M/s. Bhooratnam Constructions Co. Pvt.Ltd., Sec'bad, Hyderabad V. DCIT, Central Circle-5, Hyderabad

ITA 271/HYD/2011

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66271 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 6 month(s) 15 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 07-09-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 23-08-2011
• Assessment Year: 2006-2007
• Appeal Filed On: 21-02-2011
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: V SRINIVAS
• Assessee Lawyers: C P RAMASWAMY
• Keywords: Search and seizure

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD BENCH A', HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SRI SAKTIJIT DEY, JUDICIAL MEMBER I.T.A. NO. 270/HYD/2011 ASSESSMENT YEAR 2005-06 I.T.A. NO. 271/HYD/2011 ASSESSMENT YEAR 2006-07 M/S. BHOORATNAM CONSTRUCTION CO. PVT. LTD., SECUNDERABAD PAN: AACCB2077M VS. DY. CIT CENTRAL CIRCLE-5 HYDERABAD APPELLANT RESPONDENT APPELLANT BY: SRI C.P. RAMASWAMY RESPONDENT BY: SRI V. SRINIVAS DATE OF HEARING: 27.08.2012 DATE OF PRONOUNCEMENT: 07.09.2012 O R D E R PER CHANDRA POOJARI, AM: THESE TWO APPEALS BY THE ASSESSEE ARE DIRECTED AGA INST THE DIFFERENT ORDER OF THE CIT(A)-VII, HYDERABAD DATED 6.12.2010 FOR ASSESSMENT YEARS 2005-06 AND 2006-07. 2. THE ISSUE BEFORE IS WITH REGARD TO ALLOWABILITY OF DEDUCTION U/S. 80IA(4) OF INCOME-TAX ACT, 1961. BR IEF FACTS OF THE ISSUE ARE THAT A SEARCH AND SEIZURE OPERATION W AS CONDUCTED U/S. 132 OF THE I.T. ACT, 1961 IN GROUP CASES OF M/ S. BHOORATNAM CONSTRUCTION CO. PVT. LTD. ON 30.8.2007. CONSEQUEN T TO THE SEARCH OPERATION, THE ASSESSEE'S CASE WAS NOTIFIED WITH CENTRAL CIRCLE-5, HYDERABAD. THE ASSESSING OFFICER HAS COM PLETED THE ASSESSMENT PROCEEDINGS. BEFORE THE CIT(A), THE AR OF THE ASSESSEE COMPANY SUBMITTED THAT THE COMPANY IS DEVE LOPING VARIOUS INFRASTRUCTURAL FACILITY PROJECTS ON CONTRA CT BASIS AND THE I.T.A. NOS. 270 & 271/HYD/2011 M/S. BHOORATNAM CONSTRUCTION CO. PVT. LTD. ================================ 2 AGREEMENTS OF THE ASSESSEE COMPANY WITH REGARD TO T HE INFRASTRUCTURAL PROJECTS ARE MAINLY WITH CENTRAL GO VERNMENT, STATE GOVERNMENT, STATUTORY BODIES OR LOCAL AUTHORI TIES. THE ASSESSEE HAS STARTED THAT DEVELOPMENT OF PROJECTS A FTER 1.4.1995. THEREFORE, IT IS THE SUBMISSION OF THE A R THAT SINCE THE ASSESSEE HAD TAKEN UP THE INFRASTRUCTURE FACILI TY PROJECTS ON CONTRACT BASIS, IT HAD CLAIMED DEDUCTION U/S. 80IA OF THE ACT WHICH HAS BEEN DISALLOWED BY THE ASSESSING OFFICER ON THE GROUND THAT THE ASSESSEE HAD TAKEN UP ONLY WORKS CO NTRACTS TOWARDS WATER PIPELINING. THE ASSESSING OFFICER HA S NOT APPRECIATED THE FACT THAT THE ASSESSEE IS INVOLVED IN EXECUTING THE INFRASTRUCTURAL PROJECTS. THEREFORE, THERE SHO ULD NOT HAVE BEEN A DENIAL OF DEDUCTION U/S. 80IA OF THE ACT. 3. THE LEARNED AR SUBMITTED THAT THIS ISSUE IS COVERED BY VARIOUS ORDERS OF THE TRIBUNAL. HE DREW OUR ATTENT ION TO THE ORDER OF THE TRIBUNAL IN THE CASE OF M/S. KOYA & CO . CONSTRUCTION (P) LTD. V. ACIT, 51 SOT 203 (HYD) (UR O) WHEREIN THE TRIBUNAL HELD AS FOLLOWS: 24. WE FIND THAT THE PROVISIONS OF SECTION 80IA (4) OF THE ACT WHEN INTRODUCED AFRESH BY THE FINANCE ACT, 1999 , THE PROVISIONS UNDER SECTION 80IA (4A) OF THE ACT WERE DELETED FROM THE ACT. THE DEDUCTION AVAILABLE FOR ANY ENTERPRISE EARLIER UNDER SECTION 80IA (4A) ARE ALSO MADE AVAILABLE UND ER SECTION 80IA (4) ITSELF. FURTHER, THE VERY FACT THAT THE LE GISLATURE MENTIONED THE WORDS (I) DEVELOPING OR (II) OPERA TING AND MAINTAINING OR (III) DEVELOPING, OPERATING AND MA INTAINING CLEARLY INDICATES THAT ANY ENTERPRISE WHICH CARRIED ON ANY OF THESE THREE ACTIVITIES WOULD BECOME ELIGIBLE FOR DE DUCTION. THEREFORE, THERE IS NO AMBIGUITY IN THE INCOME-TAX ACT. WE FIND THAT WHERE AN ASSESSEE INCURRED EXPENDITURE FOR PUR CHASE OF MATERIALS HIMSELF AND EXECUTES THE DEVELOPMENT WORK I.E., CARRIES OUT THE CIVIL CONSTRUCTION WORK, HE WILL BE ELIGIBLE FOR TAX BENEFIT UNDER SECTION 80 IA OF THE ACT. IN CONT RAST TO THIS, A ASSESSEE, WHO ENTERS INTO A CONTRACT WITH ANOTHER P ERSON INCLUDING GOVERNMENT OR AN UNDERTAKING OR ENTERPRIS E REFERRED TO IN SECTION 80 IA OF THE ACT, FOR EXECUTING WORKS CONTRACT, WILL NOT BE ELIGIBLE FOR THE TAX BENEFIT UNDER SECTION 8 0 IA OF THE ACT. WE FIND THAT THE WORD OWNED IN SUB-CLAUSE (A) OF CLAUSE (1) I.T.A. NOS. 270 & 271/HYD/2011 M/S. BHOORATNAM CONSTRUCTION CO. PVT. LTD. ================================ 3 OF SUB SECTION (4) OF SECTION 80IA OF THE ACT REFER TO THE ENTERPRISE. BY READING OF THE SECTION, IT IS CLEARS THAT THE ENTERPRISES CARRYING ON DEVELOPMENT OF INFRASTRUCTU RE DEVELOPMENT SHOULD BE OWNED BY THE COMPANY AND NOT THAT THE INFRASTRUCTURE FACILITY SHOULD BE OWNED BY A COMPAN Y. THE PROVISIONS ARE MADE APPLICABLE TO THE PERSON TO WHO M SUCH ENTERPRISE BELONGS TO IS EXPLAINED IN SUB-CLAUSE (A ). THEREFORE, THE WORD OWNERSHIP IS ATTRIBUTABLE ONLY TO THE EN TERPRISE CARRYING ON THE BUSINESS WHICH WOULD MEAN THAT ONLY COMPANIES ARE ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA (4) AND NOT ANY OTHER PERSON LIKE INDIVIDUAL, HUF, FIRM ETC. 25. WE ALSO FIND THAT ACCORDING TO SUB-CLAUSE (A), CLAUSE (I) OF SUB SECTION (4) OF SECTION 80-IA THE WORD IT DENO TES THE ENTERPRISE CARRYING ON THE BUSINESS. THE WORD IT CANNOT BE RELATED TO THE INFRASTRUCTURE FACILITY, PARTICULARL Y IN VIEW OF THE FACT THAT INFRASTRUCTURE FACILITY INCLUDES RAIL SYS TEM, HIGHWAY PROJECT, WATER TREATMENT SYSTEM, IRRIGATION PROJECT , A PORT, AN AIRPORT OR AN INLAND PORT WHICH CANNOT BE OWNED BY ANY ONE. EVEN OTHERWISE, THE WORD IT IS USED TO DENOTE AN ENTERPRISE. THEREFORE, THERE IS NO REQUIREMENT THAT THE ASSESSE E SHOULD HAVE BEEN THE OWNER OF THE INFRASTRUCTURE FACILITY. 26. THE NEXT QUESTION IS TO BE ANSWERED IS WHETHER THE ASSESSEE IS A DEVELOPER OR MERE WORKS CONTRACTOR. THE REVENU E RELIED ON THE AMENDMENTS BROUGHT IN BY THE FINANCE ACT 2007 A ND 2009 TO MENTION THAT THE ACTIVITY UNDERTAKEN BY THE ASSE SSEE IS AKIN TO WORKS CONTRACT AND HE IS NOT ELIGIBLE FOR DEDUCT ION UNDER SECTION 80IA (4) OF THE ACT. WHETHER THE ASSESSEE I S A DEVELOPER OR WORKS CONTRACTOR IS PURELY DEPENDS ON THE NATURE OF THE WORK UNDERTAKEN BY THE ASSESSEE. EACH OF THE WORK UNDERT AKEN HAS TO BE ANALYZED AND A CONCLUSION HAS TO BE DRAWN ABOUT THE NATURE OF THE WORK UNDERTAKEN BY THE ASSESSEE. THE AGREEME NT ENTERED INTO WITH THE GOVERNMENT OR THE GOVERNMENT BODY MAY BE A MERE WORKS CONTRACT OR FOR DEVELOPMENT OF INFRASTRU CTURE. IT IS TO BE SEEN FROM THE AGREEMENTS ENTERED INTO BY THE ASSESSEE WITH THE GOVERNMENT. WE FIND THAT THE GOVERNMENT HA NDED OVER THE POSSESSION OF THE PREMISES OF PROJECTS TO THE ASSESSEE FOR THE DEVELOPMENT OF INFRASTRUCTURE FACILITY. IT IS THE ASSESSEES RESPONSIBILITY TO DO ALL ACTS TILL THE P OSSESSION OF PROPERTY IS HANDED OVER TO THE GOVERNMENT. THE FIRS T PHASE IS TO TAKE OVER THE EXISTING PREMISES OF THE PROJECTS AND THEREAFTER DEVELOPING THE SAME INTO INFRASTRUCTURE FACILITY. S ECONDLY, THE ASSESSEE SHALL FACILITATE THE PEOPLE TO USE THE AVA ILABLE EXISTING FACILITY EVEN WHILE THE PROCESS OF DEVELOPMENT IS I N PROGRESS. ANY LOSS TO THE PUBLIC CAUSED IN THE PROCESS WOULD BE THE RESPONSIBILITY OF THE ASSESSEE. THE ASSESSEE HAS TO DEVELOP THE INFRASTRUCTURE FACILITY. IN THE PROCESS, ALL THE WO RKS ARE TO BE EXECUTED BY THE ASSESSEE. IT MAY BE LAYING OF A DRA INAGE I.T.A. NOS. 270 & 271/HYD/2011 M/S. BHOORATNAM CONSTRUCTION CO. PVT. LTD. ================================ 4 SYSTEM; MAY BE CONSTRUCTION OF A PROJECT; PROVISION OF WAY FOR THE CATTLE AND BULLOCK CARTS IN THE VILLAGE; PROVIS ION FOR TRAFFIC WITHOUT ANY HINDRANCE, THE ASSESSEES DUTY IS TO DE VELOP INFRASTRUCTURE WHETHER IT INVOLVES CONSTRUCTION OF A PARTICULAR ITEM AS AGREED TO IN THE AGREEMENT OR NOT. THE AGRE EMENT IS NOT FOR A SPECIFIC WORK, IT IS FOR DEVELOPMENT OF FACIL ITY AS A WHOLE. THE ASSESSEE IS NOT ENTRUSTED WITH ANY SPECIFIC WOR K TO BE DONE BY THE ASSESSEE. THE MATERIAL REQUIRED IS TO BE BRO UGHT IN BY THE ASSESSEE BY STICKING TO THE QUALITY AND QUANTIT Y IRRESPECTIVE OF THE COST OF SUCH MATERIAL. THE GOVERNMENT DOES N OT PROVIDE ANY MATERIAL TO THE ASSESSEE. IT PROVIDES THE WORKS IN PACKAGES AND NOT AS A WORKS CONTRACT. THE ASSESSEE UTILIZES ITS FUNDS, ITS EXPERTISE, ITS EMPLOYEES AND TAKES THE RESPONSIBILI TY OF DEVELOPING THE INFRASTRUCTURE FACILITY. THE LOSSES SUFFERED EITHER BY THE GOVT. OR THE PEOPLE IN THE PROCESS OF SUCH D EVELOPMENT WOULD BE THAT OF THE ASSESSEE. THE ASSESSEE HANDS O VER THE DEVELOPED INFRASTRUCTURE FACILITY TO THE GOVERNMENT ON COMPLETION OF THE DEVELOPMENT. THEREAFTER, THE ASSE SSEE HAS TO UNDERTAKE MAINTENANCE OF THE SAID INFRASTRUCTURE FO R A PERIOD OF 12 TO 24 MONTHS. DURING THIS PERIOD, IF ANY DAMA GES ARE OCCURRED IT SHALL BE THE RESPONSIBILITY OF THE ASSE SSEE. FURTHER, DURING THIS PERIOD, THE ENTIRE INFRASTRUCTURE SHALL HAVE TO BE MAINTAINED BY THE ASSESSEE ALONE WITHOUT HINDRANCE TO THE REGULAR TRAFFIC. THEREFORE, IT IS CLEAR THAT FROM A N UN-DEVELOPED AREA, INFRASTRUCTURE IS DEVELOPED AND HANDED OVER T O THE GOVERNMENT AND AS EXPLAINED BY THE CBDT VIDE ITS CI RCULAR DATED 18-05-2010, SUCH ACTIVITY IS ELIGIBLE FOR DED UCTION UNDER SECTION 80IA (4) OF THE ACT. THIS CANNOT BE CONSIDE RED AS A MERE WORKS CONTRACT BUT HAS TO BE CONSIDERED AS A D EVELOPMENT OF INFRASTRUCTURE FACILITY. THEREFORE, THE ASSESSEE IS A DEVELOPER AND NOT A WORKS CONTRACTOR AS PRESUMED BY THE REVEN UE. THE CIRCULAR ISSUED BY THE BOARD, RELIED ON BY LEARNED COUNSEL FOR THE ASSESSEE, CLEARLY INDICATE THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA (4) OF THE ACT. THE D EPARTMENT IS NOT CORRECT IN HOLDING THAT THE ASSESSEE IS A MERE CONTRACTOR OF THE WORK AND NOT A DEVELOPER. 27. WE ALSO FIND THAT AS PER THE PROVISIONS OF THE SECTION 80IA OF THE ACT, A PERSON BEING A COMPANY HAS TO ENTER I NTO AN AGREEMENT WITH THE GOVERNMENT OR GOVERNMENT UNDERTA KINGS. SUCH AN AGREEMENT IS A CONTRACT AND FOR THE PURPOSE OF THE AGREEMENT A PERSON MAY BE CALLED AS A CONTRACTOR AS HE ENTERED INTO A CONTRACT. BUT THE WORD CONTRACTOR IS USED TO DENOTE A PERSON ENTERING INTO AN AGREEMENT FOR UNDE RTAKING THE DEVELOPMENT OF INFRASTRUCTURE FACILITY. EVERY AGREE MENT ENTERED INTO IS A CONTRACT. THE WORD CONTRACTOR IS USED T O DENOTE THE PERSON WHO ENTERS INTO SUCH CONTRACT. EVEN A PERSON WHO ENTERS INTO A CONTRACT FOR DEVELOPMENT OF INFRASTRU CTURE FACILITY IS A CONTRACTOR. THEREFORE, THE CONTRACTOR AND THE DEVELOPER I.T.A. NOS. 270 & 271/HYD/2011 M/S. BHOORATNAM CONSTRUCTION CO. PVT. LTD. ================================ 5 CANNOT BE VIEWED DIFFERENTLY. EVERY CONTRACTOR MAY NOT BE A DEVELOPER BUT EVERY DEVELOPER DEVELOPING INFRASTRUC TURE FACILITY ON BEHALF OF THE GOVERNMENT IS A CONTRACTOR. 28. WE FIND THAT THE DECISION RELIED ON BY THE LEAR NED COUNSEL FOR THE ASSESSEE IN THE CASE OF CIT VS. LAXMI CIVIL ENGINEERING WORKS [SUPRA] SQUARELY APPLICABLE TO THE ISSUE UNDE R DISPUTE WHICH IS IN FAVOUR OF THE ASSESSEE WHEREIN IT WAS H ELD THAT MERE DEVELOPMENT OF A INFRASTRUCTURE FACILITY IS AN ELIG IBLE ACTIVITY FOR CLAIMING DEDUCTION UNDER SECTION 80IA OF THE AC T AFTER CONSIDERING THE JUDGEMENT OF THE MUMBAI HIGH COURT IN THE CASE OF ABG HEAVY ENGINEERING [SUPRA]. THE CASE OF ABG IS NOT THE PURE DEVELOPER WHEREAS, IN THE PRESENT CASE , THE ASSESSEE IS THE PURE DEVELOPER. WE ALSO FIND THAT S ECTION 80IA OF THE ACT, INTENDED TO COVER THE ENTITIES CARRYING OUT DEVELOPING, OPERATING AND MAINTAINING THE INFRASTRU CTURE FACILITY KEEPING IN MIND THE PRESENT BUSINESS MODEL S AND INTEND TO GRANT THE INCENTIVES TO SUCH ENTITIES. THE CBDT, ON SEVERAL OCCASIONS, CLARIFIED THAT PURE DEVELOPER SHOULD ALS O BE ELIGIBLE TO CLAIM DEDUCTION UNDER SECTION 80IA OF THE ACT, W HICH ULTIMATELY CULMINATED INTO AMENDMENT UNDER SECTION 80IA OF THE ACT, IN THE FINANCE ACT 2001, TO GIVE EFFECT TO THE AFORESAID CIRCULARS ISSUED BY THE CBDT. WE ALSO FIND THAT, T O AVOID MISUSE OF THE AFORESAID AMENDMENT, AN EXPLANATION W AS INSERTED IN SECTION 80IA OF THE ACT, IN THE FINANCE ACT-2007 AND 2009, TO CLARIFY THAT MERE WORKS CONTRACT WOULD NOT BE ELIGIBLE FOR DEDUCTIONS UNDER SECTION 80IA OF THE A CT. BUT, CERTAINLY, THE EXPLANATION CANNOT BE READ TO DO AWA Y WITH THE ELIGIBILITY OF THE DEVELOPER; OTHERWISE, THEPARLIAM ENT WOULD HAVE SIMPLY REVERSED THE AMENDMENT MADE IN THE FINA NCE ACT, 2001. THUS, THE AFORESAID EXPLANATION WAS INSERTED, CERTAINLY, TO DENY THE TAX HOLIDAY TO THE ENTITIES WHO DOES ON LY MERE WORKS CONTACT OR SUB-CONTRACT AS DISTINCT FROM THE DEVELO PER. THIS IS CLEAR FROM THE EXPRESS INTENSION OF THE PARLIAMENT WHILE INTRODUCING THE EXPLANATION. THE EXPLANATORY MEMORA NDUM TO FINANCE ACT 2007 STATES THAT THE PURPOSE OF THE TAX BENEFIT HAS ALL ALONG BEEN TO ENCOURAGE INVESTMENT IN DEVELOPME NT OF INFRASTRUCTURE SECTOR AND NOT FOR THE PERSONS WHO M ERELY EXECUTE THE CIVIL CONSTRUCTION WORK. IT CATEGORICAL LY STATES THAT THE DEDUCTION UNDER SECTION 80IA OF THE ACT IS AVAI LABLE TO DEVELOPERS WHO UNDERTAKES ENTREPRENEURIAL AND INVES TMENT RISK AND NOT FOR THE CONTRACTORS, WHO UNDERTAKES ONLY BU SINESS RISK. WITHOUT ANY DOUBT, THE LEARNED COUNSEL FOR THE ASSE SSEE CLEARLY DEMONSTRATED BEFORE US THAT THE ASSESSEE AT PRESENT HAS UNDERTAKEN HUGE RISKS IN TERMS OF DEPLOYMENT OF TEC HNICAL PERSONNEL, PLANT AND MACHINERY, TECHNICAL KNOW-HOW, EXPERTISE AND FINANCIAL RESOURCES. I.T.A. NOS. 270 & 271/HYD/2011 M/S. BHOORATNAM CONSTRUCTION CO. PVT. LTD. ================================ 6 29. AS PER SUBMISSION OF THE ASSESSEES COUNSEL BRO ADLY THE TECHNICAL NATURE OF THE WORK UNDERTAKEN BY THE ASSE SSEE IS AS FOLLOWS: I) DESIGNING AND MANUFACTURING OF PIPES: THE ASSESSEE SPECIALLY DESIGNED AND MANUFACTURED PRE-STRESSED CONCRETE PIPES AND IT HAS BEEN DONE IN ACCORDANCE W ITH SPECIFIC REQUIREMENTS. II) DESIGN AND MANUFACTURING OF PIPE FITTINGS OR SPECIA LS III) TRANSPORTING, LAYING AND JOINING OF PIPES CONFORMIN G WITH SPECIFICATIONS. THE ACTIVITY INVOLVES EARTH WO RK EXCAVATION, TRENCH EXCAVATION, HARD ROOK BLASTING, LOWERING AND LAYING OF PIPES, FITTING OF SPECIALS, FITTING OF RUBBER RINGS AT THE JOINTS, TESTING PIPE JOINTS AND PIPELINE. IV) CONSTRUCTION OF PUMP HOUSE, PROVIDING AND FITTING O F PUMP SETS. SUPPLY AND FITTING OF SUBMERSIBLE PUMPS, CENTRIFUGAL PUMPS, TURBINE PUMPS, SUBMERSIBLE MOTOR S, MOTORS FOR TURBINES AND CENTRIFUGAL PUMP SETS, TRANSFORMER, GENERATOR, PANEL BOARDS ETC. V) DESIGN AND CONSTRUCTION OF RAW WATER PUMPING STATIO NS, WATER TREATMENT PLANT, TREATED WATER PUMPING STATIO N, TREATED WATER TRANSMISSION MAIN, CONSTRUCTION OF SU RGE TANK AND PIPE CONNECTION ARRANGEMENT, BOOSTER STATI ONS, INTERNAL TRANSMISSION MAIN AND FEEDER MAINS, CONSTRUCTION OF SERVICE RESERVOIRS AND MASTER RESERVOIRS. VI) MOBILISATION OF LABOURERS, [PREPARATION OF PLANS TECHNICAL EXPERTISE, SUPERVISION, CO-ORDINATION AND CONTROL, SET UP MANUFACTURING FACILITY NEARBY THE P ROJECT SITE TO MANUFACTURE PROJECT SPECIFIC PIPES AS PER T HE REQUIRED SPECIFICATIONS WHICH REQUIRES WELL EQUIPPE D MACHINES, EMPLOYMENT OF SKILLED LABOUR AND TECHNICA L EXPERTS, EQUIPMENT TO TRANSPORT HEAVY PIPES TO LAYI NG SITES, EQUIPMENT TO LIFT AND LOWERING OF PIPES AT T HE EXCAVATED SITES, PROVIDE QUALIFIED AND EXPERIENCE ENGINEER FOR EACH PROJECT SITE ETC TO BRING IN TO E XISTENCE AN INFRASTRUCTURE FACILITY. MANUFACTURING OF PIPES TO SITES, EXCAVATION UNDER VARIOUS CONDITIONS OF SOIL AND ROCK, LOWERING AND LAYING OF PIPES, JOINTING AND TE STING OF PIPE JOINT AND PIPE LINE AS A WHOLE, CONSTRUCTIO N OF PUMP HOUSES, STORAGE TANK/COLLECTION WELL, TREATME NT PLANTS, DISTRIBUTION PLANTS ETC AND ALL THESE TOGET HER DEVELOP IN TO A NEW INFRASTRUCTURE WATER SUPPLY FAC ILITY. I.T.A. NOS. 270 & 271/HYD/2011 M/S. BHOORATNAM CONSTRUCTION CO. PVT. LTD. ================================ 7 30. FURTHER, THE ORDER OF TRIBUNAL IN THE CASE OF B .T. PATIL CITED SUPRA IS PRIOR TO AMENDMENT TO SEC 80IA(4), AFTER T HE AMENDMENT THE SECTION 80IA(4) READ AS (I) DEVELOPIN G OR (II) OPERATING AND MAINTAINING OR (III) DEVELOPING, OPER ATING AND MAINTAINING ANY INFRASTRUCTURE FACILITY, PRIOR TO A MENDMENT THE OR BETWEEN THREE ACTIVITIES WAS NOT THERE, AFTER THE AMENDMENT OR HAS BEEN INSERTED W.E.F. 1-4-2002 BY FINANCE ACT 2001. 31. ACCORDINGLY, THE ASSESSEE IS ENTITLED FOR DEDUCTION UNDER SECTION 80IA OF THE ACT ON THE PROJECTS WHICH INVOLVE ABOVE ACTIVITIES. THEREFORE, IN OUR CONSIDERED VIEW , THE ASSESSEE SHOULD NOT BE DENIED THE DEDUCTION UNDER S ECTION 80IA OF THE ACT IF THE CONTRACTS INVOLVES DEVELOPMENT, O PERATING, MAINTENANCE, FINANCIAL INVOLVEMENT, AND DEFECT CORR ECTION AND LIABILITY PERIOD, THEN SUCH CONTRACTS CANNOT BE CAL LED AS SIMPLE WORKS CONTRACT TO DENY THE DEDUCTION U/S 80IA OF AC T. IN OUR OPINION THE CONTRACTS WHICH CONTAIN ABOVE FEATURES TO BE SEGREGATED ON THIS DEDUCTION U/S. 80-IA HAS TO BE G RANTED AND THE OTHER AGREEMENTS WHICH ARE PURE WORKS CONTRACTS HIT BY THE EXPLANATION SECTION 80IA(13), THOSE WORK ARE NOT EN TITLE FOR DEDUCTION U/S 80IA OF THE ACT. THE PROFIT FROM THE CONTRACTS WHICH INVOLVES DEVELOPMENT, OPERATING, MAINTENANCE, FINANCIAL INVOLVEMENT, AND DEFECT CORRECTION AND LIABILITY PE RIOD IS TO BE COMPUTED BY ASSESSING OFFICER ON PRO-RATA BASIS OF TURNOVER. THE ASSESSING OFFICER IS DIRECTED TO EXAMINE THE RE CORDS ACCORDINGLY AND GRANT DEDUCTION ON ELIGIBLE TURNOVE R AS DIRECTED ABOVE. IT IS NEEDLESS TO SAY THAT SIMILAR VIEW HAS BEEN TAKEN BY THE CHENNAI BENCH OF THE TRIBUNAL AND DEDU CTION U/S. 80IA WAS GRANTED IN THE CASE OF M/S. CHETTINAD LIGN ITE TRANSPORT SERVICES (P) LTD., IN ITA NO. 2287/MDS/06 ORDER DATED 27TH JULY, 2007 FOR THE ASSESSMENT YEAR 2004- 05. LATER IN ITA NO. 1179/MDS/08 VIDE ORDER DATED 26TH FEBRUARY, 2010 THE TRIBUNAL HAS TAKEN THE SAME VIEW. 4. HE SUBMITTED THAT IN THE CASE OF GVPR ENGINEERS LTD . V. ACIT, 51 SOT 207 (HYD) (URO) WHEREIN THE TRIBUNAL H ELD THAT DEDUCTION U/S. 80IA IS AVAILABLE TO DEVELOPERS WHO UNDERTAKE ENTREPRENEURIAL INVESTMENT RISK AND NOT FOR THE CON TRACTORS, WHO UNDERTAKE ONLY BUSINESS RISK. WITHOUT ANY DOUBT, TH E ASSESSEE CLEARLY DEMONSTRATED THAT THE PLANT AND MACHINERY, TECHNICAL KNOW-HOW, EXPERTISE AND FINANCIAL RESOURCES. THEREF ORE, IF THE CONTRACTS INVOLVE DESIGN, DEVELOPMENT, OPERATION & MAINTENANCE, FINANCIAL INVOLVEMENT AND DEFECT CORRE CTION AND LIABILITY PERIOD, THEN SUCH CONTRACTS CANNOT BE CAL LED AS SIMPLE I.T.A. NOS. 270 & 271/HYD/2011 M/S. BHOORATNAM CONSTRUCTION CO. PVT. LTD. ================================ 8 WORKS CONTRACT, TO DENY THE DEDUCTION UNDER SECTION 80IA. THE CONTRACTS WHICH CONTAIN ABOVE FEATURES TO BE SEGREG ATED HAVE TO BE GRANTED DEDUCTION UNDER SECTION 80IA AND THE OTH ER AGREEMENTS WHICH ARE PURE WORKS CONTRACTS HIT BY TH E EXPLANATION TO SECTION 80IA(13) ARE NOT ENTITLED FO R DEDUCTION UNDER SECTION 80IA. THE PROFIT FROM THE CONTRACTS W HICH INVOLVE DESIGN, DEVELOPMENT, OPERATING & MAINTENANCE, FINAN CIAL INVOLVEMENT AND DEFECT CORRECTION AND LIABILITY PER IOD IS TO BE COMPUTED BY THE ASSESSING OFFICER ON PRO RATA BASIS OF TURNOVER. THE ASSESSING OFFICER IS DIRECTED TO EXAMINE THE RE CORDS, ACCORDINGLY, AND GRANT DEDUCTION ON ELIGIBLE TURNOV ER. 5. FURTHER, HE SUBMITTED THAT IN THE CASE OF KMC CONSTRUCTION LTD. V. ACIT, 51 SOT 214 (HYD) (URO) W HEREIN THE TRIBUNAL HAS TAKEN THE SAME VIEW. 6. HE ALSO SUBMITTED THAT IN THE CASE OF SUSHEE HI-TEC H CONSTRUCTIONS PVT. LTD. VS. DCIT, IN ITA NOS. 269 & 1165/HYD/2009 AND ITA NO. 1171/HYD/2010 DATED 16TH MARCH, 2012 WHEREIN THE TRIBUNAL HELD AS FOLLOWS: THE ASSESSEE SHOULD NOT BE DENIED THE DEDUCTION UNDER SECTION 80IA OF THE ACT AS THE CONTRACTS INVOLVES, DEVELOPM ENT, OPERATING, MAINTENANCE, FINANCIAL INVOLVEMENT, AND DEFECT CORR ECTION AND LIABILITY PERIOD, THEN SUCH CONTRACTS CANNOT BE CAL LED AS SIMPLE WORKS CONTRACT. IN OUR OPINION THE CONTRACTS WHICH CONTAI N ABOVE FEATURES TO BE SEGREGATED AND ON THIS DEDUCTION U/S. 80-IA H AS TO BE GRANTED AND THE OTHER AGREEMENTS WHICH ARE PURE WORKS CONTR ACTS HIT BY THE EXPLANATION SECTION 80IA(13), THOSE WORK ARE NOT EN TITLE FOR DEDUCTION U/S 80IA OF THE ACT. THE PROFIT FROM SUCH CONTRACTS WHICH INVOLVES DEVELOPMENT, OPERATING, MAINTENANCE, FINAN CIAL INVOLVEMENT, AND DEFECT CORRECTION AND LIABILITY PE RIOD IS TO BE COMPUTED BY ASSESSING OFFICER ON PRO-RATA BASIS OF TURNOVER. THE ASSESSING OFFICER IS DIRECTED TO EXAMINE AND GRANT DEDUCTION ON ELIGIBLE TURNOVER AS DIRECTED ABOVE. 7. ON THE OTHER HAND, THE DR SUBMITTED THAT THIS IS SQ UARELY COVERED AGAINST THE ASSESSEE BY THE ORDER OF THE TR IBUNAL MUMBAI BENCH IN THE CASE OF INDIAN HUME PIPE CO. LT D. VS. DCIT IN ITA NO. 5172/MUM/08 DATED 29.7.2011 FOR A.Y. 200 4-04 I.T.A. NOS. 270 & 271/HYD/2011 M/S. BHOORATNAM CONSTRUCTION CO. PVT. LTD. ================================ 9 WHEREIN IT WAS HELD THAT THE COMPANY WAS NOT ENTITL ED TO DEDUCTION U/S. 80IA(4) OF THE ACT AS IT WAS ONLY EN GAGED IN CARRYING OUT WORKS CONTRACT AND NOT DEVELOPMENT OF ELIGIBLE INFRASTRUCTURE PROJECT. THIS DECISION WAS PRONOUNC ED AFTER CONSIDERING THE ORDER OF TRIBUNAL MUMBAI BENCH IN T HE CASE OF B.P. PATIL AND THE JUDGEMENT OF BOMBAY HIGH COURT I N THE CASE OF CIT VS. ABG HEAVY INDUSTRIES LTD. (322 ITR 323) AND ALSO PUNE BENCH DECISION THE CASE OF LAXMI CIVIL ENGINEERING PVT. LTD. VS. ADD. CIT,KOLHAPUR (UNREPORTED) IN ITA NO. 766/PN/09 DATED 8.2.2011 WHEREIN IT WAS HELD THAT THE ASSESSEE OF S IMILAR NATURE WHO HAS CARRIED ON SIMILAR NATURE OF WORKS AS IN TH E CASE OF THE ASSESSEE IS NOT ENTITLED FOR DEDUCTION U/S. 80IA(4) OF THE ACT IN VIEW OF THE EXPLANATION INTRODUCED BELOW SECTION 80 IA(13) OF THE ACT. 8. WE HAVE HEARD BOTH THE PARTIES AND PERUSED THE MATE RIAL ON RECORD. IN OUR OPINION, AS SEEN FROM THE FACTS OF THE CASE, THE ASSESSEE HAS NOT PRODUCED COPIES OF TENDER/CONTRACT EXECUTED BY IT BEFORE THE LOWER AUTHORITIES. BEFORE US THE ASSESSEE FILED CERTAIN COPIES OF TENDERS SUGGESTING NATURE OF ACTI VITY CARRIED ON BY THE ASSESSEE AND ARGUED THAT THE ISSUE IS ALREAD Y DECIDED BY THIS TRIBUNAL IN FAVOUR OF THE ASSESSEE BY VARIOUS DECISIONS CITED SUPRA. HOWEVER, AT THIS STAGE WE ARE NOT IN A POSI TION TO EXPRESS ANY OPINION ON THE NATURE OF ACTIVITIES CARRIED ON BY THE ASSESSEE. THE LOWER AUTHORITIES HAD NO OCCASION TO EXAMINE THE NATURE OF ACTIVITIES CARRIED ON BY THE ASSESSEE. B EING SO, IN OUR OPINION, IT IS APPROPRIATE TO REMIT THE ISSUE BACK TO THE FILE OF ASSESSING OFFICER FOR FRESH CONSIDERATION. WHILE D OING SO, THE ASSESSING OFFICER HAS TO SEE WHETHER THE ASSESSEE C ARRIED ON CONTRACT FOR SALE OR CONTRACT FOR WORK AND THE APPL ICABILITY OF EXPLANATION BELOW SECTION 80IA(13) OF THE ACT. THE ASSESSING OFFICER IS DIRECTED TO EXAMINE THE TERMS OF CONTRAC T INCLUDING THE NATURE OF OBLIGATION TO BE DISCHARGED BY THE AS SESSEE WHILE I.T.A. NOS. 270 & 271/HYD/2011 M/S. BHOORATNAM CONSTRUCTION CO. PVT. LTD. ================================ 10 EXECUTING THE CONTRACT. FOR CLAIMING DEDUCTION U/S . 80IA(4) THE ASSESSEE SHALL SATISFY THE TWO CONDITIONS VIZ., INV ESTMENT IN ELIGIBLE PROJECTS AND (2) EXECUTION OF PROJECT BY I TSELF. IF THE ASSESSEE SATISFIES THE ABOVE CONDITIONS AND THE ABO VE EXPLANATION IF NOT APPLICABLE THEN ONLY THE ASSESSE E IS ENTITLED FOR DEDUCTION U/S. 80IA(4) OF THE ACT. WITH THIS O BSERVATION, WE REMIT THE ENTIRE ISSUE BACK TO THE FILE OF THE ASSE SSING OFFICER FOR FRESH CONSIDERATION AND TO DECIDE IN ACCORDANCE WITH LAW. 9. IN THE RESULT, BOTH THE APPEALS ARE ALLOWED FOR STA TISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 7 TH SEPTEMBER, 2012. SD/- (SAKTIJIT DEY) JUDICIAL MEMBER SD/- (CHANDRA POOJARI) ACCOUNTANT MEMBER HYDERABAD, DATED 7 TH SEPTEMBER, 2012 TPRAO COPY FORWARDED TO: 1. M/S. BHOORATNAM CONSTRUCTION CO. PVT. LTD., C/O. DR. C.P. RAMASWAMI, ADVOCATE, FLAT NOS. 102 & 103, GITANJALI APARTMENTS, PLOT NO. 108, SRINAGAR COLONY, HYDERABA D-73. 2. THE DY. COMMISSIONER OF INCOME-TAX, CENTRAL CIRC LE-5, HYDERABAD. 3. THE CIT-VII, HYDERABAD. 4. THE CIT (CENTRAL), HYDERABAD. 5. THE DR A BENCH, ITAT, HYDERABAD