ITO WD 3(1), THANE V. NCC SMC INDU JV, THANE

ITA 3070/MUM/2014

• Counselvise Citation: [2016] 133 COUNSELVISE.COM (IT) 4081 (ITAT-MUMBAI)
• Duration Of Justice: 1 year(s) 9 month(s) 1 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-02-2016
• Appeal Filed By: Department
• Bench Allotted: B
• Assessment Year: 2009-2010
• Appeal Filed On: 02-05-2014
• Court: TRIBUNAL
• Department Lawyers: SUMIT KUMAR
• Assessee Lawyers: NELKANT KHANDELWAL
• Keywords: Difference of opinion
• Section: 143(3)

Judgement Text

, , IN THE INCOME TAX APPELLATE TRIBUNAL B , BENCH MUMBAI BEFORE SHRI R.C.SHARMA , A M & SHRI AMARJIT SINGH , J M ./ ITA NO . 3070 /MUM /20 1 4 ( / ASSESSMENT YEAR : 20 09 - 20 10 ) ITO, WARD - 3(1), THANE - 400604 VS. M/S NCC SMC INDU JV, 101, AKRUTI SMC, LBS MARG, KHOPAT, THANE(W) - 400601 ./ ./ PAN/GIR NO. : A A GF N 7852 H ( / APPELLANT ) .. ( / RESPONDENT ) /REVENUE BY : SHRI SUMIT KU MAR /ASSESSEE BY : SHRI NELKANT KHANDELWAL / DATE OF HEARING : 17 / 1 1 / 2015 / DATE OF PRONOUNCEMENT 03/02 /201 6 / O R D E R PER R.C.SHARMA (A.M) : TH IS IS AN APPEAL FILED BY THE REVEN UE AGAINST THE ORDER OF CIT(A) , MUMBAI, FOR THE ASSESSMENT YEAR 20 0 9 - 2010 , IN THE MATTER OF ORDER PASSED U/S. 143(3) OF THE I.T. ACT , WHEREIN FOLLOWING GROUNDS HAVE BEEN RAISED BY THE REVENUE : - 1. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) - II, THANE HAS ERRED IN ALLOWING THE DEDUCTIO N U/S 80LA AT RS. 2,94,16,222/ - WITHOUT APPRECIATING THE FACT THAT BEING A CONTRACTOR THE DEDUCTION U/S 80 LA IS NOT ALLOWABLE TO THE ASSESSEE . 2. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN L AW, THE LD. CIT (A) - II, THANE HAS ERRED IN NOT APPRECIATING THE FACT THAT THE ASSESSEE HAS MERELY GOT THE WORK EXECUTED BY SUB - CONTRACTING 100% OF WORK ON SAME TERMS AND CONDITIONS (AS IN ORIGINAL AGREEMENT) AND THAT THE ASSESSEE HAS SHOWN THE RECEIPTS UND ER HEAD WORKS CONTRACT RECEIPTS AND HAS PAID WORKS CONTRACTS TAX AND THAT TAX HAS BEEN DEDUCTED AT SOURCE ON THE CONTRACT RECEIPTS . ITA NO. 3070/14 2 3. ON THE FACTS AND CIRCUMSTANCES OF THE CASE AND IN LAW, THE LD. CIT (A) - II THANE HAS ERRED IN NOT APPRECIATING THE FACT THAT DEDUCTION U/S 80IA IS AVAILABLE TO AN ENTERPRISE CARRYING ON THE BUSINESS OF DEVELOPING AN INFRASTRUCTURE FACILITY OR MAINTAINING AND OPERATING AN INFRASTRUCTURE FACILITY OR DEVELOPING, MAINTAINING AND OPERATING A INFRASTRUCTURE FACILITY SUBJECT TO FU LFILLMENT OF CERTAIN CONDITIONS. THUS, PRIMARY CONDITION FOR CLAIMING DEDUCTION U/S 80LA IS THAT THE ASSESSEE SHOULD BE A DEVELOPER OF AN INFRASTRUCTURE FACILITY. BEING A CONTRACTOR THE ASSESSEE HAS MERELY EXECUTED WORKS CONTRACT BY SUB - CONTRACTING 100% OF WORK ON SAME TERMS AND CONDITIONS (AS IN ORIGINAL AGREEMENT) AND THUS CANNOT BE ACKNOWLEDGED AS A DEVELOPER AND HENCE DEDUCTION U/S 80LA IS NOT ALLOWABLE TO THE ASSESSEE. 4 THE APP ELLANT PRAYS THE ORDER OF THE L D. CIT(A) - I. THANE. MAY BE VACATED AND THA T OF THE ASSESSING OFFICER BE RESTORED. 2. RIVAL CONTENTIONS HAVE BEEN HEARD AND RECORD PERUSED. FACTS IN BRIEF ARE THAT T HE ASSESSEE IS A JOINT VENTURE BETWEEN NAGARJUNA CONSTRUCTION CO. LTD., SMC INFRASTRUCTURE PVT. LTD. & INDU PROJECT LTD. ENGAGED I N THE BUSINESS OF CIVIL CONSTRUCTION FOR INFRASTRUCTURE PROJECTS. IT HAS FILED RETURN OF INCOME ON 06/07/2009 SHOWING NIL INCOM E. D URING THE YEAR UNDER CONSIDERATION, THE ASSESSEE HAD EXECUTED WORKS CONTRACTS AMOUNTING TO RS. 99,05,53,214/ - SHOWING NET INC OME OF RS. 2,94,16,222/ - . THE DEDUCTION U/S. 80LA HAS BEEN CLAIMED IN RESPECT OF THE ENTIRE INCOME. THE A. O ACCORDINGLY, REQUIRED THE ASSESSEE TO JUSTIFY THE CLAIM OF DEDUCTION U/S. 801A. THE ASSESSEE VIDE ITS LETTER DT. 15/12/2011 SUBMITTED A DETAILED EXP LANATION IN RESPECT OF THE ENTITLEMENT OF DEDUCTION U/ S, 80IA(4) OF THE A CT. THE A.O. NOTICED THAT THE ASSESSEE HAD CREDITED RECEIPTS FROM CONTRACTS AS 'WORK CONTRACT RECEIPTS' WHICH CLEARLY SHOW THAT THE ASSESSEE HAD MERELY EXECUTED A WORKS CONTRACT. FURT HERMORE, AGAINST THIS WORK CONTRACT RECEIPTS, THE ASSESSEE HAS PAID WORKS CONTRACT TAX AND THE TAX HAS ALSO BEEN DEDUCTED ON THE SAME. IN VIEW OF THESE FACTS, THE ITA NO. 3070/14 3 ASSESSEE WAS IN NO WAY A DEVELOPER OF AN INFRASTRUCTURAL FACI LITY AS ENVISAGED IN SECTION 80I A. THE A.O. HAS ALSO MENTIONED THAT IN THE CASE OF SISTER CONCERN OF ASSESSEE NAMELY SMC INFRASTRUCTURE PVT. LTD., THE DISALLOWANCE U/S. 80LA HAS BEEN DECIDED IN THE FAVOUR OF DEPARTMENT BY THE ITAT AND APPEAL OF THE ASSESSEE IS PENDING BEFORE THE HON'BLE HIGH COURT. IN VIEW OF THIS LEGAL POSITION AND ALSO THE DISCUSSION MADE, THE A.O. DISALLOWED ENTIRE DEDUCTION CLAIMED U/S. 80I A 3. BY THE IMPUGNED ORDER, THE CIT(A) ALLOWED ASSESSEES CLAIM U/S.80IA AFTER HAVING FOLLOWING OBSERVATION : - 4. I HAVE CAREFU LLY CONSIDERED THE FACTS ON RECORD AND SUBMISSION OF THE APPELLANT. I HAVE ALSO GONE THROUGH THE CASE LAWS RELIED UPON BY THE APPELLANT. IT IS NOTICED FROM THE ASSESSMENT ORDER THAT THE A.D. HAS DISALLOWED THE DEDUCTION CLAIMED U/S, 80I A ON THE SOLO GROUND THAT THE ASSESSEE HAD MERELY EXECUTED WORKS CONTRACT AND HENCE, WAS A CONTRACTOR AND NOT A DEVELOPER OF THE INFRASTRUCTURE PROJECT AS ENVISAGED IN THE SECTION 801A. THIS CONCLUSION OF A .D. IS, BASED ON THE FOLLOWING G ROUNDS - (A) THAT THE RECEIPTS ARE SH OWN AS 'WORKS CONTRACT RECEIPTS'. (B) THAT THE ASSESSEE HAS PAID WORKS CONTRACT TAX. (C) THAT THE TAX HAS BEEN DEDUCTED ON THE RECEIPTS. (D) THAT THE DISALLOWANCE U/S. 801A UNDER THE SIMILAR FACTS AND CIRCUMSTANCES HAS BEEN CONFIRMED BY THE HON'BLE I TAT IN THE CASE OF SMC INFRASTRUCTURE PVT. LTD. WHICH IS A MEMBER IN THE ASSESSEE JV. THU S, FROM THE FACTS EMERGING FROM THE SUBJECT MATTER OF ASSESSMENT, IT IS CRYSTAL CLEAR TH AT THERE WAS NO DISPUTE IN RESPECT OF OTHER CONDITIONS OF THE SECTION FOR CLA IMING DEDUCTION U/S. 801A( 4). 4.1 AT THE OUTSET, IT IS WORTHWHILE TO MENTION THAT IT IS AN ESTABLISHED LEGAL POSITION THAT THE NATURE OF ENTRIES IN THE BOOKS OF ACCOUNT ARE NOT RELEVANT FOR TAXABILITY OF A PARTICULAR RECEIPT OR OTHERWISE. SIMILARLY AS T O WHETHER ASSESSEE HAS PAID WORKS CONTRACT TAX OR NOT, OR TAX HAS BEEN DEDUCTED ON SUCH RECEIPTS OR NOT, ARE ALSO IRRELEVANT FACTORS. THUS, THE ISSUE FOR CONSIDERATION AND DETERMINATION IS WHETHER THE APPELLANT IS A WORKS CONTRACTOR AS PER ITA NO. 3070/14 4 EXPLANATION TO S ECTION 80IA(13) OR A DEVELOPER OF INFRASTRUCTURE PROJECT AS ENVISAGED IN SECTION 80IA(4). UNDISPUTEDLY, THE APPELLANT IS A CONSORTIUM OF THE COMPANIES REGISTERED IN INDIA AND HAS ENTERED INTO AN AGREEMENT WITH THE LOCAL AUTHORITY I.E. PIMPRI CHINCHWAD MUNI CIPAL CORPORATION (PCMC) FOR ERECTION OF DIRECT WATER PIPELINE FROM PAWANA DAM TO WATER TREATMENT PLANT AT SECTOR - 23 IN PCMC AREA. COPY OF THE AGREEMENT DT. 30/04/20 - 08 FURNISHED BY THE APPELLANT VIDE REPLY DT.09/01/2014 IS PLACED ON RECORD. AS PER THIS AG REEMENT, PCMC HAS ACCEPTED THE 'BID' OF THE APPELLANT FOR EXECUTION OF 'JNNURM PROJECT FOR PIMPRI CHINCHWAD CITY, WATER SUPPLY PROJECT FOR DIRECT PIPELINE FROM PAWANA DAM TO WATER TREATMENT PLANT AT S ECTOR - 23, NIGADI IN PCMC AREA AT A PRICE OF RS. 397.93 CR S. THE WORK HAS BEEN ENTRUSTED FOR EXECUTION, COMPLETION AND REMEDYING OF ANY DEFECTS THEREIN. VIDE CLAUSE 4 OF THE AGREEMENT, VARIOUS DOCUMENTS INCLUDING NOTICE INVITING TENDER, CONTRACTOR'S BID, ETC. HAVE BEEN MADE PART OF THE AGREEMENT. ACCORDINGLY, THE APPELLANT HAS BEEN GIVEN THE WORK ORDER VIDE LETTER NO.PAPU/NI/KAVI/396/08 DT. 30/04/2008 ON FURNISHING OF SECURITY OF BANK GUARANTEE OF RS. 15,91,75,000/ - . COPY OF THE WORK ORDER HAS BEEN PLACED ON RECORD BY THE APPELLANT VIDE ITS LETTERS DT. 11/09/2013 & 09/01/2014. 4.2 ON PERUSAL OF THE COPIES OF TENDER DOCUMENTS FILED VIDE LETTER DT. 24/01/14, IT IS NOT ICED THAT THE TENDER WAS ISSUED FOR FOLLOWING WORKS: - (I) PROJECT (PARA - 1, VOL.1/3) WATER SUPPLY PROJECT UNDER JNNRUM GOI FUNDING FOR PIMPRI CHINC HWAD MUNICIPAL CORPORATION, PUNE - DIRECT PIPELINE FROM PAWANA DAM UPTO WTP WITHIN PCMC AREA, PUNE. (II) JOB (PARA 2, VOL. 1/3) DESIGNING, PROVIDING, ERECTING TESTING, COMMISSIONING AND TRIAL RUN FOR THE COMPLETE SYSTEM OF DIRECT PIPELINE FROM PAWANA D AM UPTO CITY. THIS COMPRISES OF APPROACH CHANNEL, JACK WELL - PUMP HOUSE, ELECTRO - MECHANICAL INSTALLATIONS, APPROACH BRIDGE/BUND, RISING MAIN, MBR, GRAVITY MAINS, ETC/COMPLETE TO CARRY 525 ML IN 20 HRS. (III) LAND CONDITIONS & LAYOUT (PARA 9, VOL. 1/3) THE OWNER WILL FURNISH & PAY FOR LAND, EASEMENTS AND RIGHTS - OF - WAY FOR THE WORKS. THE CONTRACTOR (I.E. ASSESSEE) SHALL, HOWEVER, HELP THE OWNER TO OBTAIN CONSENTS FROM THE VARIOUS AUTHORITIES SUCH AS IRRIGATION, NATIONAL HIGHWAY, EXPRESS HIGHWAY, VILLAGE AREA, ENROUTE PROPERTY OWNERS. MAKE ALL NECESSARY ARRANGEMENTS, AND ACCOUNT FOR ALL MISCELLANEOUS EXPENSES FOR THE COMPLETION OF THE SAID TASK OF LAND ACQUISITION/OR ACCESS .... (IV) CLEARING OF SITE INCLUDING JUNGLE CLEARANCE (PARA - 1, VOL. 2/3) ITA NO. 3070/14 5 BEFORE STARTING THE WORK, THE SITE SHALL BE CLEARED OF ALL SHRUBS, GRASS, AND OTHER VEGETATION INCLUDING LARGE AND SMALL BUSHES, ALL STUMPS, REMOVAL OF ROOTS, CUTTING AND DISPOSAL OF SMALL TREES THE CONTRACTOR SHALL MAKE HIMSELF FAMILIAR WITH THE LOCAL RULES AND REGULATIONS PERTAINING TO LAND CLEARANCE, ENVIRONMENTAL ASPECTS INCLUDING SPECIAL REQUIREMENTS OF FOREST AREAS, WHEREVER APPLICABLE AND THE WORK SHALL BE CARRIED OUT IN STRICT ACCORDANCE THEREWITH. (V) SCOPE OF WORK (PARA 2, VOL. 2/3) BESIDES VARIOUS ITEMS OF WATER SYSTEMS, THE WORK ALSO INCLUDES CONSTRUCTION OF SERVICE ROAD. 4.2.1 IN ADDITION TO THE GENERAL RESPONSIBILITY OF THE CONTRACT, THE APPELLANT IS ALSO RESPONSIBLE AND LIABLE FOR THE FOLLOWING: - (I ) LOSS OR DAMAGE AND INDEMNITY AGREEMENT (P ARA 10.2. VOL. 1/3) THE CONTRACTOR SHALL BE RESPONSIBLE DURING THE PROGRESS AS WELL MAINTENANCE FOR ANY LIABILITY IMPOSED BY LAW FOR ANY DAMAGE TO THE WORK OR ANY PART THEREOF OR TO ANY OF THE MATERIALS OR OTHER THINGS USED IN PERFORMING THE WORK OR FOR INJURY TO ANY PERSON OR PERSONS OR FOR ANY PROPERTY DAMAGED IN OR OUTSIDE THE WORKS LIMIT. THE CONTRACTOR SHALL INDEMNIFY AND HOLD THE OWNER AND THE ENGINEERS HARMLESS AGAINST ANY OR ALL LIABILITIES, CLAIMS, LOSS OR INJURY, INCLUDING COSTS, EXPENSES AND AT TORNEY'S FEES INCURRED IN DEFENCE OF THE SAME WHATSOEVER DURING THE PROGRESS AND MAINTENANCE OF THE WORK. (II ) DEFECTS AND RECTIFICATION (PARA 26. VOL. 1/3) FOR THE PERIOD STATED BELOW FROM THE DATE OF ISSUANCE OF COMPLETION CERTIFIC ATE, THE CONTRACTOR SHALL REMAIN LIABLE FOR ANY OF THE WORK OR WORKS OR PARTS THEREOF OR EQUIPMENT AND FITTINGS SUPPLIED WHICH IN THE OPINION OF THE ENGINEER FAIL TO COMPLY WITH THE REQUIREMENTS OF THE CONTRACT OR ARE IN ANY WAY UNSATISFACTORY OR DEFECTIVE . THE DEFECT LIABILITY PERIOD HAS BEEN MENTIONED IN FORM B - 1 AND THE SAME RANGES FROM ONE YEAR TO FIVE YEARS FOR DIFFERENT ITEMS. (III) DEFECTIVE WORK IS LIABLE TO BE REJECTED AT ANY STAGE. THE CONTRACTOR, ON NO ACCOUNT CAN REFUSE TO RECTIFY THE DEFECTS MERELY ON REASONS THAT FURTHER WORK HAS BEEN CARRIED OUT. NO EXTRA PAYMENT SHALL BE MADE FOR RECTIFICATION (PARA 51.8, VOL. 1/3). (IV) CONTRACTOR'S LIABILITY AND INSURANCE (PARA 62.2, VOL. 1/3) WITHOUT LIMITING HIS OBLIGATIONS AND RESPONSIBILITIES, TH E CONTRACTOR SHALL INSURE IN THE JOINT NAME OF THE PCMC AND CONTRACTOR AGAINST ALL LOSS OR DAMAGE FROM WHATEVER CAUSE . ITA NO. 3070/14 6 IT IS NOTICED THAT THE APPELLANT HAS TAKEN AN INSURANCE COVER FOR ENTIRE VALUE OF THE PROJECT ESTIMATED AT RS. 397.93 CRS. FROM ORIENT AL INSURANCE COMPANY LTD. VIDE POLICY NO.123105/44/2009/10 AND ACCORDINGLY, TOTAL PREMIUM OF RS. 1,17,05,582/ - WAS TO BE PAID IN 10 INSTALLMENTS STARTING FROM 19/06/2008 TO 19/06/2010. 4.3 AS PER THE AGREEMENT OF JOINT VENTURE DT. 25/04/2008, THE JOINT VENTURE (JV) HAS BEEN CREATED FOR THE SPECIAL PURPOSE OF EXECUTING THE WATER SUPPLY PROJECT AND IT WILL STAND DISSOLVED ON COMPLETION OF THE SAME. ALL THE THREE CONSTITUENT COMPANIES OF THE JV HAVE EXPERIENCE AND TECHNICAL EXPERTISE FOR DEVELOPMENT OF THE INFRASTRUCTURE PROJECT AS DETAILED BELOW: - NAGARJUNA CONSTRUCTION COMPANY LTD. IS A REPUTED CIVIL ENGINEERING COMPANY HAVING WIDE EXPERIENCE IN CONSTRUCTIONS AND EXECUTION OF THE ROAD, MASS CONCRETING AND OTHER INFRASTRUCTURE PROJECTS. (II) SMC INFRAST RUCTURE PVT. LTD. IS A REPUTED CIVIL ENGINEERING COMPANY HAVING WIDE EXPERIENCE IN CONSTRUCTION AND EXECUTION OF PIPELINES, BRIDGES, MASS CONCRETING AND OTHER INFRASTRUCTURE PROJECTS. (III) INDU PROJECT LTD. IS A REPUTED CIVIL ENGINEERING COMPANY HAVING WIDE EXPERIENCE IN CONSTRUCTIONS AND EXECUTION OF TUNNEL, BUILDING, ROADS, MASS CONCRETING AND OTHER INFRASTRUCTURE PROJECTS. ACCORDINGLY, THE PROJECT OF WATER SUPPLY SYSTEMS UNDER CONSIDERATION IS BEING EXECUTED BY ABOVE COMPANIES. 4.4 FROM THE ABOVE FACTS, IT EMERGES THAT THE APPELLANT JV HAS ENTERED INTO AN AGREEMENT WITH THE LOCAL AUTHORITY FOR EXECUTION OF NEW INFRASTRUCTURE FACILITY I.E. A WATER SUPPLY PROJECT. ALL THE WORKS STARTING FROM CONCEPTION TO COMMISSIONING HAVE BEEN TAKEN OVER BY THE APP ELLANT IN CONTRADISTINCTION TO THE PART OF WORK WHICH NORMALLY HAPPENS IN A CASE OF WORKS CONTRACT. THE APPELLANT IS ALSO LIABLE FOR FINANCIAL REQUIREMENTS AS IS EVIDENT FROM THE BANK GUARANTEE OFFERED AND INSURANCE COVER OBTAINED. IN VIEW OF THIS FACTUAL MATRIX OF THE CASE OF APPELLANT FOLLOWING DECISIONS RELIED UPON SUPPORT ITS CASE FAVOURABLY: - (A) CIT VS. ABG HEAVY INDUSTRIES LTD. (I.T. APPEALS NO. 1687, 2121,2291 AND 2663 OF 2009 & 416 OF 2010) - ORDER DT. 15/02/2010 OF BOMBAY HIGH COURT: - IN THIS CASE, THE ASSESSEE WAS AWARDED A CONTRACT FOR LEASING OF CONTAINER HANDLING CRANES AT JNPT. THE CONTENTION OF THE REVENUE THAT THE ASSESSEE WAS NOT ENGAGED IN DEVELOPING THE FACILITY AT ALL WAS NOT ACCEPTED. IT WAS HELD THAT THE TERM 'DEVELOPMENT'HAS NOT B EEN DEFINED FOR THE PURPOSE OF SECTION 80 LA AND MUST, THEREFORE, RECEIVE ITS ORDINARY AND NATURAL MEANING. UNDER THE TERMS OF CONTRACT WITH JNPT, THE ASSESSEE UNDERTOOK AN OBLIGATION FOR ITA NO. 3070/14 7 SUPPLYING, INSTALLING, TESTING, COMMISSIONING AND MAINTENANCE OF CONT AINER HANDLING EQUIPMENT NAMELY, THE CRANES IN QUESTION. CONSIDERING OTHER ASPECTS, THE ASSESSEE WAS HELD TO BE A DEVELOPER OF INFRASTRUCTURE FACILITY. (B) M/S. MAYTAS - NCC(JV) VS. ACIT (ITA NO. 1292/HYD/2010, A.V. 2007 - 08) - ORDER DATED 27/08/2012 OF I TAT, HYDERABAD. IN THIS CASE', IT HAS BEEN HELD THAT IF THE CONTRACTS INVOLVE DESIGN, DEVELOPMENT, OPERATION & MAINTENANCE, FINANCIAL INVOLVEMENT, AND DEFECT CORRECTION AND LIABILITY PERIOD, THEN SUCH CONTRACTS CAN NOT BE CALLED AS SIMPLE WORK S CONTRACT, TO DENY DEDUCTION U/ S. 80 LA. (C) DCIT VS. KOYA & COMPANY CONSTRUCTION PVT. LTD. (ITA NO. 1840 8T 1843 OF 2012, A.V. 2007 - 08), ORDER DATED 05/04/2013 OF ITAT, HYDERABAD. IN THIS CASE, IT HAS BEEN CLARIFIED THAT EVERY CONTRACTOR MAY NOT BE A DEVELOPER B UT EVERY DEVELOPER DEVELOPING LNFRASTRUCTURE FACILITY' ON BEHALF OF THE GOVT. IS A CONTRACTOR. THE WORD 'CONTRACTOR' IS USED TO DENOTE A PERSON ENTERING INTO AN AGREEMENT WITH THE GOVT. OR GOVT. UNDERTAKINGS. SUCH AN AGREEMENT IS A CONTRACT AND FOR THE P URPOSE OF THE AGREEMENT, A PERSON MAY BE CALLED AS CONTRACTOR 9S HE ENTERED INTO A CONTRACT. THEREFORE, THE CONTRACTOR AND DEVELOPER CAN NOT BE VIEWED DIFFERENTLY. THE DEVELOPER TAKES THE ENTREPRENEURIAL AND INVESTMENT RISKS IN TERMS OF DEPLOYMENT OF TEC HNICAL PERSONNEL, PLANT AND MACHINERY, TECHNICAL KNOW - HOW, EXPERTISE AND FINANCIAL RESOURCES WHILE CONTRACTOR TAKES ONLY BUSINESS RISKS. THE EXPLANATION BELOW SECTION SOIA(13) HAS BEEN INSERTED TO DENY TAX EXEMPTION TO THE ENTITIES WHO DOES ONLY MERE WORKS CONTRACT OR SUB - CONTRACT AS DISTINCT FROM A DEVELOPER. (D) B. T. PATIL & SONS BELGAUM CONSTRUCTIONS PVT. LTD. (ITA NO. 1408 & 1409/PN/2003) ORDER DT. 28/02/2013 OF ITAT, PUNE. IN THIS CASE, ORIGINAL APPEAL COULD NOT BE DECIDED BECAUSE OF DIFFERENCE OF OPINION BETWEEN HON'BLE MEMBERS OF THE PUNE BENCH OF ITAT. ACCORDINGLY, A LARGER BENCH WAS CONSTITUTED AND THE ISSUE OF DEDUCTION U/S. 80IA(4) WAS DECIDED AGAINST THE ASSESSEE VIDE ORDER REPORTED IN B.T. PATIL & SONS BELGAUM CONSTRUCTION PVT. LTD. VS. ACI T (2009) 126 TTJ 577 (MUM) (TM). AFTER THIS DECISION, APPEAL OF ASSESSEE WAS REFIXED FOR GIVING EFFECT TO THE DECISION OF LARGER BENCH U/S. 255(4). HOWEVER, THE SAME WAS DISMISSED IN LIMINE BECAUSE OF NON - APPEARANCE ON BEHALF OF THE ASSESSEE. AGGRIEVED A SSESSEE MOVED A MISCELLANEOUS APPLICATION BEFORE THE HON.BLE ITAT, PUNE TO RECALL THE ORDER. WITH THE ABUNDANT PRECAUTION, APPEAL WAS ALSO FILED ITA NO. 3070/14 8 BEFORE THE HON'BLE HIGH COURT, BOMBAY. IN THE MEANTIME, HON'BLE BOMBAY HIGH COURT PASSED AN ORDER IN THE CASE O F CIT VS. ABG HEAVY INDUSTRIES LTD. & ORS (2010) 322 ITR 323 (BOM) ALLOWING DEDUCTION U/S. 80IA(4) TO THE CONTRACTORS ENGAGED IN DEVELOPMENT OF INFRASTRUCTURE FACILITY. FURTHER, APPEAL OF ASSESSEE WAS RECALLED BY THE HON'BLE ITAT AND ACCORDINGLY, THE ASSES SEE REQUESTED TO WITHDRAW APPEAL BEFORE THE HON'BLE HIGH COURT. THE HON'BLE HIGH COURT, BOMBAY PASSED AN ORDER DIRECTING THE ITAT, PUNE TO CONSIDER THE DECISION IN THE CASE OF THE ABG HEAVY INDUSTRIES LTD. (SUPRA) WHILE PASSING ORDER GIVING EFFECT OF OPINI ON OF THIRD MEMBER U/S. 255(4). IN VIEW OF THIS DEVELOPMENT, HONBLE ITAT, PUNE PASSED AN ORDER DT. 28/02/2013 HOLDING THAT THE AMENDMENT OF 2909 IN NOT APPLICABLE IN THE CASE WHERE THE ASSESSEE EXECUTES THE WORK BY SHOULDERING INVESTMENT AND TECHNICAL RISK BY EMPLOYING TEAM OF TECHNICALLY AND ADMINISTRATIVELY QUALIFIED PERSONS AND IT IS LIABLE FOR LIQUIDATED DAMAGES IF FAILED TO FULFILL THE OBLIGATION LAID DOWN IN THE AGREEMENT AND ALSO SECURING BY BANK GUARANTEE. IT WAS FURTHER HELD THAT PRACTICALLY THE OP INION OF THIRD MEMBER WAS OVERRULED BY HON'BLE BOMBAY HIGH COURT THAT EVEN A CONTRACTOR IS A DEVELOPER. ACCORDINGLY, THE OPINION OF THIRD MEMBER OF HON'BLE TRIBUNAL WAS HELD TO BE NO LONGER GOOD LAW. IN RESULT, DEDUCTION UIS. 80IA(4) WAS ALLOWED TO ASSESSE E B.T. PATIL & SONS BELGAUM CONSTRUCTION PVT. LTD. IT IS NOTICED THAT IN THE CASE OF GROUP CONCERN OF THE ASSESSEE ON HAND I.E. SMC INFRASTRUCTURE PVT. LTD., DEDUCTION U] S. 80IA( 4) WAS DISALLOWED BY THE CIT(A) & HON'BLE ITAT, MUMBAI IN EARLIER YEARS FO LLOWING THE DECISION OF LARGER BENCH OF HON'BLE ITAT IN THE CASE OF B.T. PATIL & SONS BELGAUM CONSTRUCTION PVT. LTD. (SUPRA) WHICH NOW STANDS OVERRULED RATHER REVERSED AND HENCE, VERY BASIS OF DISALLOWANCE OF DEDUCTION U/S. 80IA(4) NO LONGER SURVIVES. 4. 5 THEREFORE, IN VIEW OF THE ABOVE FACTS AND LEGAL POSITION, IT EMERGES THAT THE APPELLANT JOINT VENTURE HAS CONCEIVED THE NEW INFRASTRUCTURE FACILITY BEING WATER SUPPLY SYSTEM & DESIGNED ALSO. IT IS EXECUTING AND FINALLY WILL COMMISSION THE SAME BY SHOULDE RING INVESTMENT AND TECHNICAL RISKS BY EMPLOYING TEAM OF TECHNICALLY AND ADMINISTRATIVELY QUALIFIED PERSONNEL AND ALSO LIABLE FOR LIQUIDATED DAMAGES, IF FAILED TO FULFIL L THE OBLIGATIONS LAID DOWN IN THE AGREEMENT AND ALSO SECURING BY BANK GUARANTEE. THE A PPELLANT IS ALSO LIABLE FOR DEFECTS CORRECTION UPTO A PERIOD OF FIVE YEARS FROM THE DATE OF COMMENCEMENT. FURTHER, THE APPELLANT HAS BEEN GIVEN WORK OF ENTIRE PROJECT WORTH RS.397.93 CRS. AND NOT PART OF IT AND HENCE, I HOLD THAT THE APPELLANT IS A 'DEVELO PER' AND NOT MERELY A 'WORKS CONTRACTOR'. THUS, RESPECTIVELY FOLLOWING THE ABOVE MENTIONED DECISIONS OF HON'BLE TRIBUNALS & JURISDICTIONAL HIGH COUT, I FURTHER HOLD THAT THE APPELLANT IS ENTITLED FOR DEDUCTION U/S. 80IA(4). HENCE, THE APPELLANT SUCCEEDS IN RESPECT OF GROUNDS NO. 1 & 2. ITA NO. 3070/14 9 4. AGAINST THE ABOVE ORDER OF CIT(A), THE REVENUE IS IN FURTHER APPEAL BEFORE US. 5. IT WAS CONTENDED BY LD. DR THAT THE TRIBUNAL HAVE DECIDED SIMILAR ISSUE IN THE SISTER CONCERN OF THE ASSESSEE, THEREFORE, THE AO HAS COR RECTLY DISALLOWED THE ASSESSEES CLAIM U/S.80IA OF THE ACT. HE FURTHER RELIED ON THE ORDER OF THE AO. 6. ON THE OTHER HAND, IT WAS CONTENDED BY LD. AR THAT SIMILAR ISSUE HAS BEEN DECIDED BY THE TRIBUNAL IN CASE OF ASSOCIATE CONCERN OF THE ASSESSEE EXACTLY ON THE ISSUE OF 80IA. HE INVITED OUR ATTENTION TO THE VARIOUS ORDERS OF THE TRIBUNAL IN CASE OF GROUP CONCERNS, WHICH ARE PLACED ON RECORD. LD. AR ALSO INVITED OUR ATTENTION TO THE FINDINGS RECORDED BY CIT(A) WITH RESPECT TO EACH AND EVERY OBJECTION RAISE D BY THE AO IN ASSESSMENT ORDER. AS PER LD. AR THE ISSUE IS SQUARELY COVERED BY THE ORDER OF THE TRIBUNAL IN CASE OF GROUP CONCERNS AND THE FACTS OF THE INSTANT CASE ARE EXACTLY SIMILAR, THEREFORE, APPEAL OF THE REVENUE DESERVES TO BE DISMISSED. 7. WE HAVE CONSIDERED RIVAL CONTENTIONS AND CAREFULLY GONE THROUGH THE ORDERS OF THE AUTHORITIES BELOW AS WELL AS ORDER OF THE TRIBUNAL IN THE CASE OF GROUP CONCERN OF THE ASSESSEE PLACED ON RECORD, AS WELL AS ORDER OF HON BLE BOMBAY HIGH COURT IN THE CASE OF ABG HE AVY INDUSTRIES LTD., 189 TAXMANN 54. WE FOUND THAT THE CIT(A) HAS DEALT WITH EACH AND EVERY OBJECTION/OBSERVATION OF THE AO AND AFTER RECORDING DUE FINDING REACHED TO THE CONCLUSION THAT THE ASSESSEE WAS ENGAGED IN THE INFRASTRUCTURE PROJECT AND NOT MERELY ACTING AS A CONTRACTOR. THE DETAILED FINDINGS ITA NO. 3070/14 10 RECORDED BY THE CIT(A) AT PARA 4 AS REPRODUCED ABOVE, HAVE NOT BEEN CONTROVERTED BY DEPARTMENT BY BRINGING ANY POSITIVE MATERIAL ON RECORD. WE ALSO FOUND THAT THE CIT(A) HAD CONSIDERED EACH AND EVERY PROJECT U NDERTAKEN BY THE ASSESSEE AND RECORDED A FINDING TO THE EFFECT THAT THE ASSESSEE HAS ENTERED INTO AN AGREEMENT WITH THE LOCAL AUTHORITY FOR EXECUTION OF NEW INFRASTRUCTURE FACILITY I.E. A WATER SUPPLY PROJECT. ALL THE WORKS STARTING FROM CONCEPTION TO COMM ISSIONING HAVE BEEN TAKEN OVER BY THE APPELLANT IN CONTRADISTINCTION TO THE PART OF WORK WHICH NORMALLY HAPPENS IN A CASE OF WORKS CONTRACT. THE APPELLANT IS ALSO LIABLE FOR FINANCIAL REQUIREMENTS AS IS EVIDENT FROM THE BANK GUARANTEE OFFERED AND INSURANCE COVER OBTAINED. ACCORDINGLY, WE DO NOT FIND ANY REASON TO INTERFERE IN THE FINDINGS RECORDED BY CIT(A) IN REACHING TO THE CONCLUSION THAT ASSESSEE WAS NOT WORKING AS A CONTRACTOR BUT AS A DEVELOPER OF THE INFRASTRUCTURE PROJECT. WE HAD ALSO GONE THROUGH T HE TERMS AND CONDITIONS OF WORK ORDER OF WATER SUPPLY AND DRAINAGE DEPARTMENT, PIMPRI CHINCHWAD CORPORATION, PUNE ALONG WITH DETAILED TENDER NOTICE OF DIRECT PIPELINE FROM PAWANA DAM, AGREEMENT DATED 30 TH APRIL, 2008 BETWEEN PIMPRI CHINCHWAD MUNICIPAL CORP ORATION AND NCC - SMC - INDU(JV), AGREEMENT OF JOINT VENTURE DATED 25 TH APRIL, 2008 AND DETAILED TENDER OF DIRECT PIPELINE PROJECT PAWANA DAM. AS PER THE TERMS AND CONDITIONS OF THE WORK ORDER, WE FOUND THAT ASSESSEE HAS WORKED AS DEVELOPER AND NOT AS A CONT RACTOR. FURTHERMORE, THE TRIBUNAL IN CASE OF GROUP CONCERNS OF THE ASSESSEE SMC INFRASTRUCTURE PVT. LTD. VIDE ORDER DATED 14 - 11 - 2014 HAVE ITA NO. 3070/14 11 DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE AFTER HAVING FOLLOWING OBSERVATIONS : - 2. RIVAL CONTENTIONS HAVE BEEN H EARD AND PERUSED THE RECORDS. SO FAR AS GROUND WITH REGARD TO THE CLAIM OF DEDUCTION U/S 80IA OF THE INCOME TAX ACT, 1961 IS CONCERNED, THE TRIBUNAL HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE IN ITA NO. 4842/MUM/2006, ITA NO. 514/MUM/2009, ITA NO. 788 5/MUM/2010 & ITA NO. 283/MUM/2011 ORDER DATED 20 - 6 - 2014. 3. THE TRIBUNAL VIDE ITS ORDER DATED 25TH JUNE, 2014 FOR A.YS 2004 - 05, 2005 - 06 AND 2007 - 08 AFTER FOLLOWING THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. ABG HEAVY INDUSTRIES LTD. , 189 TAXMANN 54 HELD THAT THE ASSESSEE WAS ENTITLED FOR CLAIM OF DEDUCTION U/S 80IA(4) OF THE ACT. THE PRECISE OBSERVATION OF THE TRIBUNAL WAS UNDER: - 10. WE HAVE HEARD BOTH THE PARTIES AND THEIR CONTENTIONS HAVE CAREFULLY BEEN CONSIDERED. WE HAVE CARE FULLY GONE THROUGH THE ASSESSMENT ORDER FOR A.Y 2004 - 05 WHICH IS THE BASE YEAR FOR WHICH THE ASSESSEE IS CLAIMING THAT IT IS ENTITLED TO GET DEDUCTION UNDER SECTION 80 IA(4). THE FIRST AND FOREMOST OBJECTION OF THE AO IS THAT ASSESSEE, WHILE EXECUTING THE PROJECT, HAD ACTED IN THE CAPACITY OF A CONTRACTOR, THEREFORE, THE DEDUCTION CANNOT BE ALLOWED TO THE ASSESSEE AS PRE - REQUISITE OF THE SECTION TO ENABLE THE ASSESSEE TO CLAIM DEDUCTION IS THAT HE SHOULD BE A DEVELOPER. 10.1 THE SECOND CONTENTION OF AO IS THAT ASSESSEE HAS ONLY BUILT SOME PART OF THE PROJECT AND IT HAS NEITHER OPERATED OR MAINTAINED THE INFRASTRUCTURE PROJECT WHICH IS ALSO A CONDITION PRECEDENT TO GRANT DEDUCTION UNDER SECTION 80 IA(4). THE AO HAS REJECTED THE CONTENTION OF THE ASSESSEE TH AT ITS CASE IS SQUARELY COVERED BY DECISION OF ITAT IN THE CASE OF PATEL ENGINEERING LTD. (SUPRA). AS AGAINST SUCH CASE OF THE AO LD. CIT(A) HAS FOLLOWED MAINLY THE DECISION OF ITAT IN THE CASE OF PATEL ENGINEERING LTD. (SUPRA) AND HAS ALLOWED RELIEF TO TH E ASSESSEE. WE HAVE TO EXAMINE THAT WHETHER OR NOT ASSESSEE IS ENTITLED TO GET DEDUCTION UNDER SECTION 80 IA(4) IN THE LIGHT OF AFOREMENTIONED OBJECTION OF THE AO AND PLEA OF THE ASSESSEE. IT IS THE CASE OF THE ASSESSEE THAT AO HAS COMMITTED AN ERROR IN HO LDING THAT ASSESSEE HAS ACTED AS A CONTRACTOR IN PLACE OF THE CLAIM OF THE ASSESSEE THAT IT HAS WORKED AS A DEVELOPER OF THE INFRASTRUCTURE PROJECT. FOR RAISING SUCH CONTENTION THE ASSESSEE HAS PLACED RELIANCE NOT ONLY ON THE DECISION IN THE CASE OF PATEL ENGINEERING LTD. (SUPRA) BUT ALSO ON THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF ABG HEAVY INDUSTRIES LTD. (SUPRA). IT MAY BE MENTIONED HERE THAT AO HAS PASSED THE IMPUGNED ASSESSMENT ORDER FOR A.Y 2004 - 05 ON 31/3/2006 WHEN THE BENEFIT OF DECI SION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT V/S ABG HEAVY INDUSTRIES LTD. WAS NOT AVAILABLE. THE ASSESSEE IN THAT CASE DID NOT DEVELOP, OPERATE OR ITA NO. 3070/14 12 MAINTAIN THE ENTIRE PORT BUT ONLY PART OF THE FUNCTION OF THE PORT WAS DEVELOPED AND MAINTAINED BY T HE ASSESSEE. LD. AO IN THAT CASE WAS OF THE VIEW THAT THE ASSESSEE MERELY ENGAGED IN THE BUSINESS OF SUPPLYING, INSTALLING, TESTING, COMMISSIONING AND MAINTAINING CRANES AT THE PORT AND WAS NOT IN THE BUSINESS OF DEVELOPING , MAINTAINING AND OPERATING OF P ORT. THIS CONTENTION OF THE ASSESSEE IS ALSO RECORDED IN PARA - 7 OF THE DECISION WHICH HAS ALREADY BEEN REPRODUCED IN THE ABOVE PART OF THIS ORDER. (PARA - 7). 10.2 WHILE ADJUDICATING THE AFOREMENTIONED CONTENTION OF THE REVENUE , THEIR LORDSHIPS IN PARA - 1 6 HAVE OBSERVED THAT SUCH SUBMISSION CANNOT BE ACCEPTED. THE EXPRESSION DEVELOPMENT HAS NOT BEEN ARTIFICIALLY DEFINED FOR THE PURPOSE OF SECTION 80 IA(4) OF THE ACT MUST, THEREFORE, RECEIVED ITS ORDINARY AND NATURAL MEANING. UNDER THE TERMS OF THE CONTRA CT BETWEEN THE ASSESSEE AND JNPT THE ASSESSEE UNDERTOOK AN OBLIGATION TO SUPPLY, INSTALLING, TESTING, COMMISSIONING AND MAINTENANCE OF CONTAINER HANDLING EQUIPMENTS NAMELY THE CRANES IN QUESTION. THEIR LORDSHIPS IN PARA - 17 HAVE OBSERVED THAT THE OBLIGATION S WHICH HAVE BEEN ASSUMED BY THE ASSESSEE UNDER THE TERMS OF THE CONTRACT ARE OBLIGATIONS INVOLVING THE DEVELOPMENT OF AN INFRASTRUCTURE FACILITY. SECTION 80 IA(4) OF THE ACT ESSENTIALLY CONTEMPLATED A DEDUCTION IN A SITUATION WHERE AN ENTERPRISE CARRIED O N A BUSINESS OF DEVELOPING, MAINTAINING AND OPERATING INFRASTRUCTURE FACILITY. A PORT WAS DEFINED TO INCLUDE WITHIN THE PURVIEW OF THE EXPRESSION INFRASTRUCTURE FACILITY. THE OBLIGATIONS, WHICH THE ASSESSEE ASSUMED UNDER THE TERMS OF THE CONTRACT WERE NO T MERELY FOR SUPPLY AND INSTALLATION OF THE CRANES BUT INVOLVED A CONTINUOUS OBLIGATION FROM THE SUPPLY OF THE CRANES TO THE INSTALLATION, TESTING, COMMISSIONING, OPERATION AND MAINTENANCE OF CRANES FOR A TERM OF 10 YEARS, AFTER WHICH THE CRANES WERE TO VE ST IN JNPT FREE OF COST. THE ASSESSEE DID NOT HAVE TO DEVELOP THE ENTIRE PORT IN ORDER TO QUALIFY FOR DEDUCTION UNDER SECTION 80 IA(4). PARLIAMENT DID NOT LEGISLATE A CONDITION IMPOSSIBLE OF COMPLIANCE. 10.3 IF THE FACTS OF THE PRESENT CASE ARE TO BE EXA MINED IN THE LIGHT OF AFOREMENTIONED DECISION OF HONBLE BOMBAY HIGH COURT, THEN IT CAN BE SAID THAT FOR CLAIMING DEDUCTION UNDER SECTION 80 IA(4), IT IS NOT NECESSARY FOR THE ASSESSEE TO DEVELOP THE ENTIRE PROJECT IN ORDER TO QUALIFY FOR A DEDUCTION UNDER SECTION 80 IA(4). IF THE PROVISIONS ARE SO CONSTRUED THEN IT WILL BE A CONDITION IMPOSSIBLE OF COMPLIANCE BECAUSE OF THE MAGNITUDE OF THE ENTIRE PROJECT. FOR QUALIFYING DEDUCTION UNDER SECTION 80 IA(4) WHAT WOULD BE NECESSARY WILL BE THAT THE WORK CARRIED ON BY THE ASSESSEE MUST BE AN INTEGRAL PART OF THE PROJECT AND IF IT IS SO, THEN IT CANNOT BE SAID THAT ASSESSEE IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80 IA(4) FOR THE REASON THAT THE ASSESSEE ON ITS OWN DID NOT DEVELOP AN INFRASTRUCTURE PROJECT. TH EREFORE, OBSERVATIONS OF THE AO THAT ASSESSEE DID NOT DEVELOP AN INFRASTRUCTURE PROJECT AND ONLY PART OF THE WORK WAS CARRIED OUT CANNOT DISENTITLE THE ASSESSEE TO CLAIM THE DEDUCTION. ITA NO. 3070/14 13 10.4. THE NATURE OF WORKS CARRIED OUT BY THE ASSESSEE REGARDING THE PR OJECT HAVE BEEN STATED IN PARA - 4 OF THE ASSESSMENT ORDER FOR A.Y.2004 - 05. IT INTER - ALIA INCLUDE MANUFACTURING , SUPPLYING , LOWERING, LAYING, JOINTING, TESTING AND COMMISSIONING OF 2200 MM DIAMETER MS PUMPING MAIN WITH CEMENT MORTAR. IN - LINING & OUT - COATIN G FROM CLEAR WATER RESERVOIR AT GODAKONDALA TO MBR AT GUNGAL AND SIMILAR ACTIVITIES WERE CARRIED OUT IN RESPECT OF OTHER PLACES WHICH HAVE BEEN SPECIFIED BY THE AO. THE ACTIVITY OF THE ASSESSEE IS NOT LIMITED ONLY TO CONSTRUCTION OF THE PROJECT BUT AS PER THE TENDER THE ASSESSEE HAD TO SUBMIT BANK GUARANTEE FOR COMPLETION OF THE CONTRACT AND AS PER CLAUSE - 88 OF THE CONTRACT THE ASSESSEE IS ALSO LIABLE FOR LIQUIDATED DAMAGES AND THE MAXIMUM AMOUNT FOR PENALTY HAS BEEN PRESCRIBED WHICH IS NOT TO EXCEED 5% OF THE CONTRACT VALUE. THERE IS ALSO DESCRIPTION OF DEFECT LIABILITY PERIOD IN CLAUSE - 89 WHICH IS THE LIABILITY OF THE ASSESSEE UNDER THE CONTRACT FOR 24 MONTHS FROM THE DATE OF SUCCESSFUL COMPLETION OF THE WORK AND TAKEN OVER BY VISAKHAPATNAM MUNICIPAL CORPO RATION. KEEPING IN VIEW THE ENTIRETY OF FACTS AND AFOREMENTIONED DECISION OF HONBLE BOMBAY HIGH COURT, IT CANNOT BE SAID THAT ASSESSEE DID NOT ACT IN THE CAPACITY OF DEVELOPER AND IT HAS ALREADY BEEN MENTIONED THAT TO BE ENTITLED TO CLAIM DEDUCTION UNDER SECTION 80 IA(4) IT IS NOT NECESSARY THAT ENTIRE INFRASTRUCTURE PROJECT SHOULD BE DEVELOPED BY THE ASSESSEE. 10.5 NOW THE NEXT QUESTION WILL BE THAT WHETHER TO CLAIM DEDUCTION UNDER SECTION 80 IA(4) IT IS NECESSARY FOR AN ASSESSEE NOT ONLY TO DEVELOP THE PROJECT BUT ALSO TO OPERATE AND MAINTAIN THE INFRASTRUCTURE FACILITY. THIS ISSUE IS ALSO NO MORE RES - INTEGRA AND IS COVERED BY THE AFOREMENTIONED DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. ABG HEAVY INDUSTRIES LTD. (SUPRA). IN THAT CASE IT WAS THE CONTENTION OF THE REVENUE THAT FOR ASSESSMENT YEAR 1997 - 98 AND 1998 - 99, IT WAS NECESSARY FOR THE ASSESSEE TO CUMULATIVELY FULFILL THE REQUIREMENT OF DEVELOPING, OPERATING AND MAINTAINING INFRASTRUCTURE FACILITY. IT WAS PLEADED BY THE REVENUE TH AT, EVEN IF IT BE HELD TO HAVE DEVELOPED THE FACILITY IT CANNOT BE REGARDED AS OPERATING THE FACILITY. THEIR LORDSHIPS HAVE REFERRED TO SUCH CONTENTION OF REVENUE IN PARA - 19 OF THE DECISION AND THEY OBSERVED THAT IT IS NOT POSSIBLE TO ACCEPT SUCH SUBMISSIO NS. THEIR LORDSHIPS HAVE OBSERVED THAT IT HAS ALREADY BEEN NOTED THAT ASSESSEE HAD AS A MATTER OF FACT DEVELOPED THE FACILITY. THEIR LORDSHIPS AFTER CONSIDERING THE PROVISIONS AND VARIOUS CIRCULARS OF CBDT AND ALSO THE JUDICIAL PRONOUNCEMENTS HAVE CONCLUDE D IN PARA - 22 OF THE DECISION THAT AFTER SECTION 80IA WAS AMENDED BY FINANCE ACT, 2001, THE SECTION APPLIES TO AN ENTERPRISE CARRYING ON THE BUSINESS OF (I) DEVELOPING; OR (II) OPERATING AND MAINTAINING; OR (III) DEVELOPING, OPERATING AND MAINTAINING ANY IN FRASTRUCTURE FACILITY WHICH FULFILLS CERTAIN CONDITIONS. FOR THE SAKE OF COMPLETENESS PARA - 22 & 23 OF THE DECISION IS REPRODUCED BELOW: ITA NO. 3070/14 14 22. ANOTHER SUBMISSION WHICH WAS URGED ON BEHALF OF THE REVENUE IS THAT UNDER CLAUSE (III) OF SUB - SECTION (4A) OF SEC TION 80 - IA, ONE OF THE CONDITIONS IMPOSED WAS THAT THE ENTERPRISE MUST START OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY ON OR AFTER 1 - 4 - 1995. THE SAME REQUIREMENT IS EMBODIED IN SUB - CLAUSE (C) OF CLAUSE (I) OF SUB - SECTION (4) OF THE AMENDED PROV ISIONS OF SECTION 80 - IA. ON THIS BASIS, IT WAS URGED THAT SINCE THE ASSESSEE WAS NOT OPERATING AND MAINTAINING THE FACILITY, HE DID NOT FULFILL THE CONDITION. THIS SUBMISSION IS FALLACIOUS BOTH IN FACT AND IN LAW. AS A MATTER OF FACT, THE TRIBUNAL HAS ENTE RED A FINDING THAT THE ASSESSEE WAS OPERATING THE FACILITY AND THIS FINDING HAS BEEN CONFIRMED EARLIER IN THIS JUDGMENT. THAT THE ASSESSEE WAS MAINTAINING THE FACILITY IS NOT IN DISPUTE. THE FACILITY WAS COMMENCED AFTER 1 - 4 - 1995. THEREFORE, THE REQUIREMEN T WAS MET IN FACT. MOREOVER, AS A MATTER OF LAW, WHAT THE CONDITION ESSENTIALLY MEANS IS THAT THE INFRASTRUCTURE FACILITY SHOULD HAVE BEEN OPERATIONAL AFTER 1 - 4 - 199.. AFTER SECTION 80 - IA WAS AMENDED BY THE FINANCE ACT OF 2001, THE SECTION APPLIES TO AN ENT ERPRISE CARRYING ON THE BUSINESS OF (I) DEVELOPING; OR(II)OPERATING AND MAINTAINING, OR (III) DEVELOPING, OPERATING AND MAINTAINING ANY INFRASTRUCTURE FACILITY WHICH FULFILS CERTAIN CONDITIONS. THOSE CONDITIONS ARE (I) OWNERSHIP OF THE ENTERPRISE BY A COMP ANY REGISTERED IN INDIA OR BY A CONSORTIUM; (II) AN AGREEMENT WITH THE CENTRAL OR STATE GOVERNMENT, LOCAL AUTHORITY OR STATUTORY BODY; AND (III) THE START OF OPERATION AND MAINTENANCE OF THE INFRASTRUCTURE FACILITY ON OR AFTER 1 - 4 - 1995. THE REQUIREMENT THA T 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 THE AMENDMENT OF THE PROVISION BY THE FINANCE ACT OF 2001 WOULD BE DEFEATED. A HARMONIOUS READING OF THE PROVISION I N ITS ENTIRETY WOULD LEAD TO THE CONCLUSION THAT THE DEDUCTION IS AVAILABLE TO AN ENTERPRISE WHICH (I) DEVELOPS; OR (II) OPERATES AND MAINTAINS; OR (III) DEVELOPS, MAINTAINS AND OPERATES THAT INFRASTRUCTURE FACILITY. HOWEVER, THE COMMENCEMENT OF THE OPERAT ION AND MAINTENANCE OF THE INFRASTRUCTURE FACILITY SHOULD BE AFTER 1 - 4 - 1995. IN THE PRESENT CASE, THE ASSESSEE CLEARLY FULFILLED THIS CONDITION( EMPHASIS OURS). 23. IN THE VIEW WHICH WE HAVE TAKEN, ALL THE ASSESSMENT YEARS IN QUESTION TO WHICH THIS BATCH OF APPEALS RELATES WOULD BE GOVERNED, BY THE SAME PRINCIPLE. THE SUBSEQUENT AMENDMENT OF SECTION 80 - IA(4A) OF THE ACT TO CLARIFY THAT THE PROVISION WOULD APPLY TO AN ENTERPRISE ENGAGED IN (I) DEVELOPING; OR (II) OPERATING AND MAINTAINING; OR (III) DEVELOP ING, OPERATING AND MAINTAINING AN INFRASTRUCTURE FACILITY WAS REFLECTIVE OF A POSITION ITA NO. 3070/14 15 WHICH WAS ALWAYS CONSTRUED TO HOLD THE FIELD. BEFORE THE AMENDMENT THAT WAS BROUGHT ABOUT BY PARLIAMENT BY THE FINANCE ACT OF 2001, WE HAVE ALREADY NOTED THAT THE CONSIS TENT LINE OF CIRCULARS OF THE BOARD POSTULATED THE SAME POSITION. THE AMENDMENT MADE BY PARLIAMENT TO SECTION 80 - IA(4) OF THE ACT SET THE MATTER BEYOND ANY CONTROVERSY BY STIPULATING THAT THE THREE CONDITIONS FOR DEVELOPMENT, OPERATION AND MAINTENANCE WERE NOT INTENDED TO BE CUMULATIVE IN NATURE. 10.6 ACCORDING TO AFOREMENTIONED OBSERVATIONS OF THEIR LORDSHIPS, PRE OR POST AMENDMENT THE REQUIREMENT OF SECTION 80 IA(4) IS THAT DEDUCTION WILL BE AVAILABLE AN ENTERPRISE ENGAGED IN (I) DEVELOPING; OR (II) OPE RATING AND MAINTAINING OR (III) DEVELOPING, OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY AND SUCH POSITION WAS TO BE ALWAYS CONSTRUE TO HOLD THE FIELD. THEREFORE, ONLY DEVELOPMENT OF INFRASTRUCTURE PROJECT IS SUFFICIENT TO MAKE ENTITLE AN ENTERPRI SE TO BE ELIGIBLE FOR DEDUCTION UNDER SECTION 80 IA(4). 10.7 IT MAY ALSO BE POINTED OUT THAT THE APPEAL FILED BY THE REVENUE FOR A.Y 2004 - 05 WAS EARLIER ALLOWED BY THE TRIBUNAL ON THE BASIS OF LARGER BENCH DECISION IN THE CASE OF M/S. B.T.PATEL & SONS BE LGAUM CONSTRUCTION PVT. LTD.(SUPRA) AND IT WAS BROUGHT TO OUR NOTICE THAT IN VIEW OF THE SUBSEQUENT DECISION OF HONBLE BOMBAY HIGH COURT, LARGER BENCH DECISION WAS NOT FOLLOWED BY THE TRIBUNAL AND THE MATTER WAS DECIDED BY THE TRIBUNAL VIDE ITS ORDER DATE D 28/2/2013 IN THE CASE OF B.T.PATEL & SONS BELGAUN CONSTRUCTION PVT. LTD.(SUPRA), A COPY OF THIS DECISION WAS PLACED ON OUR RECORD. THE DIRECTIONS OF HONBLE BOMBAY HIGH COURT IN PURSUANCE TO WHICH SUCH ORDER WAS PASSED ARE ALSO DESCRIBED IN THE ORDER IN PARA - 5 AND THE RELEVANT PARA - 5 IS REPRODUCED BELOW: 5. THE HONBLE BOMBAY HIGH COURT PERMITTED THE COUNSEL OF THE ASSESSEE TO WITH WITHDRAW THE SAID APPEALS. WHILE PASSING THE ORDER THE HONBLE COURT HAS KEPT ALL THE CONTENTIONS OPEN AND FURTHER DIRECTE D THE TRIBUNAL TO CONSIDER THE DECISION OF THE ABG HEAVY INDUSTRIES AND OTHER DECISIONS WHILE PASSING THEIR ORDER GIVING EFFECT TO THE OPINION OF THE THIRD MEMBER AS PER THE PROVISIONS OF SECTION 255(4) OF THE ACT. THE RELEVANT PORTION OF THE SAID ORDER OF HONBLE JURISDICTIONAL HIGH COURT IN ITA NO.1307 OF 2011 FOR A.Y.2000 - 01 AND 1640 OF 2011 FOR A.Y 2001 - 02 IS AS UNDER: 1. SINCE THE TRIBUNAL HAS RECALLED THE IMPUGNED ORDER DATED 23.03.2011, THE APPELLANT IS WITHDRAWING ITS APPEAL. 2. FURTHER, WHILE CONSIDERING THE MATTER AFRESH, THE TRIBUNAL WILL TAKE INTO CONSIDERATION ALL DECISIONS INCLUDING THE DECISION OF THIS COURT IN THE MATTER OF CIT V. ABG HEAVY INDUSTRIES LTD. REPORTED IN 322 ITR 323. ALL CONTENTIONS ARE KEPT OPEN. 3. THE APPEAL IS DISMIS SED OF IN ABOVE TERMS. ITA NO. 3070/14 16 10.8 IN THE ORDER THE TRIBUNAL AFTER CONSIDERING THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. ABG HEAVY INDUSTRIES LTD. (SUPRA) HAS DECIDED THE ISSUE IN FAVOUR OF ASSESSEE. WHILE DECIDING THE PRESENT APPEAL VI DE ORDER DATED 9/2/2010 IT WAS FOUND BY THE TRIBUNAL THAT BOTH SIDES WERE IN AGREEMENT THAT THE FACTS AND CIRCUMSTANCES ARE MUTATISMUTANTIS SIMILAR TO THOSE CONSIDERED BY THE LARGER BENCH OF THE TRIBUNAL IN THE CASE OF B.T.PATEL & SONS BELGAUN CONSTRUCTION PVT. LTD.(SUPRA). THE SAID ORDER OF THE TRIBUNAL WAS RECALLED ONLY FOR THE REASON THAT THE LARGER BENCH DECISION IN THE CASE OF M/S. B.T.PATEL & SONS BELGAUM CONSTRUCTION PVT. LTD.(SUPRA) WAS NO MORE GOOD LAW IN VIEW OF SUBSEQUENT DECISION OF HONBLE BOMB AY HIGH COURT IN THE CASE OF CIT VS. ABG HEAVY INDUSTRIES (SUPRA). THE ORDER IN THE CASE OF PRESENT ASSESSEE WAS NOT RECALLED FOR THE REASON THAT THERE IS ANY DIFFERENCE IN THE FACTS AND CIRCUMSTANCES OF THE PRESENT CASE AND THE DECISION IN THE CASE OF B.T .PATEL & SONS BELGAUN CONSTRUCTION PVT. LTD.(SUPRA). NOW THE DECISION OF LARGER BENCH IS NO MORE GOOD LAW AND THE DIVISION BENCH OF THE TRIBUNAL IN THE CASE OF B.T.PATEL & SONS BELGAUN CONSTRUCTION PVT. LTD.(SUPRA) HAS DECIDED THIS ISSUE IN FAVOUR OF THE A SSESSEE FOLLOWING THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE OF ABG HEAVY INDUSTRIES LTD. (SUPRA). PARA - 4 OF THE SAID ORDER IS REPRODUCED BELOW: 14. IN THIS BACKGROUND, THE ASSESSEE COULD CERTAINLY CLAIM THE DEDUCTIONS UNDER THE PROVISION OF SECTION 80 IA. ONE HAS TO SEE THE SUBSTANCE AND NOT THE FORM ESSENTIALLY, THOUGH IT WAS A JOINT VENTURE, IT WAS CONVERTED INTO ASSESSEES VENTURE. THE OTHER VENTURER WITHDRAW AND THE ENTIRE WORK WAS EXECUTED BY THE ASSESSEE THOUGH IN THE NAME OF JOINT VEN TURE. THE JOINT VENTURE IS NOTHING BUT THE VENTURE OF THE ASSESSEE COMPANY AND THE OTHER PERSON NOT BEING A PARTY AFTER DRAWING THE QUESTION OF JOINT VENTURE DOES NOT ARISE. THE VENTURE WAS FULLY CARRIED OUT BY THE ASSESSEE COMPANY. TAKING THE SUBSTANCE OF THE TRANSACTION, THE ASSESSEE ARE ENTITLED TO ALL THE PROFITS IN RESPECT OF THE CONTRACT EXECUTED BY THEM, HENCE THE ASSESSEE WOULD CERTAINLY BE ENTITLED TO DEDUCTION UNDER THE PROVISIONS OF 80IA AS THEY HAVE FULFILLED ALL THE OTHER CONDITIONS. THIS VIEW GET FROM DECISION IN THE CASE OF ITAT, INDORE BENCH, IN CASE OF AYUSH AJAY CONSTRUCTIONS LTD. (SUPRA). THUS, WHILE GIVING EFFECT TO THE OPINION OF THIRD MEMBER U/S.255(4) OF THE ACT, WE TAKE VIEW IN CONFORMITY WITH ORDER OF JURISDICTIONAL HIGH COURT IN CAS E OF ABG HEAVY INDUSTRIES LTD. (SUPRA) AVAILABLE AT THIS TIME THOUGH CONTRARY TO THE OPINION EXPRESSED BY THE THIRD MEMBER. SO IN VIEW OF ABOVE DISCUSSION, FOLLOWING THE RATION OF JURISDICTIONAL HIGH COURT IN THE CASE OF ABG INDUSTRIES LTD. (SUPRA), THE AS SESSING OFFICER IS DIRECT TO ALLOW DEDUCTION U/S. 80 IA OF THE ACT TO THE ASSESSEE WITH REGARD TO THE PROJECTS IN QUESTION FOR BOTH THE YEARS. THIS MATTER IS DISPOSED OFF ACCORDINGLY. ITA NO. 3070/14 17 THEREFORE, ALSO THE ISSUE IS COVERED IN FAVOUR OF THE ASSESSEE BY THE AFOREMENTIONED DECISION OF CO - ORDINATE BENCH. 10.9 IN VIEW OF ABOVE DISCUSSION, WE HOLD THAT ASSESSEE IS ENTITLED FOR DEDUCTION UNDER SECTION 80 IA(4) AND DEPARTMENTAL APPEAL FOR A.Y 2004 - 05 AND 2005 - 06 ARE DISMISSED. 11. SO FAR AS IT RELATE TO APPEAL S OF THE ASSESSEES FOR A.Y 2007 - 08, IT HAS ALREADY BEEN MENTIONED THAT FOLLOWING THE AFOREMENTIONED DECISION OF LARGER BENCH IN THE CASE OF B.T.PATEL & SONS BELGAUN CONSTRUCTION PVT. LTD. (SUPRA), LD. CIT(A) HAS HELD THAT ASSESSEE IS NOT ENTITLED TO GET DE DUCTION UNDER SECTION 80 IA(4). IT HAS ALREADY BEEN POINTED OUT THAT THE LARGER BENCH DECISION IN THE CASE OF B.T.PATEL & SONS BELGAUN CONSTRUCTION PVT. LTD. (SUPRA) IS NO MORE A GOOD LAW AND IN THE CASE OF THAT ASSESSEE ITSELF, DIVISION BENCH HAS HELD THA T ASSESSEE IS ENTITLED FOR DEDUCTION UNDER SECTION 80IA(4) OF THE ACT. WE HAVE ALREADY HELD THAT ASSESSEE IS ENTITLED FOR DEDUCTION UNDER SECTION 80 IA(4) IN RESPECT OF A.Y. 2004 - 05 AND 2005 - 06. THAT DECISION WILL BE APPLICABLE FOR A.Y 2007 - 08 IN CASE OF B OTH THE ASSESEES. THEREFORE, THESE APPEALS OF THE ASSESSEES ARE ALSO ALLOWED. 4. WE HAVE CAREFULLY GONE THROUGH THE ORDER OF THE TRIBUNAL IN ASSESSEES OWN CASE/ASSOCIATED CONCERNS CASE AS REPRODUCED ABOVE AND FOUND THAT ISSUE 80IA(4) WAS DECIDED BY TH E TRIBUNAL. THE FACTS AND CIRCUMSTANCES IN THE CASE DURING THE YEAR UNDER CONSIDERATION ARE EXACTLY SAME. RESPECTFULLY FOLLOWING THE ORDER OF THE TRIBUNAL, WE DIRECT THE A.O. TO ALLOW THE CLAIM FOR DEDUCTION U/S 80IA(4) OF THE ACT. 8 . WE ALSO FOUND THAT THE TRIBUNAL IN CASE OF NCC - SMC(JV) AND M/S SMC UNITY(JV), ITA NO. 4842/MUM/2006 AND ITA NO. 514/MUM/2009, RESPECTIVELY DECIDED THE ISSUE OF 80IA IN FAVOUR OF THE ASSESSEE VIDE ORDER DATED 20 - 6 - 2014 . THE TRIBUNAL IN CASE OF NCC SMC UNIT (JV) , ITA NO. 7398/M UM/2011, VIDE ORDER DATED 25 - 6 - 2014 HAS ALSO DECIDED THE SIMILAR GROUND IN FAVOUR OF THE ASSESSEE. THE H BENCH OF MUMBAI TRIBUNAL IN CASE OF M/S SMC INFRASTRUCTURE PVT. LTD., ITA NO. 5503/MUM/2011 HAS ALSO DECIDED THE ISSUE OF DEDUCTION U/S.80IA(4) IN FAV OUR OF THE ASSESSEE. RESPECTFULLY FOLLOWING THESE ORDERS OF THE TRIBUNAL, WE DO NOT FIND ANY MERIT IN THE ACTION OF THE AO FOR DISALLOWING ITA NO. 3070/14 18 ASSESSEES CLAIM FOR DEDUCTION U/S.80IA BY WRONGLY OBSERVING THAT ASSESSEE WAS WORKING AS A CONTRACTOR AND NOT AS A D EVELOPER OF INFRASTRUCTURE PROJECT. 9 . IN VIEW OF THE ABOVE DISCUSSION, WE DO NOT FIND ANY INFIRMITY IN THE ORDER OF CIT(A) FOR ALLOWING ASSESSEES CLAIM FOR DEDUCTION U/S.80IA(4) OF THE ACT. 10 . IN THE RESULT, APPEAL OF THE REVENUE IS DISMISSED. O RDER PR ONOUNCED IN THE OPEN COURT ON THIS 03/02 / 201 6 . SD/ - SD/ - ( AMARJIT SINGH ) ( R.C.SHARMA ) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI ; DATED 03/02 /201 6 . . /PKM , . / PS / COPY OF THE ORDER FORWARDED TO : / BY ORDER, / ( ASSTT. REGISTRAR) , / ITAT, MUMBAI 1. / THE APPELLANT 2. / T HE RESPONDENT. 3. ( ) / THE CIT(A), MUMBAI. 4. / CIT 5. , , / DR, ITAT, MUMBAI 6. / GUARD FILE. //TRUE COPY//