United Bank of India, Kolkata V. DCIT, Circle - 6, Kolkata, Kolkata

ITA 346/KOL/2012

• Counselvise Citation: [2013] 120 COUNSELVISE.COM (IT) 3154 (ITAT-KOLKATA)
• Duration Of Justice: 1 year(s) 3 month(s) 13 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 19-06-2013
• Appeal Filed By: Assessee
• Bench Allotted: B
• Assessment Year: 2008-2009
• Appeal Filed On: 06-03-2012
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: A K MAHAPATRA LD CITSR
• Assessee Lawyers: SOUMITRA CHOWDHURY LD AR
• Keywords: Retrospective amendment; Bad and doubtful debts; Competent authority
• Section: 11; 14A; 194C

Judgement Text

ITA NOS. 346 & 605/KOL/12-PB-B-GM 1 , B IN THE INCOME TAX APPELLATE TRIBUNAL, B BENCH: KO LKATA , B , , IN THE INCOME TAX APPELLATE TRIBUNAL, BENCH- B CALCUTTA ( ) BEFORE . . , SHRI N.S. SAINI, ACCOUNTANT MEMBER ! /AND '#'$ 1 & , SHRI GEORGE MATHAN, JUDICIAL MEMBER !' / ITA NO. 346/ KOL/2011 ASSESSMENT YEAR : 2008-09 UNITED BANK OF INDIA PAN: AAACU5624P - - -VERSUS -. D.C.I.T, CIRCLE-6, KOLKATA ( &) / APPELLANT ) ( *+&) / RESPONDENT ) !' / ITA NO. 1685/KOL/2011 ASSESSMENT YEAR : 2008-09 D.C.I.T, CIRCLE-6, KOLKATA - - - VERSUS -. UNITED BANK OF INDIA PAN: AAACU5624P ( &) / APPELLANT ) ( *+&) / RESPONDENT ) &) - /FOR THE APPELLANT / SHRI SOUMITRA CHOWDHURY, ADVOCATE, LD.AR *+&) - / FOR THE RESPONDENT: / SHRI A.K. MAHAPATRA, LD. CIT/SR.DR . / 0 1 /DATE OF HEARING : 19-06-2013 23 0 1 /DATE OF PRONOUNCEMENT: 19-06-2013 4 / ORDER 567 / PER BENCH ITA NO. 346/KOL/2012 IS AN APPEAL FILED BY THE A SSESSEE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS),VI, KO LKATA IN APPEAL NO. 114/CIT(A)-VI, R- 6/10-11/KOL DATED 26.12.2011 AND ITA NO. 605/KOL/2 012 IS AN APPEAL FILED BY THE REVENUE AGAINST THE ORDER OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS), VI, KOLKATA IN APPEAL NO. 114/CIT(A)-VI/R-6/10-11 DATED 26-12-2011 FOR THE ASSESSMENT YEAR 2008-09. 2. THE APPEAL FILED BY THE REVENUE IS TIME BARRED B Y 14 DAYS. FOR WHICH A CONDONATION PETITION OF DELAY IN FILING THE APPEAL HAS BEEN FIL ED BY THE REVENUE. AFTER CONSIDERING THE SAME THE DELAY IN FILING THE APPEAL BY THE REVENU E IS CONDONED AND THE APPEAL IS ADMITTED . ITA NOS. 346 & 605/KOL/12-PB-B-GM 2 3. SHRI SOUMITRA CHOWDHURY, S.K TULSIYAN, ADVOCATE , LEARNED .AUTHORISED REPRESENTATIVE REPRESENTED ON BEHALF OF THE ASSESS EE AND SHRI A. K. MAHAPATRA, LEARNED. CIT/SR.DR REPRESENTED ON BEHALF OF THE REVENUE. . ITA NO.346/KOL/2012 A.Y 2008-09 (BY THE ASSESSEE) 4. IN THIS ASSESSEES APPEAL, THE ASSESSEE HAS RAIS ED THE FOLLOWING GROUNDS OF APPEAL:- 1. FOR THAT ON THE FACTS OF THE CASE, THE ORDER PAS SED BY THE LD. C.I.T. (APPEAL) IS COMPLETELY ARBITRARY, UNJUSTIFIED AND I LLEGAL. 2. FOR THAT ON THE FACTS OF THE CASE, THE LD. C.I.T .(APPEAL) WAS WRONG IN ADJUSTING ENTIRE BAD DEBT WRITTEN OFF AMOUNTING TO RS.274,52,16,243/- FROM PROVISION FOR BAD DEBT ALLOWED U/S 36(1)(VII I NSTEAD OF ADJUSTING RS.5,40,58,676/- WHICH IS MEANT FOR RURAL WRITE OFF , THEREFORE, THE ORDER IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 3. FOR THAT ON THE FACTS OF THE CASE, THE LD. C.I.T .(APPEAL) WAS WRONG IN DISALLOWING THE OPENING CREDIT BALANCE U/S. 36(1)(V IIA) AMOUNTING TO RS. 11,96,49,538/- IN COMPUTING BOOK PROFIT U/S. 11 5JB WHICH IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 4. FOR THAT ON THE FACTS OF THE CASE, THE LD. C.I.T .(APPEAL) WAS WRONG IN NOT CONSIDERING THE FACT THAT SECTION 11 5JB IS NOT APPLICABLE TO ASSESSEE BANK, THEREFORE, THE ORDER PASSED BY THE LD. C.I.T. (A) IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 5. FOR THAT ON THE FACTS OF THE CASE, THE LD. C.I.T .(APPEAL) WAS WRONG IN DISALLOWING U/S. 14A RS.76,00,000/- AS NOTIONAL EXP ENDITURE U/S. 1 15JB WHICH IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLE GAL. 6. FOR THAT ON THE FACTS OF THE CASE, THE LD C.I.T. (APPEAL) WAS WRONG IN CONFIRMING THE ORDER OF THE A.O. WHEREIN THE A.O. H AS CHARGED INTEREST U/S 234D WHICH IS COMPLETELY ARBITRARY, UNJUSTIFIED AND ILLEGAL. 7. FOR THAT THE APPELLANT RESERVES THE RIGHT TO ADD UCE ANY FURTHER GROUND OR GROUNDS, IF NECESSARY, AT OR BEFORE THE HEARING OF THE APPEAL. 5. IT WAS SUBMITTED BY THE LEARNED AR FOR THE ASSES SEE THAT IN REGARD TO GROUND NO.2, WHICH WAS THE ACTION OF THE LEARNED COMMISSIONER OF INCOME-TAX (APPEALS) IN DIRECTING THE ADJUSTMENT OF THE ENTIRE BAD DEBTS WRITTEN OFF AM OUNTING TO RS.274,52,16,243/- FROM THE PROVISIONS FOR BAD DEBT ALLOWED U/S. 36(1)(VII) O F THE ACT. IT WAS SUBMITTED THAT THE CLAIM UNDER THIS GROUND WAS RESTRICTED TO THE AMOUNT OF RS.6.56 CRORES IN SO FAR ASSESSMENT THE ASSESSING OFFICER HAS ALREADY ALLOWED THE WRITTEN OFF THE BAD DEBTS TO THE EXTENT OF RS. 266.56 CORRES. IT WAS FAIRLY AGREED BY BOTH THE SID ES THAT THE ISSUE IN THIS APPEAL WAS COVERED BY THE DECISION OF THE CO-ORDINATE BENCH OF THIS T RIBUNAL IN ASSESSEES OWN CASE IN ITA NOS. 1497 & 1498/KOL/09 DATED 14-0213, WHEREIN THE CO-OR DINATE BENCH HAS HELD ASSESSMENT FOLLOWS R BCONFIRMING THE DISALLOWANCE OF THE CLAIM OF DEDUCTION U/S. 80IA(4) OF THE I.T ACT. ITA NOS. 346 & 605/KOL/12-PB-B-GM 3 4. THE GROUNDS OF APPEALS RAISED IN BOTH THE CASES ARE IDENTICAL EXCEPT FOR THE FIGURE OF DEDUCTION. 5. COMMON GROUNDS OF BOTH THE APPEALS ARE AS UN DER :- 1. THE ORDERS PASSED BY THE LOWER AUTHORITIES TO TH E EXTENT TO WHICH THEY ARE AGAINST THE APPELLANT ARE ARBITRARY, ERRONEOUS, INVALID AND BAD IN LAW. 2. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, THE LEARNED CIT(A) ERRED IN SUSTAINING THE DISALLOWANCE OF THE CLAIM O F DEDUCTION OF RS.69,53,L62/- & RS.2,87,52,828/- U/S 80-IA OF THE INCOME-TAX ACT, 1961, ON THE ALLEGED GROUND THAT THE APPELLANT WAS MERELY A CONTRACTOR AND NOT A DEVELOPER. 3. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, BOTH THE LOWER AUTHORITIES ERRED IN NOT APPRECIATING THAT ACTUALLY THE APPELLANT WAS ENGAGED IN THE BUSINESS OF DEVELOPMENT OF INFRASTRU CTURAL FACILITY. 4. ON THE FACTS AND IN THE CIRCUMSTANCES OF THE CAS E, BOTH THE LOWER AUTHORITIES ERRED IN REJECTING THE CLAIM OF THE APP ELLANT TOWARDS ALLOWANCE OF DEDUCTION U/S 80-IA OF THE ACT ON THE BASIS OF A SSESSMENT AN AMENDMENT TO THE EXPLANATION TO SECTION 80-IA(4) OF THE ACT I NTRODUCED BY AN AMENDMENT BY FINANCE (NO.2 ) ACT, 2009, WHEN THE AP PELLANT HAD ALREADY COMPLETED THE RELEVANT PROJECT AND CLAIMED DEDUCTIO N U/S 80-IA OF THE ACT, ON THE BASIS OF THE EARLIER ASSURANCE PROVIDED BY T HE GOVERNMENT THROUGH THE ERSTWHILE PROVISIONS OF THE SAID SECTION. 5. THE APPELLANT CRAVES LEAVE TO AMEND, ALTER, MODI FY, SUBSTITUTE, ADD TO, ABRIDGE AND! OR RESCIND ANY OR ALL OF THE ABOVE GRO UNDS. 6. IT WAS FAIRLY AGREED BY BOTH THE SIDES THAT THE FACTS IN BOTH THE APPEALS WERE IDENTICAL. 7. IT WAS THE SUBMISSION BY THE LEARNED AUTHORISED REPRESENTATIVE THAT THE ASSESSEE IS AN AOP, WHICH IS DOING THE BUSINESS OF DEVELOPMEN T OF AN IRRIGATION PROJECT. IT WAS THE SUBMISSION THAT IN THE COURSE OF ASSESSMENT THE ASS ESSING OFFICER HAS HELD THAT THE ASSESSEE WAS IN THE BUSINESS OF CIVIL CONSTRUCTION AND ON A CCOUNT OF EXPLANATION TO SECTION 80IA, WHICH WAS SUBSTITUTED BY THE FINANCE (NO.2) ACT, 2 009 WITH RETROSPECTIVE EFFECT FROM 1-4 2000, THE ASSESSEE WAS MERELY EXECUTING THE CIVIL CONSTRUCTION WORKS AND WAS NOT ENTITLED TO DEDUCTION 80IA(4). IT WAS THE SUBMISSION THAT O N APPEAL THE LEARNED COMMISSIONER OF INCOME-TAX(APPEALS) HAS UPHELD THE FINDINGS OF THE ASSESSING OFFICER WITHOUT CONSIDERING THE SUBMISSIONS OF THE ASSESSEE. THE LEARNED AUTHO RISED REPRESENTATIVE FOR THE ASSESSEE HAS FURTHER SUBMITTED THAT THE ASSESSING OFFICER HAD HE LD THAT THE ASSESSEE WAS DOING ONLY CONTRACT WORK. IT WAS THE SUBMISSION THAT AS PER THE PROVISIONS OF SECTION 80IA(4) THE ASSESSEE IS TO DOING THE DEVELOPMENT OF INFRASTR UCTURE FACILITY . IT WAS THE SUBMISSION THAT ITA NOS. 346 & 605/KOL/12-PB-B-GM 4 INFRASTRUCTURE FACILITY WAS EXPLAINED IN THE EXPLA NATION TO SECTION 80IA(4). IT WAS THE SUBMISSION THAT THE SAID EXPLANATION CLEARLY PROVID ED FOR WATER, CIVIL PROJECT, WATER TREATMENT SYSTEM, IRRIGATION PROJECT, SANITATION AN D SEWERAGE. THE LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSESSEE FURTHER SUBMITTED THAT THE ASSESSEE HAD ENTERED INTO AN AGREEMENT, MORE SPECIFICALLY EPC/TURNKEY CONTRACT W ITH THE GOVT. OF ANDHRA PRADESH IRRIGATION & CAD DEPARTMENT FOR THE EARTH WORK EXCA VATION, FORMING EMBANKMENT AND CONSTRUCTION OF CM & CD WORKS INCLUDING INVESTIGATI ON, DESIGNING AND ESTIMATION OF SRSP-FLOOD FLOW CANAL FROM KM 70.000 TO KM 86.000 I N RAMPUR (V). IT WAS THE SUBMISSION THAT THE ASSESSEE HAS UNDERTAKEN THE DE VELOPMENT OF IRRIGATION PROJECT. THUS, THE ASSESSEE WAS ENTITLED TO THE BENEFIT OF DEDUCT ION U/S. 80IA(4) OF THE ACT. IT WAS THE FURTHER SUBMISSION THAT THE ISSUE OF WHETHER THE ASSESSEE IS TO BE HELD TO BE A DEVELOPER OR MERE WORKS CONTRACTOR IN SUCH AGREEMENTS HAVE BEEN DECIDED BY THE CO-ORDINATE BENCH ITAT, HYDERABAD B BENCH, HYDERABAD IN THE CASE OF M/S. GVPR ENGINEERS LTD & ORS IN ITA NOS. 347/HYD/2008 & 17 OTHERS DATED 29.02.2012 , WHEREIN IN PARAS 26-29, IT HAS BEEN HELD AS UNDER:- 26. WE HAVE CONSIDERED THE ELABORATE SUBMISSIONS MA DE BY BOTH THE PARTIES AND ALSO PERUSED THE MATERIALS AVAILABLE ON RECORD. WE HAVE ALSO GONE THROUGH ALL THE CASE LAWS CITED BY BOTH THE PARTIES. WE FIND TH AT THE PROVISIONS OF SECTION 801A (4) OF THE ACT WHEN INTRODUCED AFRESH BY THE F INANCE ACT, 1999, THE PROVISIONS UNDER SECTION 801A (4A) OF THE ACT WERE DELETED FROM THE ACT. THE DEDUCTION AVAILABLE FOR ANY ENTERPRISE EARLIER UNDE R SECTION 801A (4A) ARE ALSO MADE AVAILABLE UNDER SECTION 801A (4) ITSELF. FURTH ER, THE VERY FACT THAT THE LEGISLATURE MENTIONED THE WORDS (I) DEVELOPING OR (II) OPERATING AND MAINTAINING OR (III) DEVELOPING, OPERATING AND MA INTAINING CLEARLY INDICATES THAT ANY ENTERPRISE WHICH CARRIED ON ANY OF THESE T HREE ACTIVITIES WOULD BECOME ELIGIBLE FOR DEDUCTION. THEREFORE, THERE IS NO AMBI GUITY IN THE INCOME-TAX ACT. WE FIND THAT WHERE AN ASSESSEE INCURRED EXPENDITURE FOR PURCHASE OF MATERIALS HIMSELF AND EXECUTES THE DEVELOPMENT WORK I.E., CAR RIES OUT THE CIVIL CONSTRUCTION WORK, HE WILL BE ELIGIBLE FOR TAX BENEFIT UNDER SE CTION 80 IA OF THE ACT. IN CONTRAST TO THIS, A ASSESSEE, WHO ENTERS INTO A CON TRACT WITH ANOTHER PERSON INCLUDING GOVERNMENT OR AN UNDERTAKING OR ENTERPRIS E REFERRED TO IN SECTION 80 IA OF THE ACT, FOR EXECUTING WORKS CONTRACT, WILL N OT BE ELIGIBLE FOR THE TAX BENEFIT UNDER SECTION 80 IA OF THE ACT. WE FIND THAT THE WO RD OWNED IN SUB-CLAUSE (A) OF CLAUSE (1) OF SUB SECTION (4) OF SECTION 801A OF THE ACT REFER TO THE ENTERPRISE. BY READING OF THE SECTION, IT IS CLEARS THAT THE EN TERPRISES CARRYING ON DEVELOPMENT OF INFRASTRUCTURE DEVELOPMENT SHOULD BE OWNED BY THE COMPANY AND NOT THAT THE INFRASTRUCTURE FACILITY SHOULD BE OWNE D BY A COMPANY. THE PROVISIONS ITA NOS. 346 & 605/KOL/12-PB-B-GM 5 ARE MADE APPLICABLE TO THE PERSON TO WHOM SUCH ENTE RPRISE BELONGS TO IS EXPLAINED IN SUB-CLAUSE (A). THEREFORE, THE WORD O WNERSHIP IS ATTRIBUTABLE ONLY TO THE ENTERPRISE, CARRYING ON THE BUSINESS WHICH W OULD MEAN THAT ONLY COMPANIES ARE ELIGIBLE FOR DEDUCTION UNDER SECTION 801A (4) AND NOT ANY OTHER PERSON LIKE INDIVIDUAL, HUF, FIRM ETC. 27. WE ALSO FIND THAT ACCORDING TO SUB-CLAUSE (A), CLAUSE (I) OF SUB SECTION (4) OF 80-IA THE WORD IT DENOTES THE ENTERPRISE CARRYING ON THE BUSINESS. THE WORD IT CANNOT BE RELATED TO THE INFRASTRUCTURE FACILI TY, PARTICULARLY IN VIEW OF THE FACT THAT INFRASTRUCTURE FACILITY INCLUDES RAIL SYS TEM, HIGHWAY PROJECT, WATER TREATMENT SYSTEM, IRRIGATION PROJECT, A PORT, AN AI RPORT OR AN INLAND PORT WHICH CANNOT BE OWNED BY ANY ONE. EVEN OTHERWISE, THE WOR D IT IS USED TO DENOTE AN ENTERPRISE. THEREFORE, THERE IS NO REQUIREMENT THAT THE ASSESSEE SHOULD HAVE BEEN THE OWNER OF THE INFRASTRUCTURE FACILITY. 28. THE NEXT QUESTION IS TO BE ANSWERED IS WHETHER THE ASSESSEE IS A DEVELOPER OR MERE WORKS CONTRACTOR. THE REVENUE RELIED ON THE AM ENDMENTS BROUGHT IN BY THE FINANCE ACT 2007 AND 2009 TO MENTION THAT THE ACTIV ITY UNDERTAKEN BY THE ASSESSEE IS AKIN TO WORKS CONTRACT AND HE IS NOT EL IGIBLE FOR DEDUCTION UNDER SECTION 801A (4) OF THE ACT. WHETHER THE ASSESSEE I S A DEVELOPER OR WORKS CONTRACTOR IS PURELY DEPENDS ON THE NATURE OF THE W ORK UNDERTAKEN BY THE ASSESSEE. EACH OF THE WORK UNDERTAKEN HAS TO BE ANA LYZED AND A CONCLUSION HAS TO BE DRAWN ABOUT THE NATURE OF THE WORK UNDERTAKEN BY THE ASSESSEE. THE AGREEMENT ENTERED INTO WITH THE GOVERNMENT OR THE G OVERNMENT 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 TH E GOVERNMENT. WE FIND THAT THE GOVERNMENT HANDED OVER THE POSSESSION OF THE PR EMISES OF PROJECTS TO THE ASSESSEE FOR THE DEVELOPMENT OF INFRASTRUCTURE FACI LITY. IT IS THE ASSESSEES RESPONSIBILITY TO DO ALL ACTS TILL THE POSSESSION O F PROPERTY IS HANDED OVER TO THE GOVERNMENT. THE FIRST PHASE IS TO TAKE OVER THE EXI STING PREMISES OF THE PROJECTS AND THEREAFTER DEVELOPING THE SAME INTO INFRASTRUCT URE FACILITY. SECONDLY, THE ASSESSEE SHALL FACILITATE THE PEOPLE TO USE THE AVA ILABLE EXISTING FACILITY EVEN WHILE THE PROCESS OF DEVELOPMENT IS IN 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 TH E WORKS ARE TO BE EXECUTED BY THE ASSESSEE. IT MAY BE LAYING OF A DRAINAGE SYSTEM; MA Y BE CONSTRUCTION OF A PROJECT; PROVISION OF WAY FOR THE CATTLE AND BULLOC K CARTS IN THE VILLAGE; PROVISION FOR TRAFFIC WITHOUT ANY HINDRANCE, THE ASSESSEES D UTY IS TO DEVELOP INFRASTRUCTURE WHETHER IT INVOLVES CONSTRUCTION OF A PARTICULAR IT EM AS AGREED TO IN THE AGREEMENT OR NOT. THE AGREEMENT IS NOT FOR A SPECIF IC WORK, IT IS FOR DEVELOPMENT OF FACILITY AS A WHOLE. THE ASSESSEE IS NOT ENTRUST ED WITH ANY SPECIFIC WORK TO BE DONE BY THE ASSESSEE. THE MATERIAL REQUIRED IS TO B E BROUGHT IN BY THE ASSESSEE BY STICKING TO THE QUALITY AND QUANTITY IRRESPECTIVE O F THE COST OF SUCH MATERIAL. THE GOVERNMENT DOES NOT PROVIDE ANY MATERIAL TO THE ASS ESSEE. IT PROVIDES THE WORKS IN PACKAGES AND NOT AS A WORKS CONTRACT. THE ASSESS EE 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 ITA NOS. 346 & 605/KOL/12-PB-B-GM 6 PROCESS OF SUCH DEVELOPMENT WOULD BE THAT OF THE AS SESSEE. THE ASSESSEE HANDS OVER THE DEVELOPED INFRASTRUCTURE FACILITY TO THE G OVERNMENT ON COMPLETION OF THE DEVELOPMENT. THEREAFTER, THE ASSESSEE HAS TO UNDERT AKE MAINTENANCE OF THE SAID INFRASTRUCTURE FOR A PERIOD OF 12 TO 24 MONTHS. DUR ING THIS PERIOD, IF ANY DAMAGES ARE OCCURRED IT SHALL BE THE RESPONSIBILITY OF THE ASSESSEE. FURTHER, DURING THIS PERIOD, THE ENTIRE INFRASTRUCTURE SHALL HAVE TO BE MAINTAINED BY THE ASSESSEE ALONE WITHOUT HINDRANCE TO THE REGULAR TRA FFIC. THEREFORE, IT IS CLEAR THAT FROM AN UN-DEVELOPED AREA, INFRASTRUCTURE IS DEVELO PED AND HANDED OVER TO THE GOVERNMENT AND AS EXPLAINED BY THE CBDT VIDE ITS CI RCULAR DATED 18-05-2010, SUCH ACTIVITY IS ELIGIBLE FOR DEDUCTION UNDER SECTI ON 801A (4) OF THE ACT. THIS CANNOT BE CONSIDERED AS A MERE WORKS CONTRACT BUT H AS TO BE CONSIDERED AS A DEVELOPMENT OF INFRASTRUCTURE FACILITY. THEREFORE, THE ASSESSEE IS A DEVELOPER AND NOT A WORKS CONTRACTOR AS PRESUMED BY THE REVENUE. THE CIRCULAR ISSUED BY THE BOARD, RELIED ON BY LEARNED COUNSEL FOR THE ASSESSE E, CLEARLY INDICATE THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION UNDER SECTION 80 1A (4) OF THE ACT. THE DEPARTMENT IS NOT CORRECT IN HOLDING THAT THE ASSES SEE IS A MERE CONTRACTOR OF THE WORK AND NOT A DEVELOPER. 29. WE ALSO FIND THAT AS PER THE PROVISIONS OF THE SECTION 801A OF THE ACT, A PERSON BEING A COMPANY HAS TO ENTER INTO AN AGREEME NT WITH THE GOVERNMENT OR GOVERNMENT UNDERTAKINGS. SUCH AN AGREEMENT IS A CON TRACT AND FOR THE PURPOSE OF THE AGREEMENT A PERSON MAY BE CALLED AS A CONTRA CTOR AS HE ENTERED INTO A CONTRACT. BUT THE WORD CONTRACTOR IS USED .TO DEN OTE A PERSON ENTERING INTO AN AGREEMENT FOR UNDERTAKING THE DEVELOPMENT OF INFRAS TRUCTURE FACILITY. EVERY AGREEMENT ENTERED INTO IS A CONTRACT. THE WORD CON TRACTOR IS USED TO DENOTE THE PERSON WHO ENTERS INTO SUCH CONTRACT. EVEN A PE RSON WHO ENTERS INTO A CONTRACT FOR DEVELOPMENT OF INFRASTRUCTURE FACILITY IS A CONTRACTOR. THEREFORE, THE CONTRACTOR AND THE DEVELOPER CANNOT BE VIEWED DIFFE RENTLY. EVERY CONTRACTOR MAY NOT BE A DEVELOPER BUT EVERY DEVELOPER DEVELOPING I NFRASTRUCTURE FACILITY ON BEHALF OF THE GOVERNMENT IS A CONTRACTOR. 8. IT WAS THE SUBMISSION THAT THE EXPLANATION TO S ECTION 80IA FOUND AFTER SUB-SECTION (13), WHICH HAS BEEN SUBSTITUTED BY THE FINANCE (NO .2) ACT, 2009 WITH RETROSPECTIVE EFFECT FROM 1-4-2000 WOULD NOT EFFECT THE ASSESSEES CLAIM OF DEDUCTION U/S. 80IA(4) IN SO FAR AS THE ASSESSEE WAS NOT UNDERTAKING WORKS CONTRACT, BU T WAS DOING THE DEVELOPMENT OF AN IRRIGATION PROJECT. FOR THIS PURPOSE, THE LEARNED AUTHORISED REPRESENTATIVE FOR THE ASSESSEE DREW OUR ATTENTION TO ARTICLE 3.1 OF THE AGREEMENT, WHICH SPECIFIED THE SCOPE OF WORK, WHICH HAS BEEN EXTRACTED HEREUNDER :- 3.1 SCOPE OF WORK AS ENVISAGED INCLUDE: SURVEYING, INVESTIGATION, SUBSOIL EXPLORATION, F IXING ALIGNMENT, DESIGNING AND ENGINEERING OF DARN AND APPURTENANT WORKS , CANAL S ECTIONS OF MAIN CANALS, BRANCH CANALS, DISTRIBUTARIES, MINORS, SUBMINORS A ND FIELD CHANNELS, DRAINS ITA NOS. 346 & 605/KOL/12-PB-B-GM 7 ETC., PREPARATION OF AYACUT REGISTERS, COMMAND AREA PLANS EXPLORATION OF FOUNDATIONS, DESIGN OF EARTHDAM SECTIONS, OVERFLOW AND NON-OVERFLOW SECTIONS OF DAMS INCLUDING FOUNDATIONS, DESIGN OF GROUTING REQU IREMENTS ETC. AS PER INVESTIGATION AND DESIGN CRITERIA OF IRRIGATION DEP ARTMENT, RELEVANT L.S. CODES, CWC MANUALS, DEPARTMENTAL CODES, CIRCULARS ISSUED B Y DEPARTMENT FROM TIME TO TIME ETC. PREPARING ITEM WISE COST ANALYSIS FOR THE ENTIRE WORK ON THE BASIS OF APPROVED ALIGNMENT AND DESIGNS, CLUBBING ITEMS FOR THE BASIS OF INTERMEDIATE PAYMENTS. SURVEYING, INVESTIGATION, SITE SURVEYS FOUNDATION SOIL EXPLORATION, FINALIZATION OF LOCATION, DESIGNING AND ENGINEERING OF STRUCTURES O N CANAL SYSTEM AS PER INVESTIGATION AID DESIN CRITERIA OF IRRIGATION DEPA RTMENT, RELEVANT I.S. CODES, IRC PUBLICATIONS. CWC MANUALS AND CIRCULARS ISSUED BY THE DEPARTMENT FROM TIME TO TIME ETC. PREPARING TEMPORARY LAND ACQUISITION CASES FOR HA RROW AREA REQUIRED IF ANY, LAND ACQUISITION CASES ON THE BASIS OF APPROVED AL IGNMENT (PRIVATE LAND, GOVT., LAND, FOREST LAND IF ANY) PROPERTY CASES IF ANY SUC H AS WELLS, TREES, HOUSES, ETC., SUBMITTING TO THE DEPARTMENT, PURSUING THE SAME WI TH LAO AND GETTING APPROVAL / AWARD FROM COMPETENT AUTHORITY. . CONSTRUCTION AND OF DAM/BARRAGE AND APPURTENANT WORKS, WHOLE CANAL UNLINED/LINED AS PER APPROVED DESIGN-DRAWINGS, SPEC IFICATIONS OF THE DEPARTMENT, RELEVANT L.S. CODES, CWC MANUALS, CIRCULARS ISSUED FROM TIME TO TIME. CONSTRUCTION OF ALL STRUCTURES OF WHOLE CANAL SY STEMS AS PER APPROVED DESIGN, DRAWINGS,. SPECIFICATIONS OF THE DEPARTMENT, RELEVA NT L.S. CODES. I RC PUBLICATIONS,CWC MANUALS, CIRCULARS ISSUED BY DEPAR TMENT FROM TIME TO TIME. FORMATION OF INSPECTION PATH / SERVICE ROAD AND P LANTATION OF SHADE TREES ALONG THE BANKS OF EARTH DAMS/CANALS - COMMISSIONING AND TRIAL OF THE CONSTRUCTED DAM! B ARRAGE AND APPURTENANT WORKS, CANAL SYSTEMMAINTENANCE DURING THE DEFECT L IABILITY PERIOD OF 24 MONTHS FROM THE DATE OF COMPLETION CERTIFICATE. BEAUTIFICATION OF DAM SITES AND CANAL STRUCTURE S ITES. THE SCOPE OF THE WORK GIVEN ABOVE IS ONLY INDICATIV E AND DETAILED SCOPE HAS BEEN DESCRIBED SEPARATELY. BIDS NOT COVERING THE ENTIRE SCOPE WILL BE TREATED AS INCOMPLETE AND HENCE WILL HE REJECTED. 9. IT WAS THE FURTHER SUBMISSION THAT AS PER ARTI CLE 107 OF THE AGREEMENT THE ASSESSEE WAS TO MAKE ITS OWN ARRANGEMENTS FOR PROCUREMENTS , SUPPLY AND USE OF CONSTRUCTION MATERIALS, WHICH SHOULD CONFIRM TO THE SPECIFICA TIONS INDICATED IN THE TENDER. IT WAS THE SUBMISSION THAT AS THE ASSESSEE HAS UNDERTAKEN THE DEVELOPMENT OF THE IRRIGATION PROJECT, THE ASSESSEE WAS ENTITLED TO THE BENEFIT OF DEDUCTION U /S. 80IA(4) AS CLAIMED ITA NOS. 346 & 605/KOL/12-PB-B-GM 8 10. IN REPLY, THE LEARNED SR.DR SUBMITTED THAT THE ASSESSEE HAS NOT UNDERTAKEN ANY IRRIGATION PROJECT. IT WAS THE SUBMISSION THAT THE CONTRACT ITSELF CLEARLY SHOWED THAT IT WAS WORKS CONTRACT. IT WAS THE FURTHER SUBMISSION THA T THE ASSESSEE HAVING UNDERTAKEN WORKS CONTRACT FROM THE GOVT. OF ANDHRA PRADESH, THE E XPLANATION TO SECTION 80IA, WHICH HAS BEEN SUBSTITUTED BY THE FINANCE (NO.2) ACT 2009 AF TER 80IA(13) WAS APPLICABLE AND THE ASSESSEE WAS NOT ENTITLED TO DEDUCTION U/S. 80IA(4 ).OF THE ACT. 11. WE HAVE CONSIDERED THE RIVAL SUBMISSIONS. ADMI TTEDLY, 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/T URNKEY CONTRACT OF THE FLOOD FLOW CANAL PROJECT FROM SRSP. THE NAME OF THE CONTRACT HAS BE EN EXTRACTED EARLIER IN THIS ORDER. THE SCOPE OF THE WORK IS ALSO EXTRACTED ABOVE. ADMITTED LY, THE ASSESSEE HAS TAKEN A TURNKEY CONTRACT FROM THE IRRIGATION DEPARTMENT, GOVT. OF A NDHRA PRADESH. THE TURNKEY CONTRACT IS IN RESPECT OF THE IRRIGATION PROJECT. IRRIGATION PROJECT IS AN INFRASTRUCTURE FACILITY WITHIN THE SCOPE OF EXPLANATION TO SECTION 80IA(4) OF THE ACT. THE PROVISIONS OF SECTION 80IA(4) IS TO BE CONTROLLED BY THE EXPLANATION TO SECTION 80IA, WHICH HAS BEEN SUBSTITUTED BY THE FINANCE (NO.2) ACT, 2009 WITH RETROSPECTIVE EFFECT FROM 1-4 -2-2000. THIS EXPLANATION IS FOUND AFTER SUB-SECTION (13) OF SECTION 80IA. THE SAID EXPLAN ATION ATTEMPTS TO CONTROL THE PROVISIONS OF SUB-SECTION 4. MORE SO, IT SAYS THAT NOTHING CO NTAINED 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. NO W, WHAT WOULD COME INTO CONSIDERATION IS WHETHER THE SUBSTITUTED EXPLANATION AFTER SUB- CL AUSE (13) CHANGED THE NATURE OF THE MEANING OF INFRASTRUCTURE FACILITY PROVIDED IN T HE EXPLANATION TO SECTION 80IA(4). ADMITTEDLY, THE EXPLANATION TO SECTION 80IA(4) GIV ES THE MEANING THE TERM INFRASTRUCTURE FACILITY. THE SUBSTITUTED EXPLANATION AFTER SUB C LAUSE (13) BRINGS IN THE NATURE OF WORK AS A WORKS CONTRACT. THE PROVISIONS OF SECTION 194C, WHI CH DEALS WITH TDS IN RESPECT OF PAYMENT TO CONTRACTORS FOR CARRYING OUT ANY WORK I N 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 C ONTRACT AGREEMENT ENTERED INTO BY THE ITA NOS. 346 & 605/KOL/12-PB-B-GM 9 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. TH IS 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 ASSESS EE IS ALSO TO MAKE ITS ARRANGEMENTS FOR STORAGE OF THE MATERIALS. THIS IS AS PER ARTICL E 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 IT FALLS OUTSIDE THE MEANING OF TERM WORK FOR THE PURPOSE OF SECTION 194C, THE QUESTIO N 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 ACTIV ITY OF DEVELOPMENT OF AN INFRASTRUCTURE FACILITY AS PROVIDED UNDER SECTION 80IA(4). THE P ROJECT IS A TURNKEY PROJECT AND IT CANNOT FORM NOR HAVE A CHARACTER OF A WORKS CONTRACT. WOR KS CONTRACT WOULD BE APPLICABLE TO THE REPAIRS AND MAINTENANCE OF AN EXISTING PROJECT. W ORKS 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 A FTER SUB CLAUSE (13) OF SECTION 80IA WAS TO DENY, THE BENEFIT OF DEDUCTION U/S. 80IA(4) IN RESP ECT 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 PRO JECT CAN NEVER FUNCTION UNDER BOT OR BOOT OR PPP . IN THE CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE ASSESSEES 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 TH E 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 VI EW ALSO FINDS SUPPORT FROM THE DECISION OF THE CO-ORDINATE BENCH OF THIS TRIBUNAL, ITAT CUT TACK BENCH, CUTTACK IN THE CASE OF ARSS INFRASTRUCTURE PROJECTS LTD VS. ACIT, CIRCLE-2 (1) , BHUBANESWAR IN ITA NOS. 142, ITA NOS. 346 & 605/KOL/12-PB-B-GM 10 143/CTK/2010 & 483,484/CTK/2011 DATED 13-06-2013, W HEREIN 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 SPEC IFIED TO MEAN A ROAD INCLUDING A TOLL ROAD, A BRIDGE OR A RAIL SYSTEM. A DMITTEDLY, 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 INTRODUC ED 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 EXPLA NATION TO SECTION 801A(4) OF THE ACT SPECIFICALLY PROVIDES FOR THE ROAD TO IN CLUDE A TOLL ROAD, A BRIDGE OR A RAIL SYSTEM. BUT CONTRACT IN RESPECT OF THE RAILW AY SYSTEM CAN NEVER EXIST. FURTHER, A PERUSAL OF THE PROVISIONS OF SECTION 801 A OF THE ACT SHOWS THAT THE TERM WORKS CONTRACT IS NOT DEFINED IN THE SAID SE CTION. 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 TH E DEFINITION WOULD BE AVAILABLE TO DRAW A MEANING TO THE SAID TERMS. IN T HE PROVISIONS OF SECTION 194C OF THE ACT, WORK HAS BEEN GIVEN AN INCLUSIVE D EFINITION BUT IN THE SUBSEQUENT PORTION IT HAS EXCLUDED THE MANUFACTURIN G OR SUPPLYING A PRODUCT ACCORDING TO REQUIREMENT OR SPECIFICATION OF A CUST OMER BY USING MATERIAL PURCHASED FROM A PERSON OTHER THAN SUCH CUSTOMER. A S 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 A ND THE SAME HAS BEEN DONE BY USING MATERIALS PURCHASE FROM THIRD PARTIES OTHE R THAN THE CUSTOMERS. THUS, THOUGH THE ASSESSEE IS DOING A WORKS CONTRACT THE S AME WOULD NOT FALL WITHIN THE MEANING OF THE WORD WORKS CONTRACT FOR THE PU RPOSE OF THE ACT DUE TO THE EXCLUSION PROVIDED IN THE MEANING OF WORK IN SECT ION 194C OF THE ACT. THE ISSUE RAISED BY THE LD. CIT THAT THE ASSESSEE IS NO T DOING THE DEVELOPMENT WORK BUT IS ONLY DOING THE CONTRACT ALSO DOES NOT S TAND TO TEST AS THE ASSESSEE ADMITTEDLY IS DEVELOPING THE ROADS AND RAILWAY LIN ES 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 SY STEMS AND BRIDGES BY PARTICIPATING IN THE TENDERS. UNDER THESE CIRCUMSTA NCES, WE ARE OF TH VIEW THAT THE AO WAS RIGHT IN LAW IN GRANTING THE ASSESSEE TH E 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 CLAIM ED. ITA NOS. 346 & 605/KOL/12-PB-B-GM 11 14. IN THE RESULT, BOTH THE APPEALS OF THE ASSES SEE ARE ALLOWED AS STATED ABOVE. 8 4 . 6 . 9 8 THIS ORDER IS PRONOUNCED IN OP EN COURT ON 19-06-2013 SD/- SD/- *PP/SPS 4 0 *--: ;:3< / COPY OF THE ORDER FORWARDED TO: 1. . &) / THE APPELLANT : UNITED BANK OF INDIA 16 OLD COUR T HOUSE ST, KOL-1 2 *+&) / THE RESPONDENT- DCIT, CIRCLE 6 P 7 CHOWRINGHEE SQ, KOL-1. 3 4. . . -4 / THE CIT, -4 ( )/ THE CIT(A) 5 . =-9 *- / DR, KOLKATA BENCH 6 . GUARD FILE . +: *-/ TRUE COPY, 4./ BY ORDER, 8 !' /ASSTT REGISTRAR ( . . . 9.> , ) ( N.S. SAINI, ACCOUNTANT MEMBER) ( '#'$ 1 & , ) (GEORGE MATHAN, JUDICIAL MEMBER) ( (( ( 1 1 1 1 ) )) ) DATE 19-06-2013