003-04 ORDE R DATED 29/08/2008 WHICH TRIGGERED THE CAUSE FOR ACTION. T HE ITAT HAS CLEARLY RECORDED A FINDING OF FACT THAT THE RTPL WAS APPOIN TED AS AGENT BY THE ASSESSEE FOR COLLECTION OF TOLL ON ROAD DEVELOPED B Y THE ASSESSEE. THE PERIOD OF AGREEMENT IS FOR 365 DAYS W.E.F. 18/11/20 01 AT THE FIRST INSTANCE WHICH WAS EXTENDED AND RENEWED ON THE SAME TERMS AN D CONDITIONS BEFORE THE EXPIRY OF THE INITIAL PERIOD. THE AO OF RTPL IN FACT, CAME TO THE CONCLUSION THAT THE ASSESSEE HEREIN (NBEL) IS R IGHTFUL CLAIMANT FOR DEDUCTION UNDER S.80IA OF THE ACT BEING DEVELOPER O F THE INFRASTRUCTURE FACILITY. HOWEVER, THE ITAT ON INTERPRETATION OF CONTRACTUAL AGREEMENT OF RTPL WITH ASSESSEE CAME TO THE CONCLUSION THAT R TPL WAS ULTIMATELY ENTRUSTED WITH THE REQUISITE WORK OF OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY. THE ITAT THUS HELD AFTER EXAMINING TERMS OF AGREEMENT BETWEEN THE RTPL THAT THE ASSESSEE THAT T HE AGREEMENT EXECUTED BETWEEN THE ASSESSEE AND RTPL WAS NOT ONLY FOR EXECUTION OF WORK OF COLLECTION OF TOLL ONLY. IN THE LIGHT OF V ARIOUS CLAUSES OF THE AGREEMENT BETWEEN THE PARTIES, IT WAS HELD THAT TRA NSFER OF RIGHTS WAS AVAILABLE TO THE ASSESSEE HEREIN AFTER DEVELOPING T HE FACILITIES FOR ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 15 - COLLECTION OF TOLL. THUS, OPERATION OF FACILITY AS WELL AS MAINTENANCE THEREOF STOOD TRANSFERRED TO RTPL. THE ITAT FOUND THAT THE TRANSFER OF RIGHT OF OPERATION AND MAINTENANCE OF FACILITY WAS COMPLETE AND IN FACT CARRIED BY RTPL. THE ITAT IN CONCLUSION HELD THAT RTPL WAS RIGHTFUL CLAIMANT OF THE DEDUCTION UNDER S.80IA(4) OF THE AC T. 11.5. IT WILL BE APT TO REPRODUCE THE APPROPRIATE PORTION OF THE ORDER OF THE ITAT JAIPUR IN ITA NO.464/JP/2008 DEALING WITH THE ISSUE IN FAVOUR OF RTPL. FOR A READY REFERENCE WE FIRST REPRODUCE THE PROVI SIONS OF SECTION 80IA OF THE I.T.ACT, 1961 HEREUNDER:- (4) THIS SECTION APPLIES TO (I) ANY ENTERPRISE CARRYING ON THE BUSINESS [OF (I) DEVELOPING OR (II) OPERATING AND MAINTAINING OR (III) DEVELOPING, OPER ATING AND MAINTAINING]ANY INFRASTRUCTURE FACILITY WHICH FULFI LS ALL THE FOLLOWING CONDITIONS, NAMELY : (A) IT IS OWNED BY A COMPANY REGISTERED IN INDIA OR BY A CONSORTIUM OF SUCH COMPANIES [OR BY AN AUTHORITY OR A BOARD OR A CORPORATION OR ANY OTHER BODY ESTABLISHE D OR CONSTITUTED UNDER ANY CENTRAL OR STATE ACT;] (B) IT HAS ENTERED INTO AN AGREEMENT WITH THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT OR A LOCAL AUTHORI TY OR ANY OTHER STATUTORY BODY FOR (I)DEVELOPING OR (II)O PERATING AND MAINTAINING OR (III) DEVELOPING, OPERATING AND MAINTAINING A NEW INFRASTRUCTURE FACILITY;] (C) IT HAS STARTED OR STARTS OPERATING AND MAINTAINING THE INFRASTRUCTURE ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 16 - FACILITY ON OR AFTER THE 1ST DAY OF APRIL, 1995: PROVIDED THAT WHERE AN INFRASTRUCTURE FACILITY IS TRANSFERRE D ON OR AFTER THE 1ST DAY OF APRIL, 1999 BY AN ENTERPRISE WHICH DEVELOPED SUCH INFRASTRUCTURE FACILITY (HEREAFTER REFERRED TO IN THIS SECTION AS THE TRANSFEROR ENTERPRISE) TO ANOTHER ENTERPRISE (HEREAFTER IN THIS SECTION REFERRED TO AS THE TRANSFEREE ENTERPRISE) FOR THE PURPOSE OF OPERATING AND MAINTAINING THE INFRASTRUC TURE FACILITY ON ITS BEHALF IN ACCORDANCE WITH THE AGREE MENT WITH THE CENTRAL GOVERNMENT, STATE GOVERNMENT, LOCAL AUTHORITY OR ST ATUTORY BODY, THE PROVISIONS OF THIS SECTION SHALL APPLY TO THE TRANSFEREE E NTERPRISE AS IF IT WERE THE ENTERPRISE TO WHICH THIS CLAUSE APPLIES AND THE DEDUCTION FROM PROFITS AND GAINS WOULD BE AVAILABLE TO SUCH TRANSFEREE ENTERPR ISE FOR THE UNEXPIRED PERIOD DURING WHICH THE TRANSFEROR ENTERPRISE WOULD HAVE BEEN ENTITLED TO THE DEDUCTION, IF THE TRANSFER HAD NOT TAKEN PLACE. THE FOLLOWING SECOND PROVISO SHALL BE INSERTED AFTE R THE EXISTING PROVISO TO CLAUSE (I) OF SUB-SECTION (4) OF SECTION 80- IA BY THE FINANCE ACT, 2016, W.E.F. 1-4-2017 : PROVIDED FURTHER THAT NOTHING CONTAINED IN THIS SEC TION SHALL APPLY TO ANY ENTERPRISE WHICH STARTS THE DEVELOPMENT OR OPERATIO N AND MAINTENANCE OF THE INFRASTRUCTURE FACILITY ON OR AFTER THE 1ST DAY OF APRIL, 2017. [EXPLANATION.FOR THE PURPOSES OF THIS CLAUSE, 'IN FRASTRUCTURE FAC ILITY' MEANS (A) A ROAD INCLUDING TOLL ROAD, A BRIDGE OR A RAIL SYST EM; (B) A HIGHWAY PROJECT INCLUDING HOUSING OR OTHER ACTIVI TIES BEING AN INTEGRAL PART OF THE HIGHWAY PROJECT; (C) A WATER SUPPLY PROJECT, WATER TREATMENT SYSTEM, IRR IGATION PROJECT, SANITATION AND SEWERAGE SYSTEM OR SOLID WASTE MANAG EMENT SYSTEM; (D) A PORT, AIRPORT, INLAND WATERWAY [, INLAND PORT OR NAVIGATIONAL CHANNEL IN THE SEA];] (II) ANY UNDERTAKING WHICH HAS STARTED OR STARTS PROVIDI NG TELECOMMUNICATION SERVICES, WHETHER BASIC OR CELLULAR, INCLUDING RADI O PAGING, DOMESTIC SATELLITE SERVICE, NETWORK OF TRUNKING, BROADBAND NETWORK AND INTERNET SERVICES ON OR AFTER THE 1ST DAY OF APRIL, 1995, BUT ON OR BEFORE THE 31ST DAY OF MARCH, [2005].] EXPLANATION. FOR THE PURPOSES OF THIS CLAUSE, 'DOMESTIC SATELLIT E' MEANS A SATELLITE OWNED AND OPERATED BY AN INDIAN COMPANY F OR PROVIDING TELECOMMUNICATION SERVICE; (III) ANY UNDERTAKING WHICH DEVELOPS, DEVELOPS AND OPERAT ES OR MAINTAINS AND ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 17 - OPERATES AN INDUSTRIAL PARK [OR SPECIAL ECONOMIC ZONE]NOTIFIED BY THE CENTRAL GOVERNMENT IN ACCORDANCE WITH THE SCHEME FR AMED AND NOTIFIED BY THAT GOVERNMENT FOR THE PERIOD BEGINNING ON THE 1ST DAY OF APRIL, 1997 AND ENDING ON THE 31ST DAY OF MARCH, [2006]: [ PROVIDED THAT IN A CASE WHERE AN UNDERTAKING DEVELOPS AN IND USTRIAL PARK ON OR AFTER THE 1ST DAY OF APRIL, 1999 OR A SPECIAL EC ONOMIC ZONE ON OR AFTER THE 1ST DAY OF APRIL, 2001 AND TRANSFERS THE OPERATION AND MAINTENANCE OF SUCH INDUSTRIAL PARK OR SUCH SPECIAL ECONOMIC ZONE, AS T HE CASE MAY BE, TO ANOTHER UNDERTAKING (HEREAFTER IN THIS SECTION REFERRED TO AS THE TRANSFEREE UNDERTAKING), THE DEDUCTION UNDER SUB-SECTION (1) SHALL BE ALLOWED TO SUCH TRANSFEREE UNDERTAKING FOR THE REMAINING PERIOD IN THE TEN CONSECUTIVE ASSESSMENT YEARS AS IF THE OPERATION AND MAINTENANC E WERE NOT SO TRANSFERRED TO THE TRANSFEREE UNDERTAKING : [ PROVIDED FURTHER THAT IN THE CASE OF ANY UNDERTAKING WHICH DEVE- LOPS, DEVELOPS AND OPERATES OR MAINTAINS AND OPERATES AN INDUSTRIAL PARK, THE PROVISIONS OF THIS CLAUSE SHALL HAVE EFFECT AS IF F OR THE FIGURES, LETTERS AND WORDS '31ST DAY OF MARCH, 2006', THE FIGURES, LETTE RS AND WORDS '31ST DAY OF MARCH, [2011]' HAD BEEN SUBSTITUTED;] (IV) AN [UNDERTAKING]WHICH, (A) IS SET UP IN ANY PART OF INDIA FOR THE GENERATION O R GENERATION AND DISTRIBUTION OF POWER IF IT BEGINS TO GENERATE POWE R AT ANY TIME DURING THE PERIOD BEGINNING ON THE 1ST DAY OF APRIL , 1993 AND ENDING ON THE 31ST DAY OF MARCH, [2017]; (B) STARTS TRANSMISSION OR DISTRIBUTION BY LAYING A NET WORK OF NEW TRANSMISSION OR DISTRIBUTION LINES AT A NY TIME DURING THE PERIOD BEGINNING ON THE 1ST DAY OF APRIL, 1999 AND ENDING ON THE 31ST DAY OF MARCH, [2017]: PROVIDED THAT THE DEDUCTION UNDER THIS SECTION TO AN [UNDERTAKING]UNDER SUB- CLAUSE (B) SHALL BE ALLOWED ONLY IN RELATION TO THE PROFITS DERIVED FROM LAYING OF SUCH NETWORK OF NEW LINES FOR TRANSMISSION OR DISTRIBUTION; [(C) UNDERTAKES SUBSTANTIAL RENOVATION AND MODERNIS ATION OF THE EXISTING NETWORK OF TRANSMISSION OR DISTRIBUTION LI NES AT ANY TIME DURING THE PERIOD BEGINNING ON THE 1ST DAY OF APRIL , 2004 AND ENDING ON THE 31ST DAY OF MARCH, [2017]. EXPLANATION.FOR THE PURPOSES OF THIS SUB-CLAUS E, 'SUBSTANTIAL RENOVATION AND MODERNISATION' MEANS AN INCREASE IN THE PLANT AND MACHINERY IN THE NETWORK OF TRANSMISSION OR DISTRIB UTION LINES BY AT ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 18 - LEAST FIFTY PER CENT OF THE BOOK VALUE OF SUCH PLAN T AND MACHINERY AS ON THE 1ST DAY OF APRIL, 2004;] [(V) AN UNDERTAKING OWNED BY AN INDIAN COMPANY AND SET U P FOR RECONSTRUCTION OR REVIVAL OF A POWER GENERATING PLANT, IF (A) SUCH INDIAN COMPANY IS FORMED BEFORE THE 30TH DAY O F NOVEMBER, 2005 WITH MAJORITY EQUITY PARTICIPATION BY PUBLIC SECTOR COMPANIES FOR THE PURPOSES OF ENFORCING THE SECURITY INTEREST OF THE LENDERS TO THE COMPANY OWNING THE POWER GENERATING PLANT AND SUCH INDIAN COMPANY IS NOTIFIED BEFORE THE 31ST DAY OF DECEM BER, 2005 BY THE CENTRAL GOVERNMENT FOR THE PURPOSES OF THIS CLAUSE; (B) SUCH UNDERTAKING BEGINS TO GENERATE OR TRANSMIT OR DISTRIBUTE POWER BEFORE THE 31ST DAY OF MARCH, [2011];] THERE IS NO DOUBT AS PER THE TERMS OF AGREEMENT BE TWEEN THE ASSESSEE AND NBEL THAT THE ASSESSEE WAS APPOINTED F OR OPERATING AND MAINTAINING INCLUDING COLLECTION OF TOLLS AS THE CO LLECTING AGENT FROM TRAFFIC PLYING ON THE SIROHI-ANADARA-REODR-MANDAR R OAD FOR THE PRESCRIBED DISTANCE. HENCE, IN OUR VIEW, THE AO WA S WRONGLY ASSUMED THAT THE AGREEMENT EXECUTED BETWEEN THE DEVELOPER A ND THE ASSESSEE WAS FOR EXECUTION OF WORK COLLECTION TOLLS ONLY. AS PE R LANGUAGE USED IN THE AGREEMENT IT IS A CASE OF TRANSFER OF RIGHTS AVAILA BLE TO THE TRANSFEROR I.E. NBEL AFTER DEVELOPING, THE FACILITIES FOR COLLECTIO N OF TOLLS (WHICH IS THE ONLY WORK OF OPERATING OF FACILITY) AS WELL AS MAIN TAINING THE FACILITY, FOR BOTH THE PURPOSES IN ALL RESPECT AND IN ACCORDANCE WITH THE TERMS OF THE AGREEMENT EXECUTED BY THE DEVELOPER NBEL WITH THE S TATE GOVERNMENT OF RAJASTHAN. IN OUR VIEW, THE TRANSFER DOES NOT MEAN AND IMPLY TRANSFER OF ANY PROPERTY, WHICH ALSO NEVER VESTS IN THE HANDS O F THE DEVELOPER OF THE FACILITY AND IT SHOULD NOT BE CONSTRUED IN A CONSER VATIVE MANNER. HERE TRANSFER ONLY MEANS THE TRANSFER OF RIGHT OF OPER ATION AND MAINTENANCE OF THE FACILITY, WHICH WAS COMPLETELY TRANSFERRED A ND IN FACT CARRIED OUT BY THE ASSESSEE. THE AO ALSO FAILED TO APPRECIATE THIS MATERIAL FACT THAT IN TERMS OF THE AGREEMENT DATED 16.8.2002 THE ASSES SEE GOT THE FACILITY OF OPERATING, COLLECTING AND MAINTAINING FOR WHOLE PER IOD I.E. UPTO 5.12.2005 AVAILABLE TO THE DEVELOPER (NBEL). THE A SSESSING OFFICER HAS ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 19 - ALSO FAILED TO CONSIDER CLAUSE (1) OF THE AGREEMENT DATED 16.8.2002 WHICH SPECIFICALLY PROVIDES THAT IT IS IRREVOCABLE AND TO REMAIN IN FORCE PERMANENTLY. IN THE CASE OF OCEAN SPARKLE LTD. VS. DCIT (SUPRA), OPERATION AND MAINTENANCE OF INFRASTRUCTURE FACILIT Y WAS TRANSFERRED BY DEVELOPER TO ANOTHER ENTERPRISE FOR THE PURPOSE OF OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY ON ITS BEHA LF IN ACCORDANCE WITH THE AGREEMENT WITH THE GOVERNMENT, IT WAS HELD THAT THE PROVISIONS OF SECTION 80IA IS EQUALLY APPLICABLE TO THE TRANSFERE E FOR THE UNEXPIRED PERIOD DURING WHICH THE TRANSFEROR WOULD HAVE BEEN ENTITLED TO DEDUCTION IF THE TRANSFER HAD NOT TAKEN PLACE. IT WAS HELD T HAT PROVISO TO SECTION 80IA(4) DOES NOT REQUIRE THAT THERE SHOULD BE A DIR ECT AGREEMENT BETWEEN THE TRANSFEREE AND THE SPECIFIED AUTHORITY OF THE G OVERNMENT. THE ASSESSEE, TRANSFEREE THEREIN WAS THUS HELD ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA IN TERMS OF PROVISO TO SECTION 80IA(4) . IN THE CASE OF PATEL ENGINEERING CO. VS. DCIT (SUPRA), THE MUMBAI BENCH OF THE TRIBUNAL AFTER DISCUSSING THE CASE IN DETAIL HAS COME TO THE CONCLUSION THAT THE FACT THAT THE LAND BELONG TO THE GOVERNMENT WOULD MAKE N O DIFFERENCE AS SUB- CLAUSE (C) OF SECTION 80IA(409I) WOULD NOT BE APPLI CABLE TO A DEVELOPER SIMPLICITOR. UNDER THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT AS PER THE TERMS OF AGREEMENT BETWEEN THE ASSESSEE AND NBE L AND THE NATURE OF WORK EXECUTED BY THE ASSESSEE, THE LD.CIT(A) HAS RI GHTLY FOUND THE ASSESSEE ELIGIBLE FOR THE CLAIMED DEDUCTION UNDER S ECTION 80IA(4)(I) PROVISO. THE FIRST APPELLATE ORDER ON THE ISSUE IS THUS UPHELD. THE GROUND IS THUS REJECTED. 11. 6. ON CAREFUL ANALYSIS OF THE DECISION OF THE C OORDINATE BENCH OF ITAT JAIPUR, WE ARE NOT IMPRESSED WITH THE CASE MA DE OUT BY THE REVENUE ON MERITS. IT IS ESSENTIALLY THE CASE OF T HE REVENUE THAT DEDUCTION UNDER S.80IA(4) OF THE ACT HAS BEEN CLAIM ED AND ALLOWED IN THE HANDS OF RTPL IN VIEW OF THE DECISION OF THE IT AT JAIPUR AND THUS THE DEDUCTION ON THE SAME INFRASTRUCTURE FACILITY C ANNOT BE EXTENDED IN ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 20 - THE HANDS OF THE ASSESSEE HEREIN. IN THIS REGARD, AS WE UNDERSTAND, THE ASSESSEE HAS DEVELOPED THE INFRASTRUCTURE FACILITY AND PRESUMABLY TRANSFERRED THE OPERATION AND MAINTENANCE OF THE AF ORESAID INFRASTRUCTURE FACILITY TO RTPL AT A PRE-DETERMINED COST AS FOUND BY ITAT IN THE CASE OF RTPL. THUS, WHILE THE ASSESSEE IS ENTITLED TO DRAW BENEFIT FROM THE INFRASTRUCTURE FACILITY TO THE EXTENT OF AGREED AMO UNT AS PER THE AGREEMENT BETWEEN THE ASSESSEE AND RTPL, THE OTHER PARTY NAME LY RTPL WILL BE ENTITLED TO AVAIL THE BENEFIT OF THE INFRASTRUCTURE FACILITY OVER AND ABOVE THE COST INCURRED BY THEM TOWARDS TRANSFER AS PER THE AGREEMENT. THERE DOES NOT APPEAR TO BE ANY OVERLAPPING OF CLAIM OF D EDUCTION. IN THIS SITUATION, THE QUANTUM OF DEDUCTION BY RESPECTIVE PARTIES ARE MUTUALLY EXCLUSIVE AND NOT IN CONFLICT WITH EACH OTHER NOTW ITHSTANDING THE FACT THAT IT EMANATES FROM SAME INFRASTRUCTURE FACILITY. 11.7 AT THIS JUNCTURE, WE NOTE THAT BENEFIT OF SE CTION 80IA(4) IS AVAILABLE TO AN ENTERPRISE CARRYING ON THE BUSINESS OF DEVELOPING OR OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILI TY ETC. SUBJECT TO FULFILLMENT OF CERTAIN CONDITIONS WITH WHICH WE ARE NOT CONCERNED AT PRESENT. THUS, IT IS MANIFEST THAT AS PER 80IA(4) OF THE ACT, BENEFIT IS AVAILABLE TO BOTH CLASS OF ASSESSEE (I) WHO HAS DE VELOPED THE INFRASTRUCTURE FACILITY AND (II) OTHER, WHO IS ENGA GED IN OPERATION AND MAINTENANCE OF FACILITY. THEREFORE, THERE DOES NOT APPEAR TO BE ANY IMPEDIMENT IN SECTION 80IA(4) OF THE ACT TO AVAIL THE BENEFIT BY MORE ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 21 - THAN ONE ASSESSEE ALBEIT ON THEIR RESPECTIVE COMPO NENT OF PROFITS. IN THE INSTANT CASE, THE ASSESSEE HAS RECEIVED AGREED AMOU NT BY VIRTUE OF AGREEMENT FROM RTPL. THE ASSESSEE IS SEEKING DEDUC TION UNDER S.80IA(4) OF THE ACT ON RECEIPT RECOVERED FROM RTP L SUBJECT TO CLAIM OF CERTAIN EXPENSES THEREON. RTPL, ON THE OTHER HAND, IS SEEKING CLAIM OF DEDUCTION ON THE PROFITS OVER AND ABOVE THE EQUIVAL ENT COST INCURRED AND PAYABLE TO THE ASSESSEE HEREIN SUBJECT TO SOME OTHE R EXPENSES. THUS, BOTH ASSESSEE AS WELL AS RTPL ARE CLAIMING DEDUCTIO N ON PROFIT ELEMENT WHICH OPERATES IN MUTUAL EXCLUSION TO EACH OTHER. RECEIPT IN THE HANDS OF ASSESSEE IS COST IN THE HANDS OF RTPL. THEREFOR E, THE ELIGIBILITY OF DEDUCTION UNDER S.80IA(4) OF THE ACT IN THE HANDS O F ASSESSEE DO NOT IMPINGE UPON THE RIGHT OF RTPL TO AVAIL BENEFIT OF 80IA(4) WHICH IS NATURALLY RESTRICTED TO AN AMOUNT AFTER EXCLUDING T HE COST INCURRED ON PAYMENT TO THE ASSESSEE HEREIN. THEREFORE, THE ENT IRE PROFITS DERIVED FROM THE INFRASTRUCTURE FACILITY, (I) TOWARDS DEVELOPMEN T THEREOF IN THE HANDS OF THE ASSESSEE AND OTHER (II) TOWARDS OPERATION AND M AINTENANCE THEREOF IN THE HANDS OF RTPL IS ELIGIBLE FOR DEDUCTION. OSTE NSIBLY, THERE IS NO CASE OF DOUBLE DEDUCTION OF THE SAME AMOUNT AS INCORRECT LY ARGUED ON BEHALF OF THE REVENUE. TO REITERATE, WHILE THE ASSESSEE HEREIN IS SEEKING CLAIM OF DEDUCTION ON PROFIT FROM ONE PART OF THE ACTIVI TY, RTPL HAS CLAIMED DEDUCTION ON OTHER PART OF THE PROFIT FROM OTHER SE T OF ACTIVITIES. THEREFORE, NO CONFLICT APPEARS TO ARISING AS A RE SULT OF THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN RTPL. IN THIS VIEW OF THE MATTER, ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 22 - THE CLAIM OF THE ASSESSEE TOWARDS DEDUCTION UNDER S .80IA(4) OF THE ACT ON RECEIPTS AGAINST ITS EFFORTS FOR DEVELOPMENT OF THE INFRASTRUCTURE FACILITY DESERVES TO BE ACCEPTED. ACCORDINGLY CL AIM OF DEDUCTION U/S.80IA(4) OF THE ACT IN THE HANDS OF ASSESSEE IS ALLOWED ON MERITS. 12. AS A RESULT, GROUND OF APPEAL TOWARDS DEDUCT ION UNDER S.80IA(4) ON MERITS IS ALLOWED, WHILE ADDITIONAL GROUNDS OF APPE AL CHALLENGING THE JURISDICTION IS DISMISSED. 13. IN THE RESULT APPEAL OF THE ASSESSEE IN ITA NO. 2485/AHD/2010 FOR AY 2003-04 IS PARTLY ALLOWED. ITA NO.2486/AHD/2010 AY 2004-05 - ASSESSEES APPE AL 14. IN THIS APPEAL, THE ASSESSEE IS AGGRIEVED BY (I) ALLEGED ILLEGAL ACTION OF THE AO IN INVOKING T HE SECTION 147 OF THE ACT BASED ON CHANGE OF OPINION IN TERMS OF ADDITIONAL G ROUND FILED. (II) DENIAL OF DEDUCTION OF RS.30,49,558/- UNDER S .80IA(4) OF THE ACT. ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 23 - (III) DISALLOWANCE OF CLAIM OF RS.45,29,321/- CLAIM ED AS BUSINESS LOSS ON ACCOUNT JHALAWAR-INDORE ROAD PROJECT. 15. BOTH THE SIDES CONSENTED THAT FACTS AND ISSUE I N THIS APPEAL ARE IDENTICAL IN MATERIAL ASPECT IN SO FAR AS GROUND NO S.(I) AND (II) SUMMARIZED ABOVE ARE CONCERNED. THUS, OUR OBSERVAT IONS IN ITA NO.2485/AHD/2010 FOR AY 2003-04 ABOVE SHALL APPLY MUTATIS MUTANTIS TO THIS APPEAL. ACCORDINGLY, IN PARITY WITH THE RE ASONS, CHALLENGE TO JURISDICTION UNDER S.147 IS DISMISSED AND THE ELIGI BILITY OF THE ASSESSEE UNDER S.80IA(4) OF THE ACT ON MERITS IS ALLOWED. 16. THIS LEAVES US WITH GROUND NO.(III) CONCERNIN G ALLOWABILITY OR OTHERWISE OF LOSS OF RS.45,29,321/- ARISING FROM JH ALAWAR-INDORE ROAD PROJECT. 17. BRIEF FACTS GERMANE TO THE ISSUE ARE THAT THE A SSESSEE ENTERED INTO AN AGREEMENT WITH GOVERNMENT OF RAJASTHAN ON 30/03/ 2001 FOR IMPROVEMENT OF JHALAWAR-INDORE ROAD PROJECT IN BOT (BUILD OPERATE AND TRANSFER) BASIS. THE ASSESSEE WAS GIVEN RIGHT TO COLLECT TOLL FROM THE USERS OF THIS ROAD IN CONSIDERATION THEREOF. HOWEV ER, AS CLAIMED BY THE ASSESSEE, THE PROJECT WAS NOT FOUND VIABLE AND THER EFORE THE SAME WAS TERMINATED IN SEPTEMBER-2004 VIDE OFFICE ORDER OF T HE CHIEF ENGINEER CPWD DATED 04.10.2004. IT IS THE CASE OF THE ASSES SEE THAT IT HAD ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 24 - INCURRED CERTAIN EXPENDITURE ON THIS PROJECT WHICH WERE CLAIMED AS REVENUE LOSS DURING THE YEAR. THE AO DID NOT ACCEPT THE EX PENDITURE INCURRED ON THE AFORESAID PROJECT SO ABANDONED AS B USINESS EXPENDITURE OF REVENUE NATURE AND TREATED THE SAME AS CAPITAL EXPE NDITURE. IN FIRST APPEAL, THE CIT(A) ALSO DID NOT FIND MERIT IN THE C ASE OF THE ASSESSEE AND REJECTED THE CLAIM OF ORDINARY BUSINESS LOSS OF TH E AFORESAID AMOUNT OF RS.45,29,321/- ON THE GROUND THAT THE JHALAWAR-INDO RE ROAD PROJECT WAS A NEW BUSINESS AND HAS NOTHING TO DO WITH THE EXIST ING BUSINESS OF THE ASSESSEE. IT WAS OBSERVED THAT AS THE PROJECT DID NOT FRUCTIFY AND THEREFORE EXPENDITURE INCURRED OVER A PERIOD CANNOT BE ALLOWED AS REVENUE EXPENDITURE AGAINST THE INCOME OF THE EXIST ING BUSINESS. THE CIT(A) ALSO ADDED ANOTHER DIMENSION TO THE CASE OF THE ASSESSEE. IT WAS OBSERVED BY THE CIT(A) THAT JHALAWAR-INDORE ROAD PR OJECT WAS TERMINATED IN SEPTEMBER-2004 WHICH IS AFTER THE CLO SURE OF THE FINANCIAL YEAR ATTRIBUTABLE TO THE AY 2004-05 IN APPEAL AND T HUS NOT A PERMISSIBLE DEDUCTION IN THE YEAR IN APPEAL. ON THIS PREMIS E ALSO, IT WAS HELD THE THE CLAIM OF THE ASSESSEE TOWARDS BUSINESS EXPENDIT URE WAS LIABLE FOR DISALLOWANCE IN SO FAR AS AY 2004-05 IS CONCERNED. ACCORDINGLY, THE CIT(A) REJECTED THE AFORESAID CLAIM OF THE ASSESSEE . 18. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSES SEE HAS INTER-ALIA TAKEN UP THE AFORESAID ISSUE IN THE PRESENT APPEAL BEFORE THE TRIBUNAL. ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 25 - 19. THE LD.AR FOR THE ASSESSEE SUBMITTED THAT THE G OVERNMENT OF RAJASTHAN ISSUED LETTER OF INTENT (LOI) FOR CARRYIN G OUT WORK OF IMPROVEMENT OF JHALAWAR-INDORE STATE HIGHWAY ON BOT BASIS. THE TOTAL COST OF PROJECT WAS NEARLY RS.715 LACS FOR THE CONC ESSIONAL PERIOD OF 129 MONTHS. AFTER THE LOI, THE AGREEMENT WAS MADE. T HE MAIN OBJECT OF THE PROJECT WAS TO CONNECT THE STATE OF MADHYA PRAD ESH AND RAJASTHAN. THE WORK WAS COMMENCED PURSUANT TO THE ARRANGEMENT AND A SIZABLE AMOUNT WAS SPENT. MEANWHILE, IN THE ENSUING PERIOD , SICOM LTD. CANCELLED THE LOAN ORIGINALLY GRANTED TO THE ASSESS EE. THE FUNDS FOR THE PROJECT COULD NOT BE ARRANGED AND THEREFORE THE PRO JECT COULD NOT BE COMPLETED AND GOT DELAYED. DUE TO THE AFORESAID PR OBLEMS, THE PROJECT WAS SEVERALLY AFFECTED AND WAS RENDERED UNVIABLE. THUS, AFTER THE RE- ASSESSMENT OF THE SITUATION, THE ASSESSEE HAD NO OP TION BUT TO DROP THE PROJECT IN ITS BUSINESS INTEREST. THE LD.AR CONTEN DED THAT EXPENDITURE INCURRED FOR THE PROJECT WAS, NEVERTHELESS, IN CONN ECTION WITH THE ACQUISITION OF A TRADING RIGHT I.E. THE RIGHT TO CO LLECT THE TOLL CHARGES FOR A SPECIFIC PERIOD AND THE EXPENDITURE WAS NOT INCURRE D FOR ANY ACQUISITION OF ASSET. THE ASSESSEE WERE NEVER TO BECOME THE OW NER OF THE ASSET BY VIRTUE OF THE PROJECT UNDERTAKEN. THE LD.AR NEXT C ONTENDED THAT THE ENTIRE AGREEMENT WITH THE GOVERNMENT WAS ON A BUILD OPERATE AND TRANSFER BASIS AND THE ASSESSEE WERE TO ACQUIRE MER ELY A RIGHT TO COLLECT THE TOLL CHARGES FOR A SPECIFIC PERIOD. THE OWNERS HIP OF THE ROAD, I.E. ASSET IN QUESTION ALWAYS BELONGED TO THE GOVERNME NT. THUS, THE RIGHT TO ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 26 - COLLECT TOLL CHARGES WAS A TRADING ASSET AND THE EX PENDITURE WAS CONSEQUENTLY INCURRED FOR THE PURPOSES OF BUSINESS ONLY. THE EXPENDITURE WAS INCURRED FOR ACQUIRING THE RIGHT TO USE THE ASSET FOR THE PURPOSE OF ONGOING BUSINESS OF THE ASSESSEE. THE L D.AR ACCORDINGLY CONTENDED THAT LOSS INCURRED BY THE ASSESSEE ON REL INQUISHMENT OF ITS RIGHT RELATING TO TOLL COLLECTION IN FAVOUR OF THE THIRD PARTY IS INTRINSICALLY OF A TRADING NATURE AND THEREFORE BUSINESS EXPENDITURE L OSS OF RS.45,29,321/- CANNOT BE DENIED TO THE ASSESSEE. 20. THE LD.AR NEXT CONTENDED THAT HAD THE PROJECT BEEN COMMISSIONED AS PROPOSED, THE TOTAL COST OF THE PROJECT KEPT AS WORK-IN-PROGRESS WOULD HAVE BEEN ALLOWED AS REVENUE EXPENDITURE AGAI NST THE TOLL INCOME. THEREFORE, THE MERE FACT THAT PROJECT HAS BEEN ABANDONED OUGHT NOT TO HAVE MADE ANY DIFFERENCE TO THE NATURE OF EX PENDITURE WHICH IS ESSENTIALLY A REVENUE EXPENDITURE AND INCURRED TO A CQUIRE A TRADING BUSINESS RIGHT OF TOLL COLLECTION. TO BUTTRESS THE POSITION OF LAW ON THIS COUNT, THE LD.AR PLACED RELIANCE ON HOST OF DECISIO NS NOTED HEREUNDER:- 1. DY.CIT VS. GUJARAT NARMADA VALLEY FERTILIZERS CO.LTD. (2015) 57 TAXMANN.COM 250 (GUJ.) 2. CIT VS. GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. (2009)314 ITR 322 (GUJ.) 3. BINANI CEMENT LTD. VS. CIT (2015) 60 TAXMANN.COM 384 (CAL.) 4. CIT VS. IDEA CELLULAR LTD. 76 TAXMANN.COM 77 (BOM.) ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 27 - 21. THE LD.DR, ON THE OTHER HAND, RELIED UPON THE O RDER OF THE CIT(A) AND SUBMITTED THAT THE LOSS ON THE ABANDONED PROJEC T HAS BEEN RIGHTLY BEEN DISALLOWED AS CAPITAL EXPENDITURE. WITHOUT PR EJUDICE TO THE AFORESAID CONTENTION, THE LD.DR FURTHER POINTED OUT THAT IN ANY EVENT, THE AFORESAID LOSS GOT CRYSTALLIZED IN THE SUBSEQUENT F INANCIAL YEAR OWING TO THE CLOSURE OF THE PROJECT. THUS, THE IMPUGNED LOS S CANNOT BE CONSIDERED WITH REFERENCE TO THE ASSESSMENT YEAR IN QUESTION. 22. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. THE SHORT CONTROVERSY IN QUESTION IS WHETHER THE LOSS INCURRE D BY THE ASSESSEE AS A RESULT OF RELINQUISHMENT OF PROJECT IS IN THE NATUR E OF TRADING LOSS AND ALLOWABLE AS A BUSINESS EXPENDITURE OR OTHERWISE. IN THE BACKGROUND OF THE FACTS, ELABORATELY NOTED ABOVE, WE FIND THAT TH ERE IS A DIRECT AND PROXIMATE NEXUS BETWEEN THE BUSINESS OPERATION AND THE LOSS WHICH IS INCIDENTAL TO IT. THE JHALAWAR-INDORE ROAD PROJECT COULD NOT BE COMPLETED DUE TO COMMERCIAL IMPEDIMENTS AS POINTED OUT ON BEHALF OF THE ASSESSEE AND THEREFORE THE PROJECT WAS ABANDONE D. THE EXPENDITURE INCURRED ON THE EFFORTS MADE IN THE PROJECT WAS CLA IMED AS BUSINESS EXPENDITURE. THE KEY FACTS RELEVANT FOR DETERMINAT ION OF THE ISSUE ARE THAT BY VIRTUE OF THE AGREEMENT WITH THE STATE, THE ASSESSEE WAS NOT VESTED WITH THE OWNERSHIP RIGHT OF THE ASSET IN ANY MANNER . THE ASSESSEE WAS ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 28 - ENTITLED TO USE THE ROAD FOR COLLECTION OF TOLL CHA RGES TO RECOUP THE EXPENDITURE INCURRED. THUS, THE EXPENDITURE INCURR ED WAS INHERENTLY TRADING IN NATURE WHICH WAS PERMISSIBLE FOR SET OFF AS BUSINESS EXPENDITURE AGAINST THE TRADING INCOME ON MATCHING PRINCIPLE BASIS. AS NOTED, THE PROJECT COULD NOT BE COMPLETED AND HENCE THE LOSS INCURRED THUS FAR WAS SADDLED ON THE ASSESSEE. UNDER THE CI RCUMSTANCES, THE LOSS INCURRED FOR IMPROVEMENT OF ROAD PROJECT WHICH WAS ULTIMATELY ABANDONED DUE TO CERTAIN COMMERCIAL REASONS ARE CLE ARLY INCURRED FOR THE PURPOSES OF ASSESSEES BUSINESS ENGAGED IN THE SIM ILAR LINE OF ACTIVITY. THE ROAD PROJECT WAS MEANT FOR THE PURPOSES OF GEN ERATING REVENUE BY COLLECTING TOLL CHARGES. THE TOLL CHARGES WERE TO BE COLLECTED BY UTILIZING THE ROAD PROJECT FOR CERTAIN SPECIFIC PERIOD. THUS , THE POTENTIAL COLLECTION OF TOLL IS NOT AN INDEPENDENT SOURCE OF INCOME. TH E ASSESSEE HAS INCURRED EXPENDITURE AND UNDERTOOK THE RISK WHICH IS INHEREN T IN CARRYING ON SUCH BUSINESS. THE LOSS THUS INCURRED IS CLEARLY INCIDE NTAL TO THE NATURE OF ASSESSEES BUSINESS AND IS ALLOWABLE WITHOUT ANY DO UBT. THE ARGUMENT SET UP BY THE CIT(A) THAT THE AFORESAID ROAD PROJEC T IS A NEW LINE OF ACTIVITY AND THUS A NEW BUSINESS IN DISTINCTION WIT H THE EXISTING BUSINESS IS SINGULARLY FALLACIOUS. ADMITTEDLY, THE ASSESSEE IS SYSTEMATICALLY ENGAGED IN THE ROAD CONSTRUCTION/IMPROVEMENT ACTIVI TY. THE IMPUGNED PROJECT GIVING RISE TO THE LOSS IS MERELY ANOTHER A CTIVITY OF SIMILAR NATURE. EACH ROAD PROJECT BY ITSELF CANNOT BE SEEN AS A SEP ARATE BUSINESS PER SE AS CLAIMED BY THE REVENUE. THEREFORE, WE DO NOT FIND ANY SUBSTANCE IN ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 29 - SUCH LINE OF ARGUMENT RAISED ON BEHALF OF THE REVEN UE. THUS, IN OUR FIRM OPINION, THE LOSS INCURRED ON CLOSURE OF JHALAWAR-I NDORE ROAD PROJECT BEARS THE CHARACTER OF REVENUE EXPENDITURE. 23. HOWEVER, WE FIND SOME FORCE IN THE ALTERNATIVE ARGUMENT ON BEHALF OF REVENUE THAT THE PROJECT WAS TERMINATED IN SEPTE MBER-2004 AFTER THE CLOSURE OF THE FINANCIAL YEAR. THEREFORE, THE ACCU MULATED EXPENDITURE CLAIMED TO BE THE BUSINESS LOSS IS NOT ATTRIBUTABLE TO THE FINANCIAL YEAR 2003-04 RELEVANT TO AY 2004-05 IN APPEAL. WE SUBS CRIBE TO THE ALTERNATIVE PLEA RAISED ON BEHALF OF THE REVENUE T HAT THE ACCUMULATED LOSS ON THE AFORESAID PROJECT SHOULD BE CONSIDERED TO HAVE BEEN CRYSTALLIZED IN THE YEAR IN WHICH THE PROJECT WAS U LTIMATELY ABANDONED. THEREFORE, IN OUR VIEW, THE RELIEF TOWARDS IMPUGNED CLAIM OF REVENUE EXPENDITURE IS ATTRIBUTABLE TO THE SUBSEQUENT AY 20 05-06 WHERE IT IS CRYSTALLIZED. TO THIS LIMITED EXTENT, THE PLEA OF THE REVENUE IS FOUND TENABLE. CONSEQUENTLY, THE LOSS CLAIMED ON THE AFO RESAID PROJECT CANNOT BE CLAIMED AS ALLOWABLE BUSINESS EXPENDITURE RELEVA NT TO THE AY 2004-05 IN APPEAL. HOWEVER, THE ASSESSEE SHALL BE AT LIBER TY TO CLAIM THE AFORESAID LOSS HELD TO BE BUSINESS EXPENDITURE IN THE AY 2005 -06 IN ACCORDANCE WITH LAW. 24. SUBJECT TO AFORESAID OBSERVATIONS, THIS ISSUE RAISED BY THE ASSESSEE IS DISPOSED OF AS DISMISSED. ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 30 - 25. AS A RESULT, ASSESSEES APPEAL IN ITA NO.2486/ AHD/2010 FOR AY 2004-05 IS PARTLY ALLOWED. 26. IN THE COMBINED RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 13 / 04 /2017 SD/- SD/- ( ) ( ) ( MAHAVIR PRASAD ) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 13 / 04 /2017 4..*,.*../ T.C. NAIR, SR. PS !'#$%$' / COPY OF THE ORDER FORWARDED TO : 1. #& / THE APPELLANT 2. '#& / THE RESPONDENT. 3. 567, 8, / CONCERNED CIT 4. 8, ( ) / THE CIT(A)-III, BARODA 5. 9:;,*67 , 67 0 , 5 / DR, ITAT, AHMEDABAD 6. ;<+ / GUARD FILE. / BY ORDER, '9,, //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD , , IN THE INCOME TAX APPELLATE TRIBUNAL D BENCH, AHMEDABAD , , BEFORE SHRI PRADIP KUMAR KEDIA, ACCOUNTANT MEMBER AND SHRI MAHAVIR PRASAD, JUDICIAL MEMBER 1. ./ I.T.A. NO.2485/AHD/2010 2. ./ I.T.A. NO.2486/AHD/2010 ( ASSESSMENT YEARS :2003-04 & 2004-05 RESPECTIVELY ) NILA BAURAT ENGINEERING LTD. 611, YASHKAMAL BUILDING SAYAJIGUNJ, BARODA / VS. THE ACIT CIRCLE-4 BARODA # ./ ./ PAN/GIR NO. : AAACN 7066 N ( #& / APPELLANT ) .. ( '#& / RESPONDENT ) #&( / APPELLANT BY : MS.URVASHI SHODHAN & SHRI PARIN SHAH, ARS '#& )( / RESPONDENT BY : SHRI VIJAY KUMAR SINGH, SR.DR *+ ), / DATE OF HEARING 11/04/2017 -./0 ), / DATE OF PRONOUNCEMENT 13/ 04 /2017 / O R D E R PER PRADIP KUMAR KEDIA, AM: THE CAPTIONED TWO APPEALS BY THE ASSESSEE ARE DIR ECTED AGAINST THE SEPARATE ORDERS OF THE COMMISSIONER OF INCOME TAX(A PPEALS)-III, BARODA [CIT(A) IN SHORT] IDENTICALLY DATED 31/05/2010 FOR THE ASSESSMENT YEARS (AYS) 2003-04 & 2004-05. ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 2 - 2. SINCE COMMON ISSUES ARE INVOLVED IN BOTH THESE APPEALS, THESE WERE HEARD TOGETHER AND ARE BEING DISPOSED OF BY WA Y OF THIS CONSOLIDATED ORDER FOR THE SAKE OF CONVENIENCE. 3. WE SHALL FIRST TAKE UP ITA NO.2485/AHD/2010 AY 2003-04 AS A LEAD CASE FOR THE PURPOSE OF DETERMINATION OF ISSUE S INVOLVED. 4. IN ITS MAIN GROUND OF APPEAL, THE ASSESSEE HAS A SSAILED THE ORDER OF THE CIT(A) WHEREIN THE ACTION OF THE ASSESSING OFFI CER (AO) IN DISALLOWING THE DEDUCTION OF RS.13,71,617/- CLAIMED BY THE ASSESSEE UNDER S.80IA OF THE INCOME TAX ACT, 1961 (HEREINAFT ER REFERRED TO AS 'THE ACT') WAS CONFIRMED. THE ASSESSEE ALSO RAISED ADD ITIONAL GROUNDS OF APPEAL IN TERMS OF RULE 11 OF THE ITAT RULES, 1963 WHEREBY THE VALIDITY OF REOPENING OF ASSESSMENT BY THE AO WAS ALSO PUT U NDER CHALLENGE. 4.1 THE ORIGINAL GROUND AND THE ADDITIONAL GROUND RAISED BY THE ASSESSEE IS EXTRACTED HEREUNDER:- ORIGINAL GROUND THE LEARNED CIT(A) HAS GROSSLY ERRED IN LAW AND ON FACTS IN CONFIRMING ACTION OF THE ASSESSING OFFICER IN DISAL LOWING THE DEDUCTION OF RS.13,71,617/- CLAIMED U/S.80IA OF THE ACT AND ORIGINALLY ALLOWED TO THE ASSESSEE IN ORDER U/S.143 (3) OF THE ACT. ADDITIONAL GROUND ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 3 - LD. CIT(A) ERRED IN LAW AND ON FACTS IN CONFIRMING THE VALIDITY OF THE REOPENING OF THE ASSESSMENT BY AO ON THE BASIS OF OBSERVATION OF HONBLE ITAT IN ORDER OF THIRD PARTY. LD.CIT(A) OUGHT TO HAVE HELD THE ASSESSMENT VOID AB INITIO & BAD IN LAW BAS ED ON CHANGE OF OPINION WHEN FULL INFORMATION WITH RESPECT TO DE DUCTION CLAIMED U/S.80IA WAS BEFORE AO AND DISCUSSED IN ORDER U/S.1 43930 OF THE ACT. 5. THE ADDITIONAL GROUNDS FILED UNDER RULE 11 OF IT AT INVOLVES EXAMINATION OF LEGAL QUESTION ON FACTS AVAILABLE ON RECORD. ACCORDINGLY, WE ADMIT THE SAME FOR ADJUDICATION. 6. BRIEFLY STATED, THE ASSESSEE IS A LIMITED COMPAN Y ENGAGED IN THE BUSINESS OF CIVIL CONSTRUCTION AND INSTALLATION OF VARIOUS INDUSTRIAL PROJECTS ON CONTRACT BASIS. THE ASSESSEE FILED RET URN OF INCOME FOR THE IMPUGNED AY 2003-04 DECLARING INCOME AT RS.20,92,31 7/-. THE RETURN OF THE ASSESSEE WAS SUBJECTED TO SCRUTINY ASSESSMEN T. AS A SEQUEL THERETO, THE ASSESSMENT ORDER UNDER S.143(3) WAS F RAMED ASSESSING THE INCOME AT RS.78,10,220/- AFTER MAKING VARIOUS DISAL LOWANCES VIDE ORDER DATED 27/03/2006. AFTER THE COMPLETION OF THE ASSE SSMENT, THE CASE WAS REOPENED UNDER S.147 OF THE ACT BY ISSUANCE OF NOT ICE UNDER S.148 OF THE ACT DATED 26/03/2009 TO THE ASSESSEE. WHILE FRAMIN G THE RE-ASSESSMENT DATED 19/11/2009, THE AO REJECTED DEDUCTION CLAIMED UNDER S.80IA(4) OF THE ACT. THE ASSESSEE CHALLENGED THE AFORESAID RE- ASSESSMENT ORDER BEFORE THE CIT(A). HOWEVER, THE CIT(A) SUSTAINED T HE DISALLOWANCES OF DEDUCTION UNDER S. 80IA OF RS.13,71,617/- MADE BY THE AO. ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 4 - 7. AGGRIEVED THERETO, THE ASSESSEE IS IN APPEAL BEF ORE THE TRIBUNAL. 8. THE LD.AR FOR THE ASSESSEE MS.URVASHI SHODHAN AT THE OUTSET SUBMITTED THAT THE REASSESSMENT ORDER FRAMED BY THE AO SUFFERS FROM JURISDICTIONAL DEFECT AND THEREFORE THE REASSESSM ENT ORDER FRAMED IN PURSUANCE THEREOF IS VITIATED AND IS A NULLITY. TH E LD.AR IN THE SAME VAIN ALSO SUBMITTED THAT THE DENIAL OF DEDUCTION UN DER S.80IA(4) CLAIMED BY THE ASSESSEE IS ALSO NOT JUSTIFIED ON MERITS. 8.1. THE LD.AR AT THE FURTHER OUTSET ADVERTED OUR ATTENTION TO THE REASONS RECORDED FOR RE-OPENING OF COMPLETED ASSESS MENT FOR AY 2003- 04 AND SUBMITTED THAT THE IMPUGNED ACTION OF THE A O IS MERELY OWING TO CHANGE OF OPINION WHICH IS NOT PERMISSIBLE IN LAW . THE LD.AR SUBMITTED THAT THE ASSESSMENT IN THIS CASE WAS COMP LETED UNDER S.143(3) WHEREIN THE CLAIM OF DEDUCTION OF THE ASSESSEE UNDE R S.80IA WAS EXAMINED AND CLAIM OF THE ASSESSEE OF RS.18,37,099/ - WAS REVISED AT RS.13,71,617/- AFTER APPLICATION OF MIND. THEREAF TER, THE AO CLAIMS TO HAVE RECEIVED INFORMATION FROM ANOTHER AO AT JAIPUR HAVING JURISDICTION OVER A CONCERN NAMELY, M/S.RAMESHWARAM TOLLS PVT.LT D. (RTPL) ALLEGING THAT THE ASSESSEE HEREIN NILA BAUART ENGI NEERING LTD. (NBEL) HAS TRANSFERRED ITS INFRASTRUCTURE FACILITY (SIROHI ROAD PROJECT) TO RTPL WITH EFFECT FROM 18/11/2001 RELEVANT TO AYS 2002-03 , 2003-04 & 2004- ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 5 - 05. BASED ON INFORMATION SUPPLIED, THE AO HEREIN OB SERVED THAT RTPL HAS ALSO PARALLELY CLAIMED DEDUCTION UNDER S.80IA(4 ) OF THE ACT ON THIS INFRASTRUCTURE FACILITY. THE AO ACCORDINGLY FOUND THAT BOTH THE ASSESSEE AS WELL AS RTPL ARE CLAIMING EXEMPTION ON THIS FACI LITY SIMULTANEOUSLY WHICH IS PATENTLY WRONG. THE AO NOTED THAT ITAT JA IPUR BENCH WHILE DECIDING THE APPEAL IN THE CASE OF RTPL HELD THAT R TPL WAS ENTITLED TO DEDUCTION UNDER S.80IB AND NOT THE ASSESSEE. THE L D.AR IN THIS CONTEXT REITERATED WITH FORCE THAT THE CLAIM OF DEDUCTION W AS SPECIFICALLY EXAMINED BY THE AO IN THE COURSE OF THE ORIGINAL AS SESSMENT PROCEEDINGS AND A PORTION OF THE TOTAL CLAIM WAS DISALLOWED AFT ER EXAMINING THE CLAIM OF DEDUCTION IN DETAIL. THE LD.AR ACCORDINGLY SUBM ITTED THAT THE AO HAVING EXAMINED THE ISSUE OF CLAIM OF DEDUCTION AS STATED AFORESAID COULD NOT HAVE REOPENED THE ASSESSMENT AS IT IS A CASE O F MERE CHANGE OF OPINION. THE LD.AR EXHORTED THAT IT IS WELL-SETT LED THAT A COMPLETED ASSESSMENT CANNOT BE REOPENED ON A MERE CHANGE OF O PINION. IT WAS THUS SUBMITTED THAT THE ISSUANCE OF NOTICE UNDER S.148 I S A BAD IN LAW AND THE ASSUMPTION OF JURISDICTION CONSEQUENT THEREUPON SUF FERS FROM THE VICE OF ILLEGALITY. 8.2. THE LD.AR NEXT CONTENDED THAT FINDINGS RECORDE D IN THE ASSESSMENT OF ONE PARTY (RTPL) IS NOT BINDING IN TH E PROCEEDINGS OF ANOTHER ASSESSEE NOTWITHSTANDING SOME PLEA OR FINDI NG WERE FOUND RECORDED IN THE ASSESSMENT OF THE ANOTHER ASSESSEE FOR OR AGAINST THE ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 6 - INTEREST OF THE PRESENT ASSESSEE. IT IS ALWAYS OPE N FOR THE REVENUE TO REACH A DIFFERENT CONCLUSION IN THE TWO ASSESSMENT PROCEEDINGS ON THE BASIS OF MATERIAL PLACED IN RESPECTIVE PROCEEDINGS. FOR THIS PROPOSITION, THE LD.AR RELIED UPON THE DECISION OF THE HONBLE G UJARAT HIGH COURT IN THE CASE OF CHANDRAVADAN R.PATEL VS ACIT IN CIVIL A PPLICATION NO.657 OF 1999, ORDER DATED 03/08/1999 (COPY PLACED IN FIL E). AS A COROLLARY, THE LD.AR FOR THE ASSESSEE PRESSED THAT THE DECISION IN THE APPEAL OF RTPL CANNOT ADVERSELY IMPACT THE CASE OF THE ASSESSEE HE REIN WHICH WAS RENDERED WITHOUT HEARING THE ASSESSEE AN AFFECTED PARTY. THE LD.AR THUS CONTENDS THAT THE REOPENING OF THE ASSESSMENT OF THE ASSESSEE BASED ON THE ORDER OF THE ITAT JAIPUR IN THE CASE OF RTPL WITHOUT HEARING THE ASSESSEE IS NOT A VALID FOUNDATION FOR REOPENING TH E ASSESSMENT. 8.3. ON MERITS, THE LD.AR ADVERTED OUR ATTENTION T O VARIOUS CLAUSES OF AGREEMENT ENTERED INTO BY ASSESSEE WITH GOVERNMENT OF RAJASTHAN AND CONTENDED THAT RELEVANT INFRASTRUCTURE FACILITY HAS BEEN CONSTRUCTED, DEVELOPED AND MAINTAINED BY THE ASSESSEE FOR WHICH LOAN WAS OBTAINED BY THE ASSESSEE AND BANK GUARANTEE WAS FURNISHED TO THE GOVERNMENT OF RAJASTHAN. THE TOLL TAX HAS BEEN COLLECTED BY RTPL IN THE CAPACITY OF AN AGENT TO THE ASSESSEE. REFERRING TO VARIOUS CLAU SES OF THE AGREEMENT, THE LD.AR HARPED THAT THE CONTROL OVER THE FACILITY CONTINUED WITH THE ASSESSEE. THE LD.AR SUBMITTED WITH VEHEMENCE THAT AGREEMENT FOR DEVELOPMENT OPERATION AND MAINTENANCE OF INFRASTRUC TURE FACILITY WITH ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 7 - GOVERNMENT OF RAJASTHAN HAS NOT BEEN ASSIGNED OR TR ANSFERRED TO RTPL AT ALL NOR COULD HAVE BEEN, AS THERE WAS NOT POWER AVAILABLE TO THE ASSESSEE FOR ASSIGNMENT OR TRANSFER OF THE FACILITY TO ANY THIRD PARTY IN VIEW OF SPECIFIC CLAUSE NO.13 OF THE AGREEMENT WITH GOVERNMENT OF RAJASTHAN. THE LD.AR POINTED OUT THAT RTPL COULD N OT BE CONSTRUED AS THE OWNER OF THE INFRASTRUCTURE FACILITY IN VIEW OF THE TERM OF AGREEMENT BETWEEN THE ASSESSEE AND RTPL. IT WAS ARGUED THAT IT IS THE ASSESSEE WHICH HAS ENTERED INTO AN AGREEMENT WITH GOVERNMENT OF RAJASTHAN. THE RTPL HAS BEEN MERELY ASSIGNED WORK OF COLLECTION OF TOLL AND THEY ARE MERELY RENDERING THE AFORESAID SERVICES FOR AND ON BEHALF OF THE ASSESSEE. THE AGREEMENT WITH RTPL AS TOLL COLLECTION AGENT WA S INITIALLY ENTERED FOR ONE YEAR IN THE FIRST INSTANCE AND THEREAFTER R ENEWED YEAR-AFTER-YEAR KEEPING IN MIND THEIR SATISFACTORY PERFORMANCE. TH E LD.AR THUS SUBMITTED THAT THE ASSESSEE ENJOYS COMPLETE COMMAND OVER THE INFRASTRUCTURE FACILITY WITHOUT ANY DEMUR. MOREOVE R, THE LAND FOR LABOUR COLONY, STAFF QUARTERS AND OTHER EXPENSES HAVE BEEN BORNE BY THE ASSESSEE. THE LD.AR ALSO ADDED THAT CERTAIN OPERAT IVE EXPENSES HAVE ALSO BEEN INCURRED BY THE ASSESSEE TOWARDS THE AFOR ESAID INFRASTRUCTURE FACILITY WHICH PROVES THEIR CASE FOR ELIGIBILITY OF DEDUCTION UNDER S.80IA(4) AS A RIGHTFUL CLAIMANT. THE LD.AR ACCORD INGLY CONTENDED THAT MERELY ON THE BASIS OF CERTAIN OBSERVATIONS OF THE ITAT IN THE CASE OF RTPL WHILE PASSING THE ORDER WITHOUT HAVING THE BEN EFIT OF REPRESENTATION FROM THE ASSESSEE, THE CLAIM OF ASSE SSEE CANNOT BE DENIED. ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 8 - 8.4. THE LD.AR SUBMITTED IN CONCLUSION THAT THE A SSESSEE IS ENTITLED TO RELIEF ON BOTH COUNTS, ONE TOWARDS LACK OF JURISDIC TION UNDER SECTION 147 OF THE ACT, AND OTHER, ON MERITS AS CLAIMED. 9. THE LD.DR MR.VIJAY KUMAR SINGH, ON THE OTHER HAN D, RELIED UPON THE ORDER OF THE CIT(A) AND SUBMITTED IN FURTHERANC E THAT THE ITAT JAIPUR IN THE CASE OF RTPL HAS CLEARLY FOUND AS A M ATTER OF FACT THAT IT WAS ASSESSEE THEREIN WHICH WAS ENTITLED FOR CLAIM O F DEDUCTION UNDER S.80IA(4) OF THE ACT FOR THE IMPUGNED INFRASTRUCTUR E FACILITY. THUS, IN THE LIGHT OF THE DECISION OF THE ITAT, THE BENEFIT OF DEDUCTION HAS ALREADY BEEN ACCORDED TO RTPL WHICH WILL OPERATE IN EXCLUSION TO NBEL. THE LD.DR SUBMITTED THAT BOTH ASSESSEE AS WE LL AS RTPL CANNOT CLAIM THE DEDUCTION IN RESPECT OF THE SAME INFRASTR UCTURE FACILITY AS IT WILL AMOUNT TO DOUBLE DEDUCTION ON THE SAME FACILITY TO TWO PARTIES. SUCH ACT WOULD BE INHERENTLY OPPOSED TO SCHEME OF THE ACT. HE ACCORDINGLY SUBMITTED THAT NO INTERFERENCE WITH THE ORDER OF CI T(A) IS CALLED FOR. 10. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. THE FIRST ISSUE IN STAKE RAISED BY THE ASSESSEE IS TOWARDS VA LIDITY OF ASSUMPTION OF JURISDICTION UNDER S.147/148 OF THE ACT. THE ISSUE CONCERNS CONFERMENT OF JURISDICTION AND THUS GOES TO THE ROOT OF MATTER AND THUS ASSUMES PRIMACY IN THE MATTER OF DELIBERATION. ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 9 - 10.1. WE NOTE THAT THE ASSESSMENT OF THE ASSESSEE W AS REOPENED ON THE BASIS OF DECISION OF THE COORDINATE BENCH OF ITAT J AIPUR IN THE CASE OF RTPL WHEREBY IT WAS FOUND THAT RTPL IS ELIGIBLE FOR CLAIM OF DEDUCTION UNDER S.80IA(4) OF THE ACT IN RESPECT OF THE IMPUGN ED INFRASTRUCTURE FACILITY (SIROHI PROJECT). THE ASSESSEE HAS ALSO C LAIMED THE DEDUCTION UNDER S.80IA(4) IN RESPECT OF THE SAME FACILITY. T HEREFORE, BASED ON THE FINDING OF FACT RENDERED BY THE TRIBUNAL IN RESPECT OF THE GIVEN INFRASTRUCTURE FACILITY, THE VIEW TAKEN BY THE AO T HAT THE ASSESSEE HAS WRONGLY CLAIMED DEDUCTION UNDER S.80IA(4) AND CONSE QUENTLY CHARGEABLE INCOME HAS ASSESSMENT HAS PRIMA-FACIE TANGIBLE BASIS INDEED. NO DOUBT, THE AO DID EXAMINE THE CLAIM OF THE DEDUCTION UNDER S.80IA(4) IN THE ORIGINAL ASSESSMENT IN THE LIGHT OF FACTS AVAILABL E BEFORE IT. THIS WAS, HOWEVER, WITHOUT THE KNOWLEDGE OF THE FACT THAT DED UCTION HAS BEEN CLAIMED AND ALLOWED IN THE HANDS OF THIRD PARTY NAM ELY RTPL. IN THESE CIRCUMSTANCES, IT CANNOT BE SAID THAT AO HAD FORMED AN OPINION THAT IT WAS THE ASSESSEE AND NOT THE THIRD PARTY WHICH W AS ELIGIBLE FOR DEDUCTION UNDER S.80IA(4) OF THE ACT. IN THE ABSEN CE OF OPINION FORMED IN THIS REGARD AT THE FIRST INSTANCE, THERE IS NO C ASE FOR ANY CHANGE OF OPINION. THUS, THE PLEA RAISED ON BEHALF OF ASSESS EE FINDS NO RESONANCE ON THIS SCORE. IT IS APPARENT THAT THE AO HAS ACCEP TED THE CLAIM OF AFORESAID DEDUCTION IN SYNC WITH THE SCOPE OF ASSE SSMENT WITHOUT EXAMINING THE ELIGIBILITY OR OTHERWISE IN THE HANDS OF SOME OTHER PARTY. WHEN SEEN IN PERSPECTIVE, FRESH MATERIAL/INFORMATIO N COMING TO THE ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 10 - POSSESSION OF THE AO WHICH SEEKS TO UNEARTH VITAL I NFORMATION TOWARDS DOUBLE CLAIM OF DEDUCTION BASED ON OPINION OF FINAL FACT FINDING AUTHORITY WOULD GIVE PRIMA-FACIE CAUSE TO BELIEVE THAT CHARGE ABLE INCOME HAS ESCAPED ASSESSMENT. IN THE CIRCUMSTANCES, THE FORM ATION OF BELIEF ON ESCAPEMENT OF CHARGEABLE INCOME IS CLEARLY HELD IN GOOD FAITH AND NOT MERELY A PRETENSE. THE INFORMATION IN THE FORM OF ORDER OF ITAT ON THE SAME INFRASTRUCTURE FACILITY CLEARLY ESTABLISHES RA TIONAL CONNECTION AND LIVE LINK BETWEEN THE REASON AND FORMATION OF BELIE F. 10.2. IT IS TRITE THAT S.147 ENVISAGE HOLDING OF B ELIEF NEED TO BE ONLY PRIMA-FACIE AND NEED NOT BE INFALLIBLE OR CONCLUSIVE SO LONG A S BASED ON GERMANE AND RELEVANT MATERIAL. THE SUFFICIENCY OR CORRECTNESS OF THE REASON OR CAUSE IS NOT A THING TO BE CONSIDERED AT THE INITIAL STAGE OF REOPENING ACTION. IT IS OPEN TO ASSESSEE TO PROVE THAT ASSUMPTION OF FACTS MADE IN THAT NOTICE IS EXTRANEOUS AT THE TIME OF AS SESSMENT. USEFUL REFERENCE MAY BE MADE TO THE DECISION IN RAYMOND WO OLLEN MILLS LTD. VS. ITO (1999) 236 ITR 34(SC) & ACIT VS. RAJESH JH AVERI STOCK BROKERS PVT.LTD. (2007) 291 ITR 500 (SC) IN THIS RE GARD. THEREFORE, WE FAIL TO COMPREHEND THE PLEA OF THE ASSESSEE QUESTI ONING THE JURISDICTION ASSUMED BY THE AO ON THE GROUND OF CHANGE OF OPINIO N. 10.3. THE RELIANCE PLACED ON THE DECISION OF HON BLE GUJARAT HIGH COURT IN THE CASE OF CHANDRAVADAN R.PATEL (SUPRA) IS GROS SLY MISPLACED. IN THAT ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 11 - CASE, THE APPLICANT SOUGHT TO BE IMPLEADED AS A PAR TY IN THE PROCEEDINGS IN THE CASE OF ONE CR PATEL INSTEAD OF MERELY AN IN TERVENER. IN THIS CONTEXT, THE HONBLE GUJARAT HIGH COURT OBSERVED TH AT THERE IS NO ROOM FOR THIRD PARTIES TO INTERVENE IN THE PROCESS OF AS SESSMENT EXCEPT IF THEY ARE PERSONS REQUIRED AS WITNESS FOR ELICITING THE E VIDENCE. IT WAS ALSO OBSERVED THAT FINDINGS RECORDED IN THE ASSESSMENT O F ONE PARTY IS NOT BINDING IN THE PROCEEDINGS AGAINST ANOTHER ASSESSEE . IT IS ALWAYS OPEN FOR THE REVENUE TO REACH A DIFFERENT CONCLUSION IN THE TWO ASSESSMENT PROCEEDINGS ON THE BASIS OF MATERIAL PLACED IN RESP ECTIVE PROCEEDINGS. IT WAS HELD THAT FOR THE PURPOSES OF JURISDICTION OF T HE AUTHORITY, THE STRANGERS HAVE NO ROLE TO PLAY. ON THIS BACKGROUND , THE APPLICANT OF THE PETITIONER SEEKING TO BE IMPLEADED AS A PARTY TO TH E MATTER WAS REJECTED. WE FAIL TO VISUALIZE HOW SUCH OBSERVATIONS PROHIBIT THE AO TO TAKE COGNIZANCE OF JUDICIAL ORDER PASSED IN THE CASE OF THIRD PARTY HAVING THE DIRECT BEARING ON THE SUBJECT MATTER OF ASSESSMENT. AT THE TIME OF ASSUMPTION OF JURISDICTION UNDER S.147 OF THE ACT W HAT IS IMPERATIVE IS RELEVANCY OF MATERIAL TO TRIGGER BELIEF CONTEMPLATE D UNDER S.147 AND NOT THE MERITS OR DEMERITS OF RESPECTIVE CLAIM. THE AO IS NOT EXPECTED TO EMBARK RIGOROUS ENQUIRY ON THE MATERIAL AT PRE-REAS SESSMENT STAGE AS LONG AS REASONS AVAILABLE ARE CAPABLE OF GIVING REA SONABLE BASIS TO HOLD BELIEF OF ESCAPEMENT. THIS VIEW HAS BEEN ENDORSED BY HONBLE SUPREME COURT CONSISTENTLY NOTED ABOVE. THE RIGHT TO OPPOR TUNITY BY ASSESSEE WOULD ARISE ONLY IN THE COURSE OF ASSESSMENT WHERE IT IS NATURALLY OPEN TO ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 12 - ASSESSEE TO REBUT THE INITIAL BELIEF OF THE AO. THE PLEA OF THE ASSESSEE THUS IS WITHOUT ANY FORCE. 10.4. NO OTHER GROUND HAS BEEN MARSHALED TO IMPE ACH THE VALIDITY OF ACTION UNDER S.147 OF THE ACT ON BEHALF OF THE ASSE SSEE. WE THUS FIND NO CASE FOR ALLEGED TRANSGRESSION OF AUTHORITY CONFERR ED UPON AO UNDER S.147 OF THE ACT. 10.5. CONSEQUENTLY, THE ADDITIONAL GROUND RAISED BY THE CHALLENGING THE VALIDITY OF REOPENING IS DISMISSED. 11. WE SHALL NOW ADDRESS THE MAIN GROUND RAISED BY THE ASSESSEE TOWARDS ELIGIBILITY OF CLAIM OF DEDUCTION UNDER S.8 0IA(4) OF THE ACT ON MERITS. 11.1. THE SUBSTANTIVE PLEA ON BEHALF OF THE ASSESSE E IS THAT THE ASSESSEE WAS ENTRUSTED WITH THE CONSTRUCTION OF INFRASTRUCTU RE FACILITIES (SIROHI ROAD PROJECT) ON BUILD, OPERATE AND TRANSFER BAS IS (BOT BASIS) AT ITS OWN COST IN THE STATE OF RAJASTHAN. THE ASSESSEE H AS DEVELOPED FINANCE FOR CONSTRUCTION OF THE PROJECT AND BUILT IT THROUG H ITS OWN RESOURCES AND WAS ENTITLED FOR RECOVERY OF INVESTMENT SO MADE I N THE PROJECT THROUGH LEVY OF TOLL ON THE USAGE OF ROAD PROJECT. THE AGRE EMENT WITH THE ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 13 - GOVERNMENT OF RAJASTHAN FOR THIS PURPOSE IS SPECIFI ED TO BE NEARLY 5 YEARS. 11.2. AT THIS STAGE, WE TAKE NOTE OF CLAUSE NO.1 3 OF THE AGREEMENT ENTERED INTO BY THE ASSESSEE WITH GOVERNMENT OF RAJ ASTHAN HEAVILY RELIED UPON BY THE ASSESSEE. IT READS AS UNDER:- (13) THE LESSEE WILL NOT ASSIGN THE DEMISED PRO PERTY OR TRANSFER THE BENEFIT OF THE LEASE TO ANY THIRD PART Y. LESSEE WILL ALSO NOT MORTGAGE THE DEMISED LAND TO ANY FINANCI AL INSTITUTION OR INDIVIDUAL FOR RAISING CAPITAL FOR CONSTRUCTION OF THE PROJECT OR FOR ANY OTHER PURPOSE. 11.3. WE ALSO SIMULTANEOUSLY TAKE NOTE OF THE AGREE MENT ENTERED INTO BY THE ASSESSEE DATED 10/11/2001 WITH RTIL. AS PER AF ORESAID AGREEMENT, RTIL ARE SPECIALIZED TOLL COLLECTION CONTRACTORS W HO HAVE BEEN AWARDED THE RIGHT TO COLLECT THE TOLL AT THE PROJECT SITE F OR A PERIOD OF ONE YEAR AS AGAINST THE RIGHT VESTED WITH THE ASSESSEE BY GOVER NMENT OF RAJASTHAN FOR A PERIOD OF FIVE YEARS. AS PER THE AFORESAID AGREEMENT, THE RTIL HAS BEEN APPOINTED AS COLLECTING AGENTS OF THE ASSESSE E FOR COLLECTION OF TOLL FROM TRAFFIC-LINE THROUGH THE SAID INFRASTRUCTURE F ACILITIES AT A LUMP-SUM CONSIDERATION OF RS.328 LAKHS. AS PER AGREEMENT, R PTL IS UNDER CONTRACTUAL OBLIGATION TO PAY THE AFORESAID AMOUNT TO THE ASSESSEE IRRESPECTIVE OF ACTUAL TOLL COLLECTION BY THEM. TH US, ON HOLISTIC READING OF THE AGREEMENT BETWEEN THE GOVERNMENT OF RAJASTHAN A ND THE ASSESSEE ON ONE HAND AND ANOTHER AGREEMENT BETWEEN THE ASSESSE E AND RTPL ON THE ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 14 - OTHER HAND, THERE IS NO MANNER OF DOUBT THAT IT IS THE ASSESSEE WHO WAS THE DEVELOPER OF THE INFRASTRUCTURE FACILITY. 11.4. AT THIS JUNCTURE, WE ALSO SIMULTANEOUSLY TAK E NOTE OF CERTAIN OBSERVATIONS MADE BY THE COORDINATE BENCH OF ITAT I N THE CASE OF ITO VS. RTPL IN ITA NO.464/JP/2008 FOR AY 2003-04 ORDE R DATED 29/08/2008 WHICH TRIGGERED THE CAUSE FOR ACTION. T HE ITAT HAS CLEARLY RECORDED A FINDING OF FACT THAT THE RTPL WAS APPOIN TED AS AGENT BY THE ASSESSEE FOR COLLECTION OF TOLL ON ROAD DEVELOPED B Y THE ASSESSEE. THE PERIOD OF AGREEMENT IS FOR 365 DAYS W.E.F. 18/11/20 01 AT THE FIRST INSTANCE WHICH WAS EXTENDED AND RENEWED ON THE SAME TERMS AN D CONDITIONS BEFORE THE EXPIRY OF THE INITIAL PERIOD. THE AO OF RTPL IN FACT, CAME TO THE CONCLUSION THAT THE ASSESSEE HEREIN (NBEL) IS R IGHTFUL CLAIMANT FOR DEDUCTION UNDER S.80IA OF THE ACT BEING DEVELOPER O F THE INFRASTRUCTURE FACILITY. HOWEVER, THE ITAT ON INTERPRETATION OF CONTRACTUAL AGREEMENT OF RTPL WITH ASSESSEE CAME TO THE CONCLUSION THAT R TPL WAS ULTIMATELY ENTRUSTED WITH THE REQUISITE WORK OF OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY. THE ITAT THUS HELD AFTER EXAMINING TERMS OF AGREEMENT BETWEEN THE RTPL THAT THE ASSESSEE THAT T HE AGREEMENT EXECUTED BETWEEN THE ASSESSEE AND RTPL WAS NOT ONLY FOR EXECUTION OF WORK OF COLLECTION OF TOLL ONLY. IN THE LIGHT OF V ARIOUS CLAUSES OF THE AGREEMENT BETWEEN THE PARTIES, IT WAS HELD THAT TRA NSFER OF RIGHTS WAS AVAILABLE TO THE ASSESSEE HEREIN AFTER DEVELOPING T HE FACILITIES FOR ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 15 - COLLECTION OF TOLL. THUS, OPERATION OF FACILITY AS WELL AS MAINTENANCE THEREOF STOOD TRANSFERRED TO RTPL. THE ITAT FOUND THAT THE TRANSFER OF RIGHT OF OPERATION AND MAINTENANCE OF FACILITY WAS COMPLETE AND IN FACT CARRIED BY RTPL. THE ITAT IN CONCLUSION HELD THAT RTPL WAS RIGHTFUL CLAIMANT OF THE DEDUCTION UNDER S.80IA(4) OF THE AC T. 11.5. IT WILL BE APT TO REPRODUCE THE APPROPRIATE PORTION OF THE ORDER OF THE ITAT JAIPUR IN ITA NO.464/JP/2008 DEALING WITH THE ISSUE IN FAVOUR OF RTPL. FOR A READY REFERENCE WE FIRST REPRODUCE THE PROVI SIONS OF SECTION 80IA OF THE I.T.ACT, 1961 HEREUNDER:- (4) THIS SECTION APPLIES TO (I) ANY ENTERPRISE CARRYING ON THE BUSINESS [OF (I) DEVELOPING OR (II) OPERATING AND MAINTAINING OR (III) DEVELOPING, OPER ATING AND MAINTAINING]ANY INFRASTRUCTURE FACILITY WHICH FULFI LS ALL THE FOLLOWING CONDITIONS, NAMELY : (A) IT IS OWNED BY A COMPANY REGISTERED IN INDIA OR BY A CONSORTIUM OF SUCH COMPANIES [OR BY AN AUTHORITY OR A BOARD OR A CORPORATION OR ANY OTHER BODY ESTABLISHE D OR CONSTITUTED UNDER ANY CENTRAL OR STATE ACT;] (B) IT HAS ENTERED INTO AN AGREEMENT WITH THE CENTRAL GOVERNMENT OR A STATE GOVERNMENT OR A LOCAL AUTHORI TY OR ANY OTHER STATUTORY BODY FOR (I)DEVELOPING OR (II)O PERATING AND MAINTAINING OR (III) DEVELOPING, OPERATING AND MAINTAINING A NEW INFRASTRUCTURE FACILITY;] (C) IT HAS STARTED OR STARTS OPERATING AND MAINTAINING THE INFRASTRUCTURE ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 16 - FACILITY ON OR AFTER THE 1ST DAY OF APRIL, 1995: PROVIDED THAT WHERE AN INFRASTRUCTURE FACILITY IS TRANSFERRE D ON OR AFTER THE 1ST DAY OF APRIL, 1999 BY AN ENTERPRISE WHICH DEVELOPED SUCH INFRASTRUCTURE FACILITY (HEREAFTER REFERRED TO IN THIS SECTION AS THE TRANSFEROR ENTERPRISE) TO ANOTHER ENTERPRISE (HEREAFTER IN THIS SECTION REFERRED TO AS THE TRANSFEREE ENTERPRISE) FOR THE PURPOSE OF OPERATING AND MAINTAINING THE INFRASTRUC TURE FACILITY ON ITS BEHALF IN ACCORDANCE WITH THE AGREE MENT WITH THE CENTRAL GOVERNMENT, STATE GOVERNMENT, LOCAL AUTHORITY OR ST ATUTORY BODY, THE PROVISIONS OF THIS SECTION SHALL APPLY TO THE TRANSFEREE E NTERPRISE AS IF IT WERE THE ENTERPRISE TO WHICH THIS CLAUSE APPLIES AND THE DEDUCTION FROM PROFITS AND GAINS WOULD BE AVAILABLE TO SUCH TRANSFEREE ENTERPR ISE FOR THE UNEXPIRED PERIOD DURING WHICH THE TRANSFEROR ENTERPRISE WOULD HAVE BEEN ENTITLED TO THE DEDUCTION, IF THE TRANSFER HAD NOT TAKEN PLACE. THE FOLLOWING SECOND PROVISO SHALL BE INSERTED AFTE R THE EXISTING PROVISO TO CLAUSE (I) OF SUB-SECTION (4) OF SECTION 80- IA BY THE FINANCE ACT, 2016, W.E.F. 1-4-2017 : PROVIDED FURTHER THAT NOTHING CONTAINED IN THIS SEC TION SHALL APPLY TO ANY ENTERPRISE WHICH STARTS THE DEVELOPMENT OR OPERATIO N AND MAINTENANCE OF THE INFRASTRUCTURE FACILITY ON OR AFTER THE 1ST DAY OF APRIL, 2017. [EXPLANATION.FOR THE PURPOSES OF THIS CLAUSE, 'IN FRASTRUCTURE FAC ILITY' MEANS (A) A ROAD INCLUDING TOLL ROAD, A BRIDGE OR A RAIL SYST EM; (B) A HIGHWAY PROJECT INCLUDING HOUSING OR OTHER ACTIVI TIES BEING AN INTEGRAL PART OF THE HIGHWAY PROJECT; (C) A WATER SUPPLY PROJECT, WATER TREATMENT SYSTEM, IRR IGATION PROJECT, SANITATION AND SEWERAGE SYSTEM OR SOLID WASTE MANAG EMENT SYSTEM; (D) A PORT, AIRPORT, INLAND WATERWAY [, INLAND PORT OR NAVIGATIONAL CHANNEL IN THE SEA];] (II) ANY UNDERTAKING WHICH HAS STARTED OR STARTS PROVIDI NG TELECOMMUNICATION SERVICES, WHETHER BASIC OR CELLULAR, INCLUDING RADI O PAGING, DOMESTIC SATELLITE SERVICE, NETWORK OF TRUNKING, BROADBAND NETWORK AND INTERNET SERVICES ON OR AFTER THE 1ST DAY OF APRIL, 1995, BUT ON OR BEFORE THE 31ST DAY OF MARCH, [2005].] EXPLANATION. FOR THE PURPOSES OF THIS CLAUSE, 'DOMESTIC SATELLIT E' MEANS A SATELLITE OWNED AND OPERATED BY AN INDIAN COMPANY F OR PROVIDING TELECOMMUNICATION SERVICE; (III) ANY UNDERTAKING WHICH DEVELOPS, DEVELOPS AND OPERAT ES OR MAINTAINS AND ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 17 - OPERATES AN INDUSTRIAL PARK [OR SPECIAL ECONOMIC ZONE]NOTIFIED BY THE CENTRAL GOVERNMENT IN ACCORDANCE WITH THE SCHEME FR AMED AND NOTIFIED BY THAT GOVERNMENT FOR THE PERIOD BEGINNING ON THE 1ST DAY OF APRIL, 1997 AND ENDING ON THE 31ST DAY OF MARCH, [2006]: [ PROVIDED THAT IN A CASE WHERE AN UNDERTAKING DEVELOPS AN IND USTRIAL PARK ON OR AFTER THE 1ST DAY OF APRIL, 1999 OR A SPECIAL EC ONOMIC ZONE ON OR AFTER THE 1ST DAY OF APRIL, 2001 AND TRANSFERS THE OPERATION AND MAINTENANCE OF SUCH INDUSTRIAL PARK OR SUCH SPECIAL ECONOMIC ZONE, AS T HE CASE MAY BE, TO ANOTHER UNDERTAKING (HEREAFTER IN THIS SECTION REFERRED TO AS THE TRANSFEREE UNDERTAKING), THE DEDUCTION UNDER SUB-SECTION (1) SHALL BE ALLOWED TO SUCH TRANSFEREE UNDERTAKING FOR THE REMAINING PERIOD IN THE TEN CONSECUTIVE ASSESSMENT YEARS AS IF THE OPERATION AND MAINTENANC E WERE NOT SO TRANSFERRED TO THE TRANSFEREE UNDERTAKING : [ PROVIDED FURTHER THAT IN THE CASE OF ANY UNDERTAKING WHICH DEVE- LOPS, DEVELOPS AND OPERATES OR MAINTAINS AND OPERATES AN INDUSTRIAL PARK, THE PROVISIONS OF THIS CLAUSE SHALL HAVE EFFECT AS IF F OR THE FIGURES, LETTERS AND WORDS '31ST DAY OF MARCH, 2006', THE FIGURES, LETTE RS AND WORDS '31ST DAY OF MARCH, [2011]' HAD BEEN SUBSTITUTED;] (IV) AN [UNDERTAKING]WHICH, (A) IS SET UP IN ANY PART OF INDIA FOR THE GENERATION O R GENERATION AND DISTRIBUTION OF POWER IF IT BEGINS TO GENERATE POWE R AT ANY TIME DURING THE PERIOD BEGINNING ON THE 1ST DAY OF APRIL , 1993 AND ENDING ON THE 31ST DAY OF MARCH, [2017]; (B) STARTS TRANSMISSION OR DISTRIBUTION BY LAYING A NET WORK OF NEW TRANSMISSION OR DISTRIBUTION LINES AT A NY TIME DURING THE PERIOD BEGINNING ON THE 1ST DAY OF APRIL, 1999 AND ENDING ON THE 31ST DAY OF MARCH, [2017]: PROVIDED THAT THE DEDUCTION UNDER THIS SECTION TO AN [UNDERTAKING]UNDER SUB- CLAUSE (B) SHALL BE ALLOWED ONLY IN RELATION TO THE PROFITS DERIVED FROM LAYING OF SUCH NETWORK OF NEW LINES FOR TRANSMISSION OR DISTRIBUTION; [(C) UNDERTAKES SUBSTANTIAL RENOVATION AND MODERNIS ATION OF THE EXISTING NETWORK OF TRANSMISSION OR DISTRIBUTION LI NES AT ANY TIME DURING THE PERIOD BEGINNING ON THE 1ST DAY OF APRIL , 2004 AND ENDING ON THE 31ST DAY OF MARCH, [2017]. EXPLANATION.FOR THE PURPOSES OF THIS SUB-CLAUS E, 'SUBSTANTIAL RENOVATION AND MODERNISATION' MEANS AN INCREASE IN THE PLANT AND MACHINERY IN THE NETWORK OF TRANSMISSION OR DISTRIB UTION LINES BY AT ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 18 - LEAST FIFTY PER CENT OF THE BOOK VALUE OF SUCH PLAN T AND MACHINERY AS ON THE 1ST DAY OF APRIL, 2004;] [(V) AN UNDERTAKING OWNED BY AN INDIAN COMPANY AND SET U P FOR RECONSTRUCTION OR REVIVAL OF A POWER GENERATING PLANT, IF (A) SUCH INDIAN COMPANY IS FORMED BEFORE THE 30TH DAY O F NOVEMBER, 2005 WITH MAJORITY EQUITY PARTICIPATION BY PUBLIC SECTOR COMPANIES FOR THE PURPOSES OF ENFORCING THE SECURITY INTEREST OF THE LENDERS TO THE COMPANY OWNING THE POWER GENERATING PLANT AND SUCH INDIAN COMPANY IS NOTIFIED BEFORE THE 31ST DAY OF DECEM BER, 2005 BY THE CENTRAL GOVERNMENT FOR THE PURPOSES OF THIS CLAUSE; (B) SUCH UNDERTAKING BEGINS TO GENERATE OR TRANSMIT OR DISTRIBUTE POWER BEFORE THE 31ST DAY OF MARCH, [2011];] THERE IS NO DOUBT AS PER THE TERMS OF AGREEMENT BE TWEEN THE ASSESSEE AND NBEL THAT THE ASSESSEE WAS APPOINTED F OR OPERATING AND MAINTAINING INCLUDING COLLECTION OF TOLLS AS THE CO LLECTING AGENT FROM TRAFFIC PLYING ON THE SIROHI-ANADARA-REODR-MANDAR R OAD FOR THE PRESCRIBED DISTANCE. HENCE, IN OUR VIEW, THE AO WA S WRONGLY ASSUMED THAT THE AGREEMENT EXECUTED BETWEEN THE DEVELOPER A ND THE ASSESSEE WAS FOR EXECUTION OF WORK COLLECTION TOLLS ONLY. AS PE R LANGUAGE USED IN THE AGREEMENT IT IS A CASE OF TRANSFER OF RIGHTS AVAILA BLE TO THE TRANSFEROR I.E. NBEL AFTER DEVELOPING, THE FACILITIES FOR COLLECTIO N OF TOLLS (WHICH IS THE ONLY WORK OF OPERATING OF FACILITY) AS WELL AS MAIN TAINING THE FACILITY, FOR BOTH THE PURPOSES IN ALL RESPECT AND IN ACCORDANCE WITH THE TERMS OF THE AGREEMENT EXECUTED BY THE DEVELOPER NBEL WITH THE S TATE GOVERNMENT OF RAJASTHAN. IN OUR VIEW, THE TRANSFER DOES NOT MEAN AND IMPLY TRANSFER OF ANY PROPERTY, WHICH ALSO NEVER VESTS IN THE HANDS O F THE DEVELOPER OF THE FACILITY AND IT SHOULD NOT BE CONSTRUED IN A CONSER VATIVE MANNER. HERE TRANSFER ONLY MEANS THE TRANSFER OF RIGHT OF OPER ATION AND MAINTENANCE OF THE FACILITY, WHICH WAS COMPLETELY TRANSFERRED A ND IN FACT CARRIED OUT BY THE ASSESSEE. THE AO ALSO FAILED TO APPRECIATE THIS MATERIAL FACT THAT IN TERMS OF THE AGREEMENT DATED 16.8.2002 THE ASSES SEE GOT THE FACILITY OF OPERATING, COLLECTING AND MAINTAINING FOR WHOLE PER IOD I.E. UPTO 5.12.2005 AVAILABLE TO THE DEVELOPER (NBEL). THE A SSESSING OFFICER HAS ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 19 - ALSO FAILED TO CONSIDER CLAUSE (1) OF THE AGREEMENT DATED 16.8.2002 WHICH SPECIFICALLY PROVIDES THAT IT IS IRREVOCABLE AND TO REMAIN IN FORCE PERMANENTLY. IN THE CASE OF OCEAN SPARKLE LTD. VS. DCIT (SUPRA), OPERATION AND MAINTENANCE OF INFRASTRUCTURE FACILIT Y WAS TRANSFERRED BY DEVELOPER TO ANOTHER ENTERPRISE FOR THE PURPOSE OF OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY ON ITS BEHA LF IN ACCORDANCE WITH THE AGREEMENT WITH THE GOVERNMENT, IT WAS HELD THAT THE PROVISIONS OF SECTION 80IA IS EQUALLY APPLICABLE TO THE TRANSFERE E FOR THE UNEXPIRED PERIOD DURING WHICH THE TRANSFEROR WOULD HAVE BEEN ENTITLED TO DEDUCTION IF THE TRANSFER HAD NOT TAKEN PLACE. IT WAS HELD T HAT PROVISO TO SECTION 80IA(4) DOES NOT REQUIRE THAT THERE SHOULD BE A DIR ECT AGREEMENT BETWEEN THE TRANSFEREE AND THE SPECIFIED AUTHORITY OF THE G OVERNMENT. THE ASSESSEE, TRANSFEREE THEREIN WAS THUS HELD ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA IN TERMS OF PROVISO TO SECTION 80IA(4) . IN THE CASE OF PATEL ENGINEERING CO. VS. DCIT (SUPRA), THE MUMBAI BENCH OF THE TRIBUNAL AFTER DISCUSSING THE CASE IN DETAIL HAS COME TO THE CONCLUSION THAT THE FACT THAT THE LAND BELONG TO THE GOVERNMENT WOULD MAKE N O DIFFERENCE AS SUB- CLAUSE (C) OF SECTION 80IA(409I) WOULD NOT BE APPLI CABLE TO A DEVELOPER SIMPLICITOR. UNDER THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT AS PER THE TERMS OF AGREEMENT BETWEEN THE ASSESSEE AND NBE L AND THE NATURE OF WORK EXECUTED BY THE ASSESSEE, THE LD.CIT(A) HAS RI GHTLY FOUND THE ASSESSEE ELIGIBLE FOR THE CLAIMED DEDUCTION UNDER S ECTION 80IA(4)(I) PROVISO. THE FIRST APPELLATE ORDER ON THE ISSUE IS THUS UPHELD. THE GROUND IS THUS REJECTED. 11. 6. ON CAREFUL ANALYSIS OF THE DECISION OF THE C OORDINATE BENCH OF ITAT JAIPUR, WE ARE NOT IMPRESSED WITH THE CASE MA DE OUT BY THE REVENUE ON MERITS. IT IS ESSENTIALLY THE CASE OF T HE REVENUE THAT DEDUCTION UNDER S.80IA(4) OF THE ACT HAS BEEN CLAIM ED AND ALLOWED IN THE HANDS OF RTPL IN VIEW OF THE DECISION OF THE IT AT JAIPUR AND THUS THE DEDUCTION ON THE SAME INFRASTRUCTURE FACILITY C ANNOT BE EXTENDED IN ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 20 - THE HANDS OF THE ASSESSEE HEREIN. IN THIS REGARD, AS WE UNDERSTAND, THE ASSESSEE HAS DEVELOPED THE INFRASTRUCTURE FACILITY AND PRESUMABLY TRANSFERRED THE OPERATION AND MAINTENANCE OF THE AF ORESAID INFRASTRUCTURE FACILITY TO RTPL AT A PRE-DETERMINED COST AS FOUND BY ITAT IN THE CASE OF RTPL. THUS, WHILE THE ASSESSEE IS ENTITLED TO DRAW BENEFIT FROM THE INFRASTRUCTURE FACILITY TO THE EXTENT OF AGREED AMO UNT AS PER THE AGREEMENT BETWEEN THE ASSESSEE AND RTPL, THE OTHER PARTY NAME LY RTPL WILL BE ENTITLED TO AVAIL THE BENEFIT OF THE INFRASTRUCTURE FACILITY OVER AND ABOVE THE COST INCURRED BY THEM TOWARDS TRANSFER AS PER THE AGREEMENT. THERE DOES NOT APPEAR TO BE ANY OVERLAPPING OF CLAIM OF D EDUCTION. IN THIS SITUATION, THE QUANTUM OF DEDUCTION BY RESPECTIVE PARTIES ARE MUTUALLY EXCLUSIVE AND NOT IN CONFLICT WITH EACH OTHER NOTW ITHSTANDING THE FACT THAT IT EMANATES FROM SAME INFRASTRUCTURE FACILITY. 11.7 AT THIS JUNCTURE, WE NOTE THAT BENEFIT OF SE CTION 80IA(4) IS AVAILABLE TO AN ENTERPRISE CARRYING ON THE BUSINESS OF DEVELOPING OR OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILI TY ETC. SUBJECT TO FULFILLMENT OF CERTAIN CONDITIONS WITH WHICH WE ARE NOT CONCERNED AT PRESENT. THUS, IT IS MANIFEST THAT AS PER 80IA(4) OF THE ACT, BENEFIT IS AVAILABLE TO BOTH CLASS OF ASSESSEE (I) WHO HAS DE VELOPED THE INFRASTRUCTURE FACILITY AND (II) OTHER, WHO IS ENGA GED IN OPERATION AND MAINTENANCE OF FACILITY. THEREFORE, THERE DOES NOT APPEAR TO BE ANY IMPEDIMENT IN SECTION 80IA(4) OF THE ACT TO AVAIL THE BENEFIT BY MORE ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 21 - THAN ONE ASSESSEE ALBEIT ON THEIR RESPECTIVE COMPO NENT OF PROFITS. IN THE INSTANT CASE, THE ASSESSEE HAS RECEIVED AGREED AMOU NT BY VIRTUE OF AGREEMENT FROM RTPL. THE ASSESSEE IS SEEKING DEDUC TION UNDER S.80IA(4) OF THE ACT ON RECEIPT RECOVERED FROM RTP L SUBJECT TO CLAIM OF CERTAIN EXPENSES THEREON. RTPL, ON THE OTHER HAND, IS SEEKING CLAIM OF DEDUCTION ON THE PROFITS OVER AND ABOVE THE EQUIVAL ENT COST INCURRED AND PAYABLE TO THE ASSESSEE HEREIN SUBJECT TO SOME OTHE R EXPENSES. THUS, BOTH ASSESSEE AS WELL AS RTPL ARE CLAIMING DEDUCTIO N ON PROFIT ELEMENT WHICH OPERATES IN MUTUAL EXCLUSION TO EACH OTHER. RECEIPT IN THE HANDS OF ASSESSEE IS COST IN THE HANDS OF RTPL. THEREFOR E, THE ELIGIBILITY OF DEDUCTION UNDER S.80IA(4) OF THE ACT IN THE HANDS O F ASSESSEE DO NOT IMPINGE UPON THE RIGHT OF RTPL TO AVAIL BENEFIT OF 80IA(4) WHICH IS NATURALLY RESTRICTED TO AN AMOUNT AFTER EXCLUDING T HE COST INCURRED ON PAYMENT TO THE ASSESSEE HEREIN. THEREFORE, THE ENT IRE PROFITS DERIVED FROM THE INFRASTRUCTURE FACILITY, (I) TOWARDS DEVELOPMEN T THEREOF IN THE HANDS OF THE ASSESSEE AND OTHER (II) TOWARDS OPERATION AND M AINTENANCE THEREOF IN THE HANDS OF RTPL IS ELIGIBLE FOR DEDUCTION. OSTE NSIBLY, THERE IS NO CASE OF DOUBLE DEDUCTION OF THE SAME AMOUNT AS INCORRECT LY ARGUED ON BEHALF OF THE REVENUE. TO REITERATE, WHILE THE ASSESSEE HEREIN IS SEEKING CLAIM OF DEDUCTION ON PROFIT FROM ONE PART OF THE ACTIVI TY, RTPL HAS CLAIMED DEDUCTION ON OTHER PART OF THE PROFIT FROM OTHER SE T OF ACTIVITIES. THEREFORE, NO CONFLICT APPEARS TO ARISING AS A RE SULT OF THE DECISION OF THE COORDINATE BENCH OF THE TRIBUNAL IN RTPL. IN THIS VIEW OF THE MATTER, ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 22 - THE CLAIM OF THE ASSESSEE TOWARDS DEDUCTION UNDER S .80IA(4) OF THE ACT ON RECEIPTS AGAINST ITS EFFORTS FOR DEVELOPMENT OF THE INFRASTRUCTURE FACILITY DESERVES TO BE ACCEPTED. ACCORDINGLY CL AIM OF DEDUCTION U/S.80IA(4) OF THE ACT IN THE HANDS OF ASSESSEE IS ALLOWED ON MERITS. 12. AS A RESULT, GROUND OF APPEAL TOWARDS DEDUCT ION UNDER S.80IA(4) ON MERITS IS ALLOWED, WHILE ADDITIONAL GROUNDS OF APPE AL CHALLENGING THE JURISDICTION IS DISMISSED. 13. IN THE RESULT APPEAL OF THE ASSESSEE IN ITA NO. 2485/AHD/2010 FOR AY 2003-04 IS PARTLY ALLOWED. ITA NO.2486/AHD/2010 AY 2004-05 - ASSESSEES APPE AL 14. IN THIS APPEAL, THE ASSESSEE IS AGGRIEVED BY (I) ALLEGED ILLEGAL ACTION OF THE AO IN INVOKING T HE SECTION 147 OF THE ACT BASED ON CHANGE OF OPINION IN TERMS OF ADDITIONAL G ROUND FILED. (II) DENIAL OF DEDUCTION OF RS.30,49,558/- UNDER S .80IA(4) OF THE ACT. ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 23 - (III) DISALLOWANCE OF CLAIM OF RS.45,29,321/- CLAIM ED AS BUSINESS LOSS ON ACCOUNT JHALAWAR-INDORE ROAD PROJECT. 15. BOTH THE SIDES CONSENTED THAT FACTS AND ISSUE I N THIS APPEAL ARE IDENTICAL IN MATERIAL ASPECT IN SO FAR AS GROUND NO S.(I) AND (II) SUMMARIZED ABOVE ARE CONCERNED. THUS, OUR OBSERVAT IONS IN ITA NO.2485/AHD/2010 FOR AY 2003-04 ABOVE SHALL APPLY MUTATIS MUTANTIS TO THIS APPEAL. ACCORDINGLY, IN PARITY WITH THE RE ASONS, CHALLENGE TO JURISDICTION UNDER S.147 IS DISMISSED AND THE ELIGI BILITY OF THE ASSESSEE UNDER S.80IA(4) OF THE ACT ON MERITS IS ALLOWED. 16. THIS LEAVES US WITH GROUND NO.(III) CONCERNIN G ALLOWABILITY OR OTHERWISE OF LOSS OF RS.45,29,321/- ARISING FROM JH ALAWAR-INDORE ROAD PROJECT. 17. BRIEF FACTS GERMANE TO THE ISSUE ARE THAT THE A SSESSEE ENTERED INTO AN AGREEMENT WITH GOVERNMENT OF RAJASTHAN ON 30/03/ 2001 FOR IMPROVEMENT OF JHALAWAR-INDORE ROAD PROJECT IN BOT (BUILD OPERATE AND TRANSFER) BASIS. THE ASSESSEE WAS GIVEN RIGHT TO COLLECT TOLL FROM THE USERS OF THIS ROAD IN CONSIDERATION THEREOF. HOWEV ER, AS CLAIMED BY THE ASSESSEE, THE PROJECT WAS NOT FOUND VIABLE AND THER EFORE THE SAME WAS TERMINATED IN SEPTEMBER-2004 VIDE OFFICE ORDER OF T HE CHIEF ENGINEER CPWD DATED 04.10.2004. IT IS THE CASE OF THE ASSES SEE THAT IT HAD ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 24 - INCURRED CERTAIN EXPENDITURE ON THIS PROJECT WHICH WERE CLAIMED AS REVENUE LOSS DURING THE YEAR. THE AO DID NOT ACCEPT THE EX PENDITURE INCURRED ON THE AFORESAID PROJECT SO ABANDONED AS B USINESS EXPENDITURE OF REVENUE NATURE AND TREATED THE SAME AS CAPITAL EXPE NDITURE. IN FIRST APPEAL, THE CIT(A) ALSO DID NOT FIND MERIT IN THE C ASE OF THE ASSESSEE AND REJECTED THE CLAIM OF ORDINARY BUSINESS LOSS OF TH E AFORESAID AMOUNT OF RS.45,29,321/- ON THE GROUND THAT THE JHALAWAR-INDO RE ROAD PROJECT WAS A NEW BUSINESS AND HAS NOTHING TO DO WITH THE EXIST ING BUSINESS OF THE ASSESSEE. IT WAS OBSERVED THAT AS THE PROJECT DID NOT FRUCTIFY AND THEREFORE EXPENDITURE INCURRED OVER A PERIOD CANNOT BE ALLOWED AS REVENUE EXPENDITURE AGAINST THE INCOME OF THE EXIST ING BUSINESS. THE CIT(A) ALSO ADDED ANOTHER DIMENSION TO THE CASE OF THE ASSESSEE. IT WAS OBSERVED BY THE CIT(A) THAT JHALAWAR-INDORE ROAD PR OJECT WAS TERMINATED IN SEPTEMBER-2004 WHICH IS AFTER THE CLO SURE OF THE FINANCIAL YEAR ATTRIBUTABLE TO THE AY 2004-05 IN APPEAL AND T HUS NOT A PERMISSIBLE DEDUCTION IN THE YEAR IN APPEAL. ON THIS PREMIS E ALSO, IT WAS HELD THE THE CLAIM OF THE ASSESSEE TOWARDS BUSINESS EXPENDIT URE WAS LIABLE FOR DISALLOWANCE IN SO FAR AS AY 2004-05 IS CONCERNED. ACCORDINGLY, THE CIT(A) REJECTED THE AFORESAID CLAIM OF THE ASSESSEE . 18. AGGRIEVED BY THE ORDER OF THE CIT(A), THE ASSES SEE HAS INTER-ALIA TAKEN UP THE AFORESAID ISSUE IN THE PRESENT APPEAL BEFORE THE TRIBUNAL. ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 25 - 19. THE LD.AR FOR THE ASSESSEE SUBMITTED THAT THE G OVERNMENT OF RAJASTHAN ISSUED LETTER OF INTENT (LOI) FOR CARRYIN G OUT WORK OF IMPROVEMENT OF JHALAWAR-INDORE STATE HIGHWAY ON BOT BASIS. THE TOTAL COST OF PROJECT WAS NEARLY RS.715 LACS FOR THE CONC ESSIONAL PERIOD OF 129 MONTHS. AFTER THE LOI, THE AGREEMENT WAS MADE. T HE MAIN OBJECT OF THE PROJECT WAS TO CONNECT THE STATE OF MADHYA PRAD ESH AND RAJASTHAN. THE WORK WAS COMMENCED PURSUANT TO THE ARRANGEMENT AND A SIZABLE AMOUNT WAS SPENT. MEANWHILE, IN THE ENSUING PERIOD , SICOM LTD. CANCELLED THE LOAN ORIGINALLY GRANTED TO THE ASSESS EE. THE FUNDS FOR THE PROJECT COULD NOT BE ARRANGED AND THEREFORE THE PRO JECT COULD NOT BE COMPLETED AND GOT DELAYED. DUE TO THE AFORESAID PR OBLEMS, THE PROJECT WAS SEVERALLY AFFECTED AND WAS RENDERED UNVIABLE. THUS, AFTER THE RE- ASSESSMENT OF THE SITUATION, THE ASSESSEE HAD NO OP TION BUT TO DROP THE PROJECT IN ITS BUSINESS INTEREST. THE LD.AR CONTEN DED THAT EXPENDITURE INCURRED FOR THE PROJECT WAS, NEVERTHELESS, IN CONN ECTION WITH THE ACQUISITION OF A TRADING RIGHT I.E. THE RIGHT TO CO LLECT THE TOLL CHARGES FOR A SPECIFIC PERIOD AND THE EXPENDITURE WAS NOT INCURRE D FOR ANY ACQUISITION OF ASSET. THE ASSESSEE WERE NEVER TO BECOME THE OW NER OF THE ASSET BY VIRTUE OF THE PROJECT UNDERTAKEN. THE LD.AR NEXT C ONTENDED THAT THE ENTIRE AGREEMENT WITH THE GOVERNMENT WAS ON A BUILD OPERATE AND TRANSFER BASIS AND THE ASSESSEE WERE TO ACQUIRE MER ELY A RIGHT TO COLLECT THE TOLL CHARGES FOR A SPECIFIC PERIOD. THE OWNERS HIP OF THE ROAD, I.E. ASSET IN QUESTION ALWAYS BELONGED TO THE GOVERNME NT. THUS, THE RIGHT TO ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 26 - COLLECT TOLL CHARGES WAS A TRADING ASSET AND THE EX PENDITURE WAS CONSEQUENTLY INCURRED FOR THE PURPOSES OF BUSINESS ONLY. THE EXPENDITURE WAS INCURRED FOR ACQUIRING THE RIGHT TO USE THE ASSET FOR THE PURPOSE OF ONGOING BUSINESS OF THE ASSESSEE. THE L D.AR ACCORDINGLY CONTENDED THAT LOSS INCURRED BY THE ASSESSEE ON REL INQUISHMENT OF ITS RIGHT RELATING TO TOLL COLLECTION IN FAVOUR OF THE THIRD PARTY IS INTRINSICALLY OF A TRADING NATURE AND THEREFORE BUSINESS EXPENDITURE L OSS OF RS.45,29,321/- CANNOT BE DENIED TO THE ASSESSEE. 20. THE LD.AR NEXT CONTENDED THAT HAD THE PROJECT BEEN COMMISSIONED AS PROPOSED, THE TOTAL COST OF THE PROJECT KEPT AS WORK-IN-PROGRESS WOULD HAVE BEEN ALLOWED AS REVENUE EXPENDITURE AGAI NST THE TOLL INCOME. THEREFORE, THE MERE FACT THAT PROJECT HAS BEEN ABANDONED OUGHT NOT TO HAVE MADE ANY DIFFERENCE TO THE NATURE OF EX PENDITURE WHICH IS ESSENTIALLY A REVENUE EXPENDITURE AND INCURRED TO A CQUIRE A TRADING BUSINESS RIGHT OF TOLL COLLECTION. TO BUTTRESS THE POSITION OF LAW ON THIS COUNT, THE LD.AR PLACED RELIANCE ON HOST OF DECISIO NS NOTED HEREUNDER:- 1. DY.CIT VS. GUJARAT NARMADA VALLEY FERTILIZERS CO.LTD. (2015) 57 TAXMANN.COM 250 (GUJ.) 2. CIT VS. GUJARAT MINERAL DEVELOPMENT CORPORATION LTD. (2009)314 ITR 322 (GUJ.) 3. BINANI CEMENT LTD. VS. CIT (2015) 60 TAXMANN.COM 384 (CAL.) 4. CIT VS. IDEA CELLULAR LTD. 76 TAXMANN.COM 77 (BOM.) ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 27 - 21. THE LD.DR, ON THE OTHER HAND, RELIED UPON THE O RDER OF THE CIT(A) AND SUBMITTED THAT THE LOSS ON THE ABANDONED PROJEC T HAS BEEN RIGHTLY BEEN DISALLOWED AS CAPITAL EXPENDITURE. WITHOUT PR EJUDICE TO THE AFORESAID CONTENTION, THE LD.DR FURTHER POINTED OUT THAT IN ANY EVENT, THE AFORESAID LOSS GOT CRYSTALLIZED IN THE SUBSEQUENT F INANCIAL YEAR OWING TO THE CLOSURE OF THE PROJECT. THUS, THE IMPUGNED LOS S CANNOT BE CONSIDERED WITH REFERENCE TO THE ASSESSMENT YEAR IN QUESTION. 22. WE HAVE CAREFULLY CONSIDERED THE RIVAL SUBMISSI ONS. THE SHORT CONTROVERSY IN QUESTION IS WHETHER THE LOSS INCURRE D BY THE ASSESSEE AS A RESULT OF RELINQUISHMENT OF PROJECT IS IN THE NATUR E OF TRADING LOSS AND ALLOWABLE AS A BUSINESS EXPENDITURE OR OTHERWISE. IN THE BACKGROUND OF THE FACTS, ELABORATELY NOTED ABOVE, WE FIND THAT TH ERE IS A DIRECT AND PROXIMATE NEXUS BETWEEN THE BUSINESS OPERATION AND THE LOSS WHICH IS INCIDENTAL TO IT. THE JHALAWAR-INDORE ROAD PROJECT COULD NOT BE COMPLETED DUE TO COMMERCIAL IMPEDIMENTS AS POINTED OUT ON BEHALF OF THE ASSESSEE AND THEREFORE THE PROJECT WAS ABANDONE D. THE EXPENDITURE INCURRED ON THE EFFORTS MADE IN THE PROJECT WAS CLA IMED AS BUSINESS EXPENDITURE. THE KEY FACTS RELEVANT FOR DETERMINAT ION OF THE ISSUE ARE THAT BY VIRTUE OF THE AGREEMENT WITH THE STATE, THE ASSESSEE WAS NOT VESTED WITH THE OWNERSHIP RIGHT OF THE ASSET IN ANY MANNER . THE ASSESSEE WAS ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 28 - ENTITLED TO USE THE ROAD FOR COLLECTION OF TOLL CHA RGES TO RECOUP THE EXPENDITURE INCURRED. THUS, THE EXPENDITURE INCURR ED WAS INHERENTLY TRADING IN NATURE WHICH WAS PERMISSIBLE FOR SET OFF AS BUSINESS EXPENDITURE AGAINST THE TRADING INCOME ON MATCHING PRINCIPLE BASIS. AS NOTED, THE PROJECT COULD NOT BE COMPLETED AND HENCE THE LOSS INCURRED THUS FAR WAS SADDLED ON THE ASSESSEE. UNDER THE CI RCUMSTANCES, THE LOSS INCURRED FOR IMPROVEMENT OF ROAD PROJECT WHICH WAS ULTIMATELY ABANDONED DUE TO CERTAIN COMMERCIAL REASONS ARE CLE ARLY INCURRED FOR THE PURPOSES OF ASSESSEES BUSINESS ENGAGED IN THE SIM ILAR LINE OF ACTIVITY. THE ROAD PROJECT WAS MEANT FOR THE PURPOSES OF GEN ERATING REVENUE BY COLLECTING TOLL CHARGES. THE TOLL CHARGES WERE TO BE COLLECTED BY UTILIZING THE ROAD PROJECT FOR CERTAIN SPECIFIC PERIOD. THUS , THE POTENTIAL COLLECTION OF TOLL IS NOT AN INDEPENDENT SOURCE OF INCOME. TH E ASSESSEE HAS INCURRED EXPENDITURE AND UNDERTOOK THE RISK WHICH IS INHEREN T IN CARRYING ON SUCH BUSINESS. THE LOSS THUS INCURRED IS CLEARLY INCIDE NTAL TO THE NATURE OF ASSESSEES BUSINESS AND IS ALLOWABLE WITHOUT ANY DO UBT. THE ARGUMENT SET UP BY THE CIT(A) THAT THE AFORESAID ROAD PROJEC T IS A NEW LINE OF ACTIVITY AND THUS A NEW BUSINESS IN DISTINCTION WIT H THE EXISTING BUSINESS IS SINGULARLY FALLACIOUS. ADMITTEDLY, THE ASSESSEE IS SYSTEMATICALLY ENGAGED IN THE ROAD CONSTRUCTION/IMPROVEMENT ACTIVI TY. THE IMPUGNED PROJECT GIVING RISE TO THE LOSS IS MERELY ANOTHER A CTIVITY OF SIMILAR NATURE. EACH ROAD PROJECT BY ITSELF CANNOT BE SEEN AS A SEP ARATE BUSINESS PER SE AS CLAIMED BY THE REVENUE. THEREFORE, WE DO NOT FIND ANY SUBSTANCE IN ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 29 - SUCH LINE OF ARGUMENT RAISED ON BEHALF OF THE REVEN UE. THUS, IN OUR FIRM OPINION, THE LOSS INCURRED ON CLOSURE OF JHALAWAR-I NDORE ROAD PROJECT BEARS THE CHARACTER OF REVENUE EXPENDITURE. 23. HOWEVER, WE FIND SOME FORCE IN THE ALTERNATIVE ARGUMENT ON BEHALF OF REVENUE THAT THE PROJECT WAS TERMINATED IN SEPTE MBER-2004 AFTER THE CLOSURE OF THE FINANCIAL YEAR. THEREFORE, THE ACCU MULATED EXPENDITURE CLAIMED TO BE THE BUSINESS LOSS IS NOT ATTRIBUTABLE TO THE FINANCIAL YEAR 2003-04 RELEVANT TO AY 2004-05 IN APPEAL. WE SUBS CRIBE TO THE ALTERNATIVE PLEA RAISED ON BEHALF OF THE REVENUE T HAT THE ACCUMULATED LOSS ON THE AFORESAID PROJECT SHOULD BE CONSIDERED TO HAVE BEEN CRYSTALLIZED IN THE YEAR IN WHICH THE PROJECT WAS U LTIMATELY ABANDONED. THEREFORE, IN OUR VIEW, THE RELIEF TOWARDS IMPUGNED CLAIM OF REVENUE EXPENDITURE IS ATTRIBUTABLE TO THE SUBSEQUENT AY 20 05-06 WHERE IT IS CRYSTALLIZED. TO THIS LIMITED EXTENT, THE PLEA OF THE REVENUE IS FOUND TENABLE. CONSEQUENTLY, THE LOSS CLAIMED ON THE AFO RESAID PROJECT CANNOT BE CLAIMED AS ALLOWABLE BUSINESS EXPENDITURE RELEVA NT TO THE AY 2004-05 IN APPEAL. HOWEVER, THE ASSESSEE SHALL BE AT LIBER TY TO CLAIM THE AFORESAID LOSS HELD TO BE BUSINESS EXPENDITURE IN THE AY 2005 -06 IN ACCORDANCE WITH LAW. 24. SUBJECT TO AFORESAID OBSERVATIONS, THIS ISSUE RAISED BY THE ASSESSEE IS DISPOSED OF AS DISMISSED. ITA NOS. 2485 & 2486/AHD/2010 NILA BAUART ENGINEERING LTD. VS. ACIT ASST.YEARS 2003-04 & 2004-05 - 30 - 25. AS A RESULT, ASSESSEES APPEAL IN ITA NO.2486/ AHD/2010 FOR AY 2004-05 IS PARTLY ALLOWED. 26. IN THE COMBINED RESULT, BOTH THE APPEALS OF THE ASSESSEE ARE PARTLY ALLOWED. THIS ORDER PRONOUNCED IN OPEN COURT ON 13 / 04 /2017 SD/- SD/- ( ) ( ) ( MAHAVIR PRASAD ) ( PRADIP KUMAR KEDIA ) JUDICIAL MEMBER ACCOUNTANT MEMBER AHMEDABAD; DATED 13 / 04 /2017 4..*,.*../ T.C. NAIR, SR. PS !'#$%$' / COPY OF THE ORDER FORWARDED TO : 1. #& / THE APPELLANT 2. '#& / THE RESPONDENT. 3. 567, 8, / CONCERNED CIT 4. 8, ( ) / THE CIT(A)-III, BARODA 5. 9:;,*67 , 67 0 , 5 / DR, ITAT, AHMEDABAD 6. ;<+ / GUARD FILE. / BY ORDER, '9,, //TRUE COPY// / ( DY./ASSTT.REGISTRAR) , / ITAT, AHMEDABAD