DCIT, Circle-4(1), Bhubaneswar V. M/s. ARSS Triveni JV, Bhubaneswar

ITA 271/CTK/2016

• Counselvise Citation: [2017] 127 COUNSELVISE.COM (IT) 5352 (ITAT-CUTTACK)
• Duration Of Justice: 1 year(s) 3 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 24-10-2017
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: DB
• Assessment Year: 2010-2011
• Appeal Filed On: 14-07-2016
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: D K PRADHAN
• Assessee Lawyers: P S PANDA
• Keywords: Retrospective amendment

Judgement Text

1 IN THE INCOME TAX APPELLATE TRIBUNAL, CUTTACK BENCH, CUTTACK BEFORE S/SHRI N.S SAINI, ACCOUNTANT MEMBER AND PAVAN KUMAR GADALE, JUDICIAL MEMBER ITA NO. 271 /CTK/2016 ASSESSMENT YEAR : 2010 - 2011 DCIT, CIRCLE 4(1), BHUBANESWAR VS. M/S. ARSS TRIVENI JV, PLOT NO.38, SECTOR - A, ZONE - D, MANCHESWAR INDUSTRIAL EST A TE, BHUBANESWAR. PAN/GIR NO. AABAA 1081 H (APPELLANT ) .. ( RESPONDENT ) ITA NOS. 2 7 2 & 273/CTK/2016 ASSESSMENT YEARS : 2010 - 2011 & 2011 - 12 DCIT, CIRCLE 4(1), BHUBANESWAR VS. M/S. ATLANTA ARSS JV, PLOT NO.38, SECTOR - A, ZONE - D, MANCHESWAR INDUSTRIAL EST A TE, BHUBANESWAR. PAN/GIR NO. AABAA 0048 E (APPELLANT ) .. ( RESPONDENT ) ITA NOS. 276 & 277/CTK/2016 ASSESSMENT YEARS : 2010 - 2011 & 2011 - 12 DCIT, CIRCLE 4(1), BHUBANESWAR VS. M/S. PATEL ARSS JV, PLOT NO.38, SECTOR - A, ZONE - D, MANCHESWAR INDUSTRIAL ESTATE, BHUBANESWAR. PAN/GIR NO.AAAAP 8266 E (APPELLANT ) .. ( RESPONDENT ) ASSESSEE BY : SHRI P.S.PANDA, AR REV ENUE BY : SHRI D.K.PRADHAN DR DATE OF HEARING : 23 /10 / 2017 DATE OF PRONOUNCEMENT : 24 /10 / 2017 2 O R D E R PER N.S.SAINI, AM THESE ARE THE APPEALS FILED BY THE DIFFERENT THREE ASSESSEE S AGAINST THE SEPARATE ORDER S OF THE CIT(A) - 2, BHUBANESWAR FOR THE ASSESSMENT YEAR 2010 - 2011 AND 2011 - 12, RESPECTIVELY 2. THE COMMON ISSUE INVOLVED IN ALL THESE APPEALS EXCEPT VARIANCE IN FIGURES IS THAT THE CIT(A) ERRED IN DEL ETING THE DISALLOWANCE MADE BY THE ASSESSING OFFICER U/S.80IA(4) OF THE ACT. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEES ARE ENGAGED IN THE BUSINESS OF WORK S CONTRACT. THE ASSESSING OFFICER OBSERVED THAT AS PER THE PROVIS IONS OF SECTION 80IA(4) OF THE A CT, IF AN UNDERTAKING OR ENTERPRISE IS INVOLVED IN THE BUSINESS OF WORKS CONTRACT AWARDED BY ANY PERSON INCLUDING CENTRAL AND STATE GOVERNMENT, THEN IT WILL NOT BE ELIGIBLE FOR DEDUCTION U/S. 80IA(4) OF THE ACT. THE ASSESSING OFFICER FOUND THAT T HE ASSESSEES ARE EXECUTING WORKS CONTRACT ON CONTRACTUAL BASIS AND, ACCORDINGLY, DISALLOWED DEDUCTION CLAIMED BY THE ASSESSEES U/S. 80IA(4) OF THE ACT . 4. ON APPEAL, THE CIT(A) DELETED THE DISALLOWANCE MADE BY THE ASSESSING OFFICER FOLLOWING THE DECISION OF THIS BENCH OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2009 - 2010 IN ITA NO.121 TO 126/CTK/2013 DATED 11.1.2016. 5 . AT THE OUTSET, BOTH THE PARTIES AGREED THAT THE ISSUE INVOLVED IN ALL THESE APPEALS IS SQUARELY COVERED BY THE CONSOLI DATED ORDER OF THIS BENCH 3 OF THE TRIBUNAL IN ASSESSEESS OWN CASE FOR THE ASSESSMENT YEAR 2009 - 2010 IN ITA NOS.121 TO 126/CTK/2013 ORDER DATED 11.1.2016, WHEREIN, IT HAS BEEN OBSERVED AS UNDER: 6. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT THE ASSESSEE IS ENGAGED IN THE BUSINESS OF DEVELOPMENT OF INFRASTRUCTURE ACTIVITIES OF ROADWAYS PROJECT OF STATE GOVERNMENT. THE ASSESSEE HAD CLAIMED DEDUCTIONS U/S.80IA AFTER SATISFYING ALL THE CONDITIONS AS MENTIONED IN SUB - SECTIO N (4) OF THE ACT. WHILE PASSING THE ORDER U/S.143(3) OF THE ACT, THE AO DISALLOWED THE DEDUCTION CLAIMED U/S.80IA(4) BASED ON THE EXPLANATION INSERTED BELOW SECTION 80IA(13), BY THE FINANCE ACT, 2009 WITH RETROSPECTIVE EFFECT FROM 01.04.2000. THE MAIN PROV ISION ENTITLES AN ASSESSEE FOR DEDUCTION IF THE ASSESSEE IS A COMPANY REGISTERED IN INDIA OR BY A CONSORTIUM OF SUCH COMPANIES AND ENTERS INTO AN AGREEMENT WITH THE CENTRAL OR STATE GOVT AND UNDERTAKES TO CARRY ON THE BUSINESS OF (I) DEVELOPING OR (II) OPE RATING AND MAINTAINING OR (III) DEVELOPING, OPERATING AND MAINTAINING ANEW INFRASTRUCTURE FACILITY AND THE CONSTRUCTION OF ROADS, BRIDGES, HIGHWAY PROJECT ETC. AS PER EXPLANATION SECTION 80IA(4) OF THE ACT INFRASTRUCTURE FACILITY INCLUDES A ROAD INCLU D ING TOLL AND ROAD, A BRIDGE OR A RAIL SYSTEM. 7. DURING THE COURSE OF SCRUTINY ASSESSMENT, THE AO DISALLOWED SESSEE'S CLAIM ON THE PLEA THAT ASSESSEE HAS EXECUTED THE WORKS CONTRACT, THEREFORE, NOT ELIGIB LE FOR DEDUCTION U/S.80IA, EVEN IF THE WORK ITSELF IN THE NATURE OF INFRASTRUCTURE DEVELOPMENT. THE AO FURTHER OBSERVED THAT FOR GETTING THE BENEFIT OF THIS SECTION, THE PERSON SHOULD EXECUTE THE WORKS HIMSELF DEVOTING HIS OWN RESOURCES AND BEARING ALL THE BUSINESS RISKS INVOLVED RATHER THAN DO THE WORK AT SOMEBODY'S BEHALF MERELY IN A CONTRACTUAL BASIS. AS PER THE AO SINCE THE ASSESSEE IS EXECUTING THE WORK FOR A PRINCIPAL ON A CONTRACTUAL BASIS RATHER THAN WORKING ON ITS OWN, THEREFORE, THE ASSESSEE'S CLAIM FOR DEDUCTION U/S.80IA OF THE ACT, CANNOT BE ALLOWED. BY THE IMPUGNED ORDER THE CIT(A) CONFIRMED THE ACTION OF THE AO, AGAINST WHICH THE ASSESSEE IS IN FURTHER APPEAL BEFORE US. 8. WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AN D ALSO DELIBERATED ON THE JUDICIAL PRONOUNCEMENTS REFERRED BY LOWER AUTHORITIES IN THEIR RESPECTIVE ORDERS AS WELL AS CITED BY ID. AR AND DR IN THE CONTEXT OF FACTUAL MATRIX OF THE CASE. FROM THE RECORD - WE FOUND THAT THE ASSESSEE HAS UNDERTAKEN INFRASTRUC TURE PROJECT. AS PER THE TERMS AND CONDITIONS OF THE INFRASTRUCTURE PROJECT SO AWARDED, WE FOUND THAT ASSESSEE HAS WORKED AS A DEVELOPER OF INFRASTRUCTURE PROJECT 4 AND NOT MERELY AS A CONTRACTOR. AS PER THE DETAILED SCOPE OF THE WORK UNDERTAKEN BY THE ASSES SEE, IT CAN BE SAFELY CONCLUDED THAT ON THE FACTS AND CIRCUMSTANCES OF THE CASE, THE ASSESSEE HAS WORKED AS A DEVELOPER AND NOT MERELY AS A CONTRACTOR. ACCORDINGLY, WE DO NOT FIND ANY MERIT IN THE ACTION OF THE AO FOR DECLINING THE CLAIM OF DEDUCTION U/S.8 0IA(4). THE ASSESSEE HAS NOT ADVERSELY HIT BY THE E XPLANATION BELOW SECTION 80IA INSERTED BY THE FINANCE ACT, 2009 WITH RE TROSPECTIVE EFFECT FROM 1 - 4 - 2009, INSOFAR AS THE ASSESSEE IS NOT WORKING MERELY AS A CONTRACTOR BUT AS A DEVELOPER. E:VEN AS PER EXPLANATION TO SECTION 80IA(4), INFRASTRUCTURE FACILITY INCLUDES ROADS INCLUDING TOLL ROAD, BRIDGE OR RAIL SYSTEM. WE FOUND THAT ASSESSEE HAS FULFILLED ALL THE CONDITIONS FOR ENTITLEMENT OF DEDUCTION, EVEN VIEWING FROM THE POINT OF VIEW OF E XPLANATION SO INSERTED BY THE FINANCE ACT, 2009. THIS ISSUE IS ALSO COVERED BY THE DECISION OF HON'BLE BOMBAY HIGH COURT IN THE CASE OF ABG HEAVY INDUSTRIES LTD., 322 ITR 323, WHEREIN THE HON'BLE BOMBAY HIGH COURT HELD AS UNDER : - 'RIGHT FROM 1996, THE CB DT WAS SEIZED WITH THE QUESTION, AS TO WHETHER INFRASTRUCTURE FACILITIES DEVELOPED UNDER A BOLT PROJECT WOULD QUALIFY FOR EXEMPTION UNDER SECTION 80 - IA. THE FIRST CIRCULAR IN THAT REGARD WAS ISSUED ON 23 - 1 - 1996, WHICH SPECIFICALLY DEALT WITH WHETHER SECTIO N 80 - IA(4A) WOULD BE APPLICABLE TO A BOLT SCHEME INVOLVING AN INFRASTRUCTURE FACILITY FOR THE INDIAN RAILWAYS. THE CIRCULAR CLARIFIED THAT AN INFRASTRUCTURE FACILITY SET UP ON A BOLT BASIS FOR RAILWAYS WOULD QUALIFY FOR DEDUCTION. THAT WAS FOLLOWED BY THE TWO CIRCULARS OF THE CBDT DATED 23 - 6 - 2000 AND 16 - 12 - 2005. THE FIRST OF THOSE CIRCULARS RECOGNIZED THAT STRUCTURES FOR STORAGE, LOADING AND UNLOADING, ETC., AT A PORT BUILT UNDER A BOT AND BOLT SCHEME WOULD QUALIFY FOR DEDUCTION. NOW THERE IS NO QUESTION OF AN ENTERPRISE OPERATING A FACILITY IN A BOLT SCHEME BECAUSE SUCH A SCHEME CONTEMPLATES THAT THE ENTERPRISE WOULD BUILD, OWN, LEASE AND EVENTUALLY TRANSFER THE FACILITY TO THE AUTHORITY FOR WHOM THE FACILITY IS CONSTRUCTED. THE SUBSEQUENT CIRCULAR DATED 16 - 12 - 2005 ONCE AGAIN CLARIFIED THE POSITION OF THE CBDT THAT STRUCTURES, WHICH HAVE BEEN BUILT, INTER ALIA, UNDER A BOLT SCHEME UP TO THE ASSESSMENT YEAR 2001 - 02, WOULD QUALIFY FOR A DEDUCTION UNDER SECTION 80 - IA. IN FACT, FROM THE ASSESSMENT YEAR 2002 - 03, THE PROCESS WAS FURTHER LIBERALIZED, CONSISTENT WITH THE BASIC PURPOSE AND OBJECT OF GRANTING THE CONCESSION. IN THIS BACKGROUND, PARTICULARLY IN THE CONTEXT OF THE OBJECTIVE SOUGHT TO BE ACHIEVED AND IN THE ABSENCE OF ANY CHALLENGE ON THE PART OF THE REVE NUE ON THE APPLICABILITY OF THE BINDING CIRCULARS OF THE CBDT, THE CONDITION AS REGARDS DEVELOPMENT, OPERATION AND MAINTENANCE OF AN INFRASTRUCTURE FACILITY WAS 5 CONTEMPORANEOUSLY CONSTRUED BY THE AUTHORITIES AT ALL MATERIAL TIMES, TO COVER WITHIN ITS PURVI EW THE DEVELOPMENT OF AN INFRASTRUCTURE FACILITY UNDER A SCHEME BY WHICH AN ENTERPRISE WOULD BUILD, OWN, LEASE AND EVENTUALLY TRANSFER THE FACILITY. THIS WAS PERHAPS A PRACTICAL REALISATION OF THE FACT THAT A DEVELOPER MAY NOT POSSESS THE WHEREWITHAL, EXPE RTISE OR RESOURCES TO OPERATE A FACILITY, ONCE CONSTRUCTED. THE PARLIAMENT EVENTUALLY STEPPED IN TO CLARIFY THAT IT WAS NOT INVARIABLY NECESSARY FOR A DEVELOPER TO OPERATE AND MAINTAIN THE FACILITY. THE PARLIAMENT WHEN IT AMENDED THE LAW WAS OBVIOUSLY AWAR E OF THE ADMINISTRATIVE PRACTICE RESULTING IN THE CIRCULARS OF THE CBDT. THE FACT THAT IN SUCH A SCHEME, AN ENTERPRISE WOULD NOT OPERATE THE FACILITY ITSELF WAS NOT REGARDED AS BEING A STATUTORY BAR TO THE ENTITLEMENT TO A DEDUCTION UNDER SECTION 80 - IA. TH E COURT COULD NOT BE UNMINDFUL IN THE INSTANT CASE OF THE UNDERLYING OBJECTS AND REASONS FOR A GRANT OF DEDUCTION TO AN ENTERPRISE ENGAGED IN THE DEVELOPMENT OF AN INFRASTRUCTURE FACILITY. THE PROVISION WAS INTENDED TO GIVE AN INCENTIVE TO INVESTMENT FOR I NFRASTRUCTURAL GROWTH IN THE COUNTRY. IN BAJAJ TEMPO V. CIT [19921 196 ITR 188/52 TAXMAN 480, THE SUPREME COURT EMPHASIZED THAT A PROVISION IN A TAXING STATUTE GRANTING INCENTIVES FOR PROMOTING GROWTH AND DEVELOPMENT SHOULD BE CONSTRUED LIBERALLY. IN THE INSTANT CASE, THE ADMINISTRATIVE CIRCULARS ISSUED BY THE CBDT PROCEEDED ON THAT BASIS BY ADOPTI NG A LIBERAL VIEW OF THE SCOPE AND AMBIT OF THE PROVISIONS OF SECTION 80 - IA. THE TRIBUNAL HAVING ONLY FOLLOWED THESE PROVISIONS, THERE WAS NO JUST REASON TO INTERFERE IN THE COURT'S APPELLATE JURISDICTION. [PARA 21] AS REGARDS THE REVENUE'S CONTENTION THAT THE ENTERPRISES MUST START OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY ON OR AFTER 1 - 4 - 1995, THE TRIBUNAL HAD ENTERED A FINDING THAT THE ASSESSEE WAS OPERATING THE FACILITY. THAT THE ASSESSEE WAS MAINTAINING THE FACILITY WAS NOT IN DISPUTE. THE FACILITY WAS COMMENCED AFTER 1 - 4 - 1995. THEREFORE, THE REQUIREMENT WAS, IN FACT, MET. MOREOVER, AS A MATTER OF LAW, WHAT THE CONDITION ESSENTIALLY MEANS IS THAT THE INFRASTRUCTURE FACILITY SHOULD HAVE BEEN OPERATIONAL AFTER 1 - 4 - 1995. AFTER SECTION 80 - IA W AS AMENDED BY THE FINANCE ACT, 2001, THE SECTION APPLIES TO AN ENTERPRISE CARRYING ON THE BUSINESS OF : (I ) DEVELOPING OR. (LI ) OPERATING AND MAINTAINING OR (LII ) DEVELOPING, OPERATING AND MAINTAINING ANY INFRASTRUCTURE FACILITY WHICH FULFILS CERTAIN CONDI T IONS. THOSE CONDITIONS ARE . (I ) OWNERSHIP OF THE ENTERPRISE BY A COMPANY REGISTERED IN INDIA OR BY A CONSORTIUM: ( II) AN AGREEMENT WITH THE CENTRAL OR THE STATE GOVERNMENT, LOCAL AUTHORITY OR STATUTORY BODY; AND (LII ) THE STARTING OF OPERATION AND MAINTENANCE OF THE 6 INFRASTRUCTURE FACILITY ON OR AFTER 1 - 4 - 1995. THE REQUIREMENT THAT THE OPERATION AND MAINTENANCE OF THE INFRASTRUCTURE FACILITY SHOULD COMMENCE AFTER 1 - 4 - 1995 HAS TO BE HARMONIOUSLY CONSTRUED WITH THE MAIN PROVISION UNDER WHICH A DEDUCTION IS AVAILABLE TO AN ASSESSEE WHO DEVELOPS OR OPERATES AND MAINTAINS OR DEVELOPS, OPERATES AND MAINTAINS AN INFRASTRUCTURE FACILITY. UNLESS BOTH THE PROVISIONS ARE HARMONIOUSLY CONSTRUED, THE OBJECT AND INTENT UNDERLYING TH E AMENDMENT TO THE PROVISION BY THE FINANCE ACT, 2001 WOULD BE DEFEATED. A HARMONIOUS READING OF THE PROVISION IN ITS ENTIRETY WOULD LEAD TO THE CONCLUSION THAT THE DEDUCTION IS AVAILABLE TO AN ENTERPRISE WHICH (1 ) DEVELOPS OR ( \ \ ) OPERATES AND MAINTAINS O R (III) DEVELOPS, MAINTAINS AND OPERATES THAT INFRASTRUCTURE FACILITY. HOWEVER, THE COMMENCEMENT OF THE OPERATION AND MAINTENANCE OF THE INFRASTRUCTURE FACILITY SHOULD BE AFTER 1 - 4 - 1995. IN THE INSTANT CASE, THE ASSESSEE CLEARLY FULFILLED THAT CONDITION. [ PARA 22] THE SUBSEQUENT AMENDMENT TO SECTION 80 - IA(4A) TO CLARIFY THAT THE PROVISION WOULD APPLY TO AN ENTERPRISE ENGAGED IN ( \ ) DEVELOPING OR ( \ \ ) OPERATING AND MAINTAINING OR ( \ L \ ) DEVELOPING, OPERATING AND MAINTAINING AN INFRASTRUCTURE FACILITY WAS REF LECTIVE OF THE POSITION WHICH WAS ALWAYS CONSTRUED TO HOLD - THE FIELD. THE AMENDMENT MADE BY THE PARLIAMENT TO SECTION 80 - IA(4) SET THE MATTER BEYOND ANY CONTROVERSY BY STIPULATING THAT THE THREE CONDITIONS FOR DEVELOPMENT, OPERATION AND MAINTENANCE WERE N OT INTENDED TO BE CUMULATIVE IN NATURE. [PARA 23] THEREFORE, THE TRIBUNAL WAS JUSTIFIED IN HOLDING THAT THE ASSESSEE HAD CARRIED ON THE BUSINESS OF DEVELOPING, MAINTAINING AND OPERATING AN INFRASTRUCTURAL FACILITY SO AS TO ENTITLE IT TO A DEDUCTION UNDER S ECTION 80 - 1 A. [PARA 23] IN THE INSTANT CASE, THE WORK OF THE ASSESSEE IS IN THE NATURE OF IN FRASTRUCTURE DEVELOPMENT. FROM THE ABOVE ORDER OF HON'BLE HIGH COURT, LOOKING TO THE NATURE OF WORK OF THE ASSESSEE, WE FOUND THAT THE ASSESSEE IS ENTITLED FOR DEDUCTION U/S.80IA(4). ACCORDINGLY, WE DO NOT FIND ANY MERIT IN THE ACTION OF AO IN DECLINING ASSESSEE'S CLA IM OF DEDUCTION U/S.80IA(4) OF THE INCOME TAX ACT. 9. AS THE FACTS AND CIRCUMSTANCES OF THE CASE IN ALL THE APPEALS ARE SAME, FOLLOWING THE REASONING GIVEN HEREINABOVE, WE DIRECT THE AO TO ALLOW ASSESSEES CLAIM U/S.80IA(4) OF THE ACT IN ALL THE CASES UND ER CONSIDERATION. 7 6 . WE FIND THAT THE CIT(A) FOLLOWING THE DECISION OF THE TRIBUNAL IN ASSESSEES OWN CASE FOR THE ASSESSMENT YEAR 2009 - 2010 HAS DIRECTED THE ASSESSING OFFICER TO ALLOW DEDUCTION CLAIMED U/S. 80IA(4) OF THE ACT. NO GOOD REASON COULD BE SHOWN BY THE LD D.R. TO NOT TO FOLLOW THE ORDER OF THE TRIBUNAL FOR ASSESSMENT YEAR 2009 - 2010. THEREFORE, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF THE CIT(A), WHICH IS HEREBY CONFIRMED AND GROUND OF APPEAL RAISED BY THE REVENUE IN THE ASSESSMENT YEARS UNDER CONSIDERATION FOR ALL THE THREE ASSESSEES IS DISMISSED. 7 . IN THE RESULT, ALL THE APPE ALS FILED BY THE REVENUE ARE DISMISSED. ORDER PRONOUN CED IN THE OPEN COURT ON 24 /10 /2017. SD/ - SD/ - ( PAVAN KUMAR GADALE) ( N.S SAINI) JUDICIALMEMBER A CCOUNTANT MEMBER CUTTACK; DATED 24 /10 /2017 B.K.PARIDA, SPS COPY OF THE ORDER FORWARDED TO : BY ORDER, SR.PRIVATE SECRETARY ITAT, CUTTACK 1. THE APPELLANT : DCIT, CIRCLE 4(1), BHUBANESWAR 2. THE RESPONDENTS CONCERNED. 3. THE CIT(A) - 2, BHUBANESWAR 4. PR.CIT - 2 BHUBANESWAR 5. DR, ITAT, CUTTACK 6. GUARD FILE. //TRUE COPY//