ACIT,Cir-12(2),Kolkata, Kolkata V. M/s Simplex Projects Pvt. Ltd., Kolkata

ITA 279/KOL/2017

• Counselvise Citation: [2018] 125 COUNSELVISE.COM (IT) 6093 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 4 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 11-07-2018
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Assessment Year: 2008-2009
• Appeal Filed On: 13-02-2017
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K TIWARI
• Keywords: Retrospective amendment
• Section: 143(3); 194C

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL KOLKATA D BENCH, KOLKATA [BEFORE SRI S.S. GODARA, JUDICIAL MEMBER& SRI M. BALAGANESH, ACCOUNTANT MEMBER] I.T.A. NO. 279/KOL/2017 ASSESSMENT YEAR: 2008-09 ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-12(2), KOLKATA........APPELLANT M/S. SIMPLEX PROJECTS PVT. LTD............................................RESPONDENT 12/1, NELLIE SEN GUPTA SARANI KOLKATA 700 087 [PAN AADCS 8598 R] APPEARANCES BY: SHRI RAVI TULSIYAN, A/R,APPEARED ON BEHALF OF THE ASSESSEE. SHRI A.K. TIWARI, CIT, SR.DR APPEARING ON BEHALF OF THE REVENUE. DATE OF CONCLUDING THE HEARING : JUNE 12 TH ,2018 DATE OF PRONOUNCING THE ORDER : JULY 11 TH ,2018 ORDER PER S.S. GODARA, JM :- THIS REVENUES APPEAL FOR THE ASSESSMENT YEAR 2008-09 ARISES AGAINST THE ORDER OF THE COMMISSIONER OF INCOME TAX (APPEALS) 17, KOLKATA (HEREINAFTER THE CIT(A)) DATED 29/11/2016 PASSED IN CASE NO. 581/CIT(A)-12/KOL./RANGE- 12/2014-15 REVERSING THE ASSESSING OFFICERS ACTION DISALLOWING ASSESSEES SECTION 80-IA DEDUCTION CLAIM OF RS.14,22,39,344/- IN ASSESSMENT ORDER DATED 28/12/2010 INVOLVING PROCEEDINGS U/S 143(3) OF THE INCOME TAX ACT, 1961 (IN SHORT ACT). 2. LEARNED DEPARTMENTAL REPRESENTATIVE INVITES OUR ATTENTION TO THE ORDER OF THE CIT(A)S DETAILED DISCUSSION HOLDING SECTION 80-IA DEDUCTION DISALLOWANCE HEREINABOVE AS FOLLOWS:- 3.2. I HAVE CONSIDERED THE FACTS OF THE CASE AND THE SUBMISSIONS OF THE APPELLANT .IN THIS CASE , THE AO HAS DISALLOWED THE CLAIM OF DEDUCTION U/S. 80IA BY STATING THAT THE FINANCE ACT, 2007, BY INSERTION OF A HEAD EXPLANATION TO SUB SECTION (13) CLARIFIES THAT THAT A PERSON WHO ENTERS INTO A CONTRACT WITH I ANOTHER PERSON ( THE UNDERTAKING OR ENTERPRISE REFERRED TO SECTION 80IA) FOR EXECUTING OR WORKS CONTRACT WILL NOT BE ELIGIBLE. THE AO DISALLOWED THE ENTIRE AMOUNT OF RS. 14,22,39,344/- CLAIMED U/S 80IA. THE APPELLANT HAS GIVEN A DETAILED SUBMISSIONS AND ALSO STATED THAT THE SAME ISSUED WAS DEALT WITH BY THE HON'BLE LTAT , KOLKATA IN THEIR OWN CASE IN WHICH THE APPELLANT HAS GOT RELIEF ON THE SAME SET OF FACTS . IN THE APPELLANTS APPEAL BEFORE THE HON 'BLE ITAT , KOLKATA FOR AY 2007-08 , THE MAIN GROUND OF APPEAL WAS 'ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CASE, THE LEARNED A.0. ERRED IN 2 I.T.A. NO. 279/KOL/2017 ASSESSMENT YEAR: 2008-09 M/S. SIMPLEX PROJECTS PVT. LTD HOLDING THAT THE APPELLANT IS NOT A 'DEVELOPER' FOR THE PURPOSE OF ALLOWANCE OF DEDUCTION U/S 80-IA(4) OF THE INCOME TAX ACT, 1961, ON THE PROFITS DERIVED FROM THE BUSINESS OF DEVELOPING INFRASTRUCTURE FACILITY AND IN THAT VIEW, IN CONFIRMING THE DISALLOWANCE OF THE CLAIM OF DEDUCTION OF RS. 7,44,64,162/- UNDER THAT SECTION'. IT WAS THE SUBMITTED BY THE ID. AR THAT IN THE COURSE OF ASSESSMENT THE AO HAS DISALLOWED THE CLAIM OF DEDUCTION U/S 80-IA(4) OF THE ACT ON THE GROUND THAT BY THE FINANCE ACT 2007 NEW EXPLANATION HAS BEEN INSERTED TO SUB-SECTION (13) OF 80-LA WHEREIN IT WAS EXPLAINED THAT A PERSON WHO ENTERS INTO A CONTRACT WITH ANOTHER PERSON FOR EXECUTING A WORKS CONTRACT WILL NOT BE ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT. THE HON'BLE ITAT , KOLKATA HELD THAT THE ISSUE IS SQUARELY COVERED BY THE DECISION OF THE COORDINATE BENCH OF THIS TRIBUNAL IN THE CASE OF ASSESSEE'S SISTER CONCERN IN THE CASE OF SIMPLEX SOM-DUTT BUILDERS J.V. AND SIMPLEX SUBHASH J.V. IN ITA NO.1684/KOL/2011 AND 1685/KO1/2011 DATED 18.06.2013 WHEREIN THE COORDINATE BENCH OF THIS TRIBUNAL HAS HELD AS UNDER AT PARAS 11 TO 13 :- ' '11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. ADMITTEDLY, A PERUSAL OF THE AGREEMENT ENTERED INTO BETWEEN THE ASSESSEE AND THE GOVT OF ANDHRA PRADESH IRRIGATION & CAD DEPARTMENT SHOWS THAT THE ASSESSEE HAS TAKEN EPC/TURNKEY CONTRACT OF THE FLOOD FLOW CANAL PROJECT FROM SRSP. THE NAME OF THE CONTRACT HAS BEEN EXTRACTED EARLIER IN THIS ORDER. THE SCOPE OF THE WORK IS A/SO EXTRACTED ABOVE. ADMITTEDLY, THE ASSESSEE HAS TAKEN' A TURNKEY : CONTRACT FROM THE IRRIGATION DEPARTMENT, GOVT. OF ANDHRA PRADESH. THE TURNKEY CONTRACT IS IN RESPECT OF THE IRRIGATION PROJECT. IRRIGATION PROJECT IS AN INFRASTRUCTURE FACILITY WITHIN THE SCOPE OF EXPLANATION TO SECTION 80JA(4) OF THE ACT. THE PROVISIONS OF SECTION 80IA(4) IS TO BE CONTROLLED BY THE EXPLANATION TO SECTION 80JA, WHICH HAS BEEN SUBSTITUTED BY THE FINANCE (NO.2) ACT, 2009 WITH RETROSPECTIVE EFFECT FROM 1-4-2000. THIS EXPLANATION IS FOUND AFTER SUB- SECTION (13) OF SECTION 80JA. THE SAID EXPLANATION ATTEMPTS TO CONTROL THE PROVISIONS OF SUB-SECTION 4. MORE SO, IT SAYS THAT NOTHING CONTAINED IN SECTION 80IA WOULD APPLY IN RELATION TO THE BUSINESS REFERRED TO SUB-SECTION (4), WHICH IS IN THE NATURE OF WORKS CONTRACT. A WORKS CONTRACT IS NOT DEFINED IN SECTION 80IA. NOW, WHAT WOULD COME INTO CONSIDERATION IS WHETHER THE SUBSTITUTED EXPLANATION AFTER SUB- CLAUSE (13) CHANGED THE NATURE OF THE MEANING OF 'INFRASTRUCTURE FACILITY' PROVIDED IN THE EXPLANATION TO SECTION 80IA(4). ADMITTEDLY, THE EXPLANATION TO SECTION 80IA(4) GIVES THE MEANING THE TERM 'INFRASTRUCTURE FACILITY'. THE SUBSTITUTED EXPLANATION AFTER SUB CLAUSE (13) BRINGS IN THE NATURE OF WORK AS A WORKS CONTRACT. THE PROVISIONS OF SECTION 194C, WHICH DEALS WITH TDS IN RESPECT OF PAYMENT TO CONTRACTORS FOR CARRYING OUT ANY WORK IN THE EXPLANATION THERETO AS EXPLAINED THE TERM 'WORK' TO BE AN INCLUSIVE DEFINITION, BUT HAS PROVIDED AN EXCLUSION TO BE 'DOES NOT INCLUDE MANUFACTURING OR SUPPLYING OF A PRODUCT. ACCORDING TO REQUIREMENT OR SPECIFICATION OF THE CUSTOMER BY USING MATERIALS PURCHASED FROM A PERSON, OTHER THAN SUCH CUSTOMER', THUS, WITH THIS IN MIND, A PERUSAL OF THE TURNKEY CONTRACT AGREEMENT ENTERED INTO BY THE ASSESSEE WITH THE IRRIGATION DEPARTMENT, GOVT OF A.P. CLEARLY SHOWS THAT THE CONSTRUCTION OF ALL THE STRUCTURES OF THE WHOLE CANAL SYSTEM IS TO BE AS PER APPROVED DESIGN, DRAWINGS, SPECIFICATIONS OF THE DEPARTMENT ETC. THE SURVEY IS TO BE DONE AS PER INVESTIGATION AND DESIGNING CRITERIA OF THE IRRIGATION DEPARTMENT. THIS IS ALSO AS PER ARTICLE 11.1 OF THE AGREEMENT. THE ASSESSEE IS TO PROCURE THE MATERIALS INDEPENDENTLY AND THOSE MATERIALS ARE TO CONFIRM TO THE SPECIFICATIONS PROVIDED. THE ASSESSEE IS ALSO TO MAKE ITS ARRANGEMENTS FOR STORAGE OF THE MATERIALS. THIS IS AS PER ARTICLE 107 OF THE AGREEMENT. THUS, ADMITTEDLY THE WORK DONE BY THE ASSESSEE FALLS IN THE EXCLUSION PROVIDED TO THE MEANING OF THE WORK GIVEN IN THE EXPLANATION TO SECTION 194C OF THE ACT. ONCE 3 I.T.A. NO. 279/KOL/2017 ASSESSMENT YEAR: 2008-09 M/S. SIMPLEX PROJECTS PVT. LTD IT FALLS OUTSIDE THE MEANING OF TERM 'WORK' FOR THE PURPOSE OF SECTION 194C , THE QUESTION THAT ARISES IS CAN IT BE SAID THAT THE ASSESSEE IS DOING THE WORK CONTRACT AS PROVIDED IN THE SUBSTITUTED EXPLANATION IN SECTION 80IA AFTER SUB CLAUSE (13)?, THE ANSWER WOULD BE EMPHATIC NO. 12. THIS IS BECAUSE THE ASSESSEE IS DOING THE ACTIVITY OF DEVELOPMENT OF AN INFRASTRUCTURE FACILITY AS PROVIDED UNDER SECTION 80IA(4) . THE PROJECT IS A TURNKEY PROJECT AND IT CANNOT FORM NOR HAVE A CHARACTER OF A WORKS CONTRACT. WORKS CONTRACT WOULD BE APPLICABLE TO THE REPAIRS AND MAINTENANCE OF AN EXISTING PROJECT. WORKS CONTRACT CANNOT BE IN RELATION TO THE DEVELOPMENT OF A NEW PROJECT. ONE OF THE ARGUMENTS RAISED BY THE LEARNED SR.DR THAT THE INTENTION OF THE SUBSTITUTION OF THE EXPLANATION AFTER SUB CLAUSE (13) OF SECTION 80IA WAS TO DENY, THE BENEFIT OF DEDUCTION U/S. 80IA(4) IN RESPECT OF WORKS CONTRACT, BUT TO PROVIDE THE DEDUCTION TO SUCH UNDERTAKINGS, WHICH IS DOING THE BUSINESS OF BUILDING, OPERATING AND TRANSFER (BOT) AND BUILDING OWNING, OPERATING AND TRANSFER BOOT AS ALSO PPP CONTRACTS DOES NOT HOLD WATER IN SO FAR AS AN IRRIGATION PROJECT CAN NEVER FUNCTION UNDER BOT OR BOOT OR PPP . IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE ASSESSEE'S CLAIM IS NOT HIT BY THE SUBSTITUTED EXPLANATION AS PROVIDED AFTER SUB CLAUSE(13) OF SECTION 80IA .. HERE, WE MAY MENTION THAT THIS VIEW FINDS SUPPORT FROM THE DECISION OF THE CO- ORDINATE OF THE TRIBUNAL, [ITAT, HYDERABAD BENCH, HYDERABAD IN THE CASE OF GVPR ENGINEERS LTD & ORS (REFER TO SUPRA). WE MAY MENTION HERE THAT OUR VIEW ALSO FINDS SUPPORT FROM THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL, ITAT CUTTACK BENCH, CUTTACK IN THE CASE OF ARSS INFRASTRUCTURE PROJECTS LTD VS. ACIT, CIRCLE-2 (1), BHUBANESWAR IN ITA NOS. 142, 143/CTK/2010 & 483,484/CTK/2011 DATED 13-06-2013, WHEREIN ONE OF US WAS A PARTY AND IN WHICH CASE IT HAS BEEN HELD AS UNDER :- 10. NOW COMING TO THE MERITS OF THE DEDUCTION U/S. 801A(4) OF THE ACT. A PERUSAL OF THE PROVISIONS OF SECTION 801A(4) OF THE ACT SHOWS THAT IN THE EXPLANATION 'INFRASTRUCTURE FACILITY' HAS BEEN SPECIFIED TO MEAN A ROAD INCLUDING A TOLL ROAD, A BRIDGE OR A RAIL SYSTEM. ADMITTEDLY, THE ASSESSEE IS DOING THE BUSINESS OF DEVELOPMENT OF RAILWAY TRACKS AND BRIDGES THEREOF AS ALSO ROADS. IF, WE ARE TO ACCEPT THE CONTENTION OF THE LD. CIT THAT THE PROVISIONS OF SECTION 801A(4) OF THE ACT AFTER THE SUBSTITUTION OF THE EXPLANATION TO SECTION 8OIA OF THE ACT WAS INTRODUCED WAS ONLY FOR THE PURPOSE OF GIVING THE BENEFIT TO BUT CONTRACTS THEN, THE EXPLANATION TO SECTION 801A(4) OF THE ACT BECOMES OTIOSE. THIS IS AS EXPLANATION TO SECTION 801A(4) OF THE ACT SPECIFICALLY PROVIDES FOR THE ROAD TO INCLUDE A TOLL ROAD, A BRIDGE OR A RAIL SYSTEM. BUT CONTRACT IN RESPECT OF THE RAILWAY SYSTEM CAN NEVER EXIST. FURTHER, A PERUSAL OF THE PROVISIONS OF SECTION 801A OF THE ACT SHOWS THAT THE TERM 'WORKS CONTRACT' IS NOT DEFINED IN THE SAID SECTION. HOWEVER, THE TERMS 'WORKS' AND 'CONTRACT' IS DEFINED IN THE PROVISIONS OF SECTION 194C OF THE ACT. IF A PARTICULAR WORD OR TERM IS NOT DEFINED IN THE SPECIFIC SECTION THEN, ONE COULD GO TO OTHER SECTIONS IN THE SAID ACT WHERE THE DEFINITION WOULD BE AVAILABLE TO DRAW A MEANING TO THE SAID TERMS. IN THE PROVISIONS OF SECTION 194C OF THE ACT, WORK HAS BEEN GIVEN AN INCLUSIVE DEFINITION BUT IN THE SUBSEQUENT PORTION IT HAS EXCLUDED THE MANUFACTURING OR SUPPLYING A PRODUCT ACCORDING TO REQUIREMENT OR SPECIFICATION OF A CUSTOMER BY USING MATERIAL PURCHASED FROM A PERSON OTHER THAN SUCH CUSTOMER. AS HAS BEEN SPECIFIED BY THE LD. AR, THE ASSESSEE IS DOING CONTRACT WORK BUT THAT WORK IS ACCORDING TO THE REQUIREMENT AND SPECIFICATION OF THE CUSTOMER AND THE SAME HAS BEEN DONE BY USING MATERIALS PURCHASE FROM THIRD PARTIES OTHER THAN THE CUSTOMERS. THUS, THOUGH THE ASSESSEE IS DOING A WORKS CONTRACT THE SAME WOULD NOT FALL WITHIN THE MEANING OF THE WORD 'WORKS CONTRACT' FOR THE PURPOSE OF THE ACT DUE TO THE EXCLUSION PROVIDED IN THE 4 I.T.A. NO. 279/KOL/2017 ASSESSMENT YEAR: 2008-09 M/S. SIMPLEX PROJECTS PVT. LTD MEANING OF 'WORK' IN SECTION 194C OF THE ACT. THE ISSUE RAISED BY THE LD. CIT THAT THE ASSESSEE IS NOT DOING THE DEVELOPMENT WORK BUT IS ONLY DOING THE CONTRACT ALSO DOES NOT STAND TO TEST AS THE ASSESSEE ADMITTEDLY IS DEVELOPING THE ROADS AND RAILWAY LINES AND THE BRIDGES THEREOF. DEVELOPMENT ENCOMPASSES WITHIN ITSELF CONTRACT WORK. THE AGREEMENT BETWEEN THE ASSESSEE AND THE CUSTOMER BEING THE GOVERNMENT IS FOR THE DEVELOPMENT OF THE INFRASTRUCTURE FACILITY BEING ROADS AND RAIL SYSTEMS AND BRIDGES BY PARTICIPATING IN THE TENDERS. UNDER THESE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE AO WAS RIGHT IN LAW IN GRANTING THE ASSESSEE THE BENEFIT OF DEDUCTION U/S. 801A(4) OF THE ACT. 13. IN THE CIRCUMSTANCES, THE ASSESSING OFFICER IS DIRECTED TO GRANT THE ASSESSEE THE BENEFIT OF DEDUCTION U/S. 80IA OF THE ACT AS CLAIMED. AS THE ISSUE IS SQUARELY COVERED BY THE ABOVE DECISION OF THE HONBLE ITAT, KOLKATAS FOR THE AY 2007-08, THE DISALLOWANCE BY THE AO DESERVES TO BE DELETED. 3. LEARNED DEPARTMENTAL REPRESENTATIVE STRONGLY ARGUED IN THE COURSE OF HEARING THAT THE CIT(A) HAS ERRED IN LAW AS WELL AS ON FACTS IN HOLDING THE IMPUGNED DISALLOWANCE. HE QUOTES SECTION 80-IA READ WITH EXPLANATION BELOW SUB- SECTION (13) INSERTED VIDE FINANCE ACT, 01/04/2000 SUBSTITUTED BY THE FINANCE AT, 2009, W.E.F. 01/04/2000 IN THE STATUTE. WE FIND NO MERIT IN THE INSTANT FACTUAL AS WELL AS LEGAL ARGUMENTS SINCE IT HAS ALREADY ON RECORD THAT A CO-ORDINATE BENCH HAS CONSIDERED ALL THESE PLEADINGS WHILST ADJUDICATION THE VERY ISSUE IN ASSESSEES FAVOUR IN PRECEDING ASSESSMENT YEAR (SUPRA) . THE REVENUES SOLE SUBSTANTIVE GROUND IS THEREFORE DECLINED. 4. THIS REVENUES APPEAL IS DISMISSED. KOLKATA, THE 11 TH DAY OF JULY, 2018. SD/- SD/- [M. BALAGANESH] [ S.S. GODARA ] ACCOUNTANT MEMBER ACCOUNTANT MEMBER DATED : 11.07.2018 {SC SPS} 5 I.T.A. NO. 279/KOL/2017 ASSESSMENT YEAR: 2008-09 M/S. SIMPLEX PROJECTS PVT. LTD COPY OF THE ORDER FORWARDED TO: 1. ASSISTANT COMMISSIONER OF INCOME TAX, CIRCLE-12(2), KOLKATA 2. M/S. SIMPLEX PROJECTS PVT. LTD 12/1, NELLIE SEN GUPTA SARANI KOLKATA 700 087 3. CIT(A)- 4. CIT- , 5. CIT(DR), KOLKATA BENCHES, KOLKATA. TRUE COPY BY ORDER SENIOR PRIVATE SECRETARY HEAD OF OFFICE/ D.D.O. ITAT, KOLKATA BENCHES