Mahalaxmi Construction Corporation Ltd, Kolhapur V. ACIT Cir-2, Kolhapur

ITA 433/PUN/2007

• Counselvise Citation: [2011] 134 COUNSELVISE.COM (IT) 7618 (ITAT-PUNE)
• Duration Of Justice: 3 year(s) 10 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 06-02-2011
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: A
• Assessment Year: 2003-2004
• Appeal Filed On: 26-03-2007
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: ANN KAPTHUAMA
• Assessee Lawyers: SUNIL PATHAK

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL PUNE BENCH A, PUNE BEFORE SHRI I.C.SUDHIR, JM AND SHRI D. KARUNAKARA RAO, AM ITA NO.433/PN/2007 ASST. YEAR: 2003-2004 MAHALAXMI CONSTRUCTION CORPOATION LTD. 223/3, S-1 (B), MAHATI TOWERS, TARABAI PARK, KOLHAPUR. PAN: AADCM2170P APPELLANT VS. ACIT, CIRCLE 2, AYAKAR BHAVAN, TARABAI PARK, KOLHAPUR. RESPONDENT APPELLANT BY : SHRI SUNIL PATHAK & NIKHIL PATH AK RESPONDENT BY : MS. ANN KAPTHUAMA, DR DATE OF HEARING:01.02.2012 DATE OF PRONOUNC EMENT: 6-2-2012 ORDER PER I.C. SUDHIR, JM THE ASSESSEE HAS QUESTIONED FIRST APPELLATE ORDER ON SEVERAL GROUNDS INVOLVING THE ISSUE AS TO WHETHER LEARNED CIT (A) HAS ERRED I N UPHOLDING THE DENIAL OF DEDUCTION OF RS.1,52,76,714/- CLAIMED U/S 80-IA(4) IN RESPECT OF INCOME DERIVED BY THE ASSESSEE FROM DEVELOPMENT OF ELIGIBLE INFRASTRUCTURAL FACILI TIES. 2. THE RELEVANT FACTS ARE THAT THE AO DENIED THE CL AIMED DEDUCTION U/S 80-IA(4) OF THE ACT TO THE ASSESSEE, ON THE BASIS THAT ASSESSEE IS EXECUTING THE CIVIL WORK ON CONTRACT BASIS BEING THE CIVIL CONTRACTOR, HOWEVER THE MAIN WORK WAS ASSIGNED TO THE GOVERNMENT. HE WAS OF THE VIEW THAT THE ASSESSEE W AS A CONTRACTOR EMPLOYED BY THE GOVERNMENT TO UNDERTAKE THE WORK. IN THE OPINION O F THE AO THE GOVERNMENT WAS A DEVELOPER ITSELF, THUS THE GOVERNMENT HAD THE INHER ENT POWER OF OPERATING AND 2 ITA NO.433/PN/2007 MAINTAINING THE SAME. THE ISSUE WAS WHETHER ASSESS EE COMPANY ITSELF WAS A DEVELOPER OF THE INFRASTRUCTURAL PROJECT SO AS TO QUALIFY FOR THE DEDUCTION U/S 80-IA OF THE ACT. REFERRING CBDT CIRCULAR NO. 717, DATED 14.8.1995 TH E AO HAS DRAWN A CONCLUSION THAT THE SAID DEDUCTION IS ALLOWABLE TO AN ENTERPRISE CA RRYING ON THE BUSINESS OF DEVELOPING, MAINTAINING AND OPERATING ANY INFRASTRUCTURAL FACIL ITY. THE AO ALSO REFERRED CBDT CIRCULAR NO. 733, DATED 3.1.9 6 ALONG WITH THE RELEVANT SEC.80- IA(4) OF THE ACT AND THE AMENDMENT TAKEN PLACE VIDE FINANCE ACT, 1999 WHICH WAS EFFECTIVE FROM 1.4.2000 AND ANOTHER AMENDMENT VIDE FINANCE ACT, 2001 WHICH WAS EFFECTIVE FROM 1.4.2002. ON THE BASIS OF THESE AME NDMENTS AND FOLLOWING THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF PATE L ENGINEERING LTD. VS. DCIT , 84 TTJ 646 (MUM), HE HAS HELD THAT ASSESSEE WAS ONLY A CON TRACTOR, HOWEVER THE GOVERNMENT WAS THE MAIN DEVELOPER OF THE PROJECT, HENCE THE AS SESSEE HAS NOT SATISFIED THE CONDITIONS PRESCRIBED FOR THE ENTITLEMENT OF THE DE DUCTION U/S 80-IA(4) OF THE ACT. THE CLAIM WAS THUS DISALLOWED. THE LD. CIT (A) HAS ALS O AFFIRMED THE ACTION OF THE AO. 3. THE MATTER WENT TO THE TRIBUNAL AND THE TRIBUNAL FOLLOWING THE DECISION OF THIRD MEMBER BENCH IN THE CASE OF M/S. B.T. PATIL & SONS BELGAM CONSTRUCTION (P) LTD. VS. ACIT , 126 TTJ (MUM) (TM) 577, HELD (VIDE ITS ORDER DATED 24.2.2010 IN ITA NO.433/PN/2007) THAT THE ASSESSEE IS NOT ENTITLED T O THE CLAIMED DEDUCTION. AGAINST THE SAID ORDER OF THE TRIBUNAL, THE ASSESSEE PREFER RED APPEAL BEFORE THE HONBLE JURISDICTIONAL BOMBAY HIGH COURT. THE HONBLE BOMB AY HIGH COURT VIDE ITS ORDER DATED 30.8.2011 IN ITA NO.4610/PN/2010 (COPY SUPPLIED) HA S BEEN PLEASED TO QUASH THE ORDER DATED 24.2.2010 OF THE TRIBUNAL AND SET ASIDE THE MATTER TO THE FILE OF THE TRIBUNAL FOR FRESH DECISION IN ACCORDANCE WITH LAW. 4. IN COMPLIANCE OF THE SAID ORDER DATED 30.8.2011 OF HONBLE BOMBAY HIGH COURT THE PRESENT APPEAL HAS BEEN HEARD. 5. AT THE OUTSET OF HEARING THE LEARNED AR SUBMITTE D THAT IN THE FIRST ROUND BEFORE THE TRIBUNAL THE DECISION OF HONBLE BOMBAY HIGH CO URT IN THE CASE OF CIT VS. ABG 3 ITA NO.433/PN/2007 HEAVY INDUSTRIES LTD AND ORS, (2010) 322 ITR 323 (B OM) WAS NOT BROUGHT TO THE NOTICE OF THE TRIBUNAL. HE SUBMITTED THAT THE ISSUE RAISE D IN APPEAL IS FULLY COVERED IN FAVOUR OF THE ASSESSEE BY THE SAID DECISION OF HONBLE BOM BAY HIGH COURT IN THE CASE OF CIT VS. ABG HEAVY INDUSTRIES LTD AND ORS (SUPRA). THE LEARNED AR ALSO POINTED OUT THAT FOLLOWING THE DECISION OF HONBLE BOMBAY HIGH COURT , AN IDENTICAL ISSUE HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY PUNE BENCH OF THE TRIBUNAL IN THE CASES OF M/S. PRATIBHA CONSTRUCTIONS & ENGINEERS (I) P. LTD VS. A CIT, ITA NOS.118/PN/2008 AND OTHERS (AYS 2003-04 TO 2006-07) ORDER DATED 27 TH SEPTEMBER, 2011 AND LAXMI CIVIL ENGG. P. LTD. VS. ADDL. CIT, ITA NO.766/PN/2007 AND OTHERS (AYS 2003-04 TO 2006-07) ORDER DATED 8.6.2011 (COPIES SUPPLIED). 6. THE LEARNED DR DID NOT DISPUTE THE SUBMISSION OF THE LEARNED AR THAT AN IDENTICAL ISSUE UNDER ALMOST SIMILAR FACTS HAS BEEN DECIDED IN FAVOUR OF THE ASSESSEE BY THE HONBLE JURISDICTIONAL HIGH COURT IN THE CASE O F CIT VS. ABG HEAVY INDUSTRIES LTD AND ORS (SUPRA). SHE, HOWEVER PLACED RELIANCE ON T HE ORDERS OF THE AUTHORITIES BELOW. THE LEARNED DR ALSO REFERRED EXPLANATION SUBSTITUTE D BELOW SUB-SECTION (13) TO SEC.80- IA OF THE ACT BY THE FINANCE (2) ACT, 2009 WITH RET ROSPECTIVE EFFECT FROM 1.4.2000. THE LEARNED DR POINTED OUT THAT THE SAID EXPLANATION HA S BEEN SUBSTITUTED FOR THE REMOVAL OF DOUBTS DECLARING THAT NOTHING CONTEND IN SEC.80- IA SHALL APPLY IN RELATION TO A BUSINESS REFERRED TO IN SUB-SECTION (4) WHICH IS IN THE NATURE OF WORKS AWARDED BY ANY PERSON (INCLUDING CENTRAL OR STATE GOVERNMENT) AND EXECUTED BY THE UNDERTAKING OR ENTERPRISE REFERRED TO IN SUB-SECTION (1). 7. WE FIND THAT THE HONBLE JURISDICTIONAL HIGH COU RT IN THE APPEAL PREFERRED BY THE ASSESSEE HAS BEEN PLEASED TO RESTORE THE MATTER TO THE FILE OF THE TRIBUNAL FOR FRESH DECISION ON THE ISSUE IN ACCORDANCE WITH LAW. ON EA RLIER OCCASION THE TRIBUNAL HAD DECIDED THE ISSUE IN FAVOUR OF THE REVENUE BY RELYI NG UPON THE DECISION OF THIRD MEMBER BENCH OF THE TRIBUNAL IN THE CASE OF B.T. PA TIL & SONS BELGAM CONSTRUCTION (P) LTD VS. ACIT 126 TTJ (MUM) (TM) 577. THE HONBLE H IGH COURT HAS OBSERVED THAT IT IS NOT IN DISPUTE THAT THE SAID DECISION OF THE TRIBUN AL IN THE CASE OF B.T. PATIL & SONS 4 ITA NO.433/PN/2007 (SUPRA) HAS BEEN RECALLED BY THE TRIBUNAL BY ORDER DATED 18.2.2011 AS EVIDENT FROM THE ORDER PASSED BY THE TRIBUNAL IN ITA NO.766/PN/2009 DATED 8.6.2011. THE HONBLE HIGH COURT HAS ACCORDINGLY QUASHED AND SET ASIDE THE IMP UGNED ORDER OF THE TRIBUNAL DATED 24.2.2010 PASSED IN ITA NO.433/PU/2003 RELATING TO AY 2003-04, AND HAS RESTORED THE MATTER TO THE FILE OF THE TRIBUNAL FOR FRESH DECISI ON. 8. HAVING GONE THROUGH THE CITED DECISIONS BY THE L EARNED AR WE FIND THAT AN IDENTICAL ISSUE HAS BEEN DECIDED IN FAVOUR OF THE A SSESSEE BY HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. ABG HEAVY INDUSTRIES L TD & ORS (SUPRA). RELEVANT PARA NOS. 22 & 23 OF THE SAID DECISION OF HONBLE HIGH C OURT IS BEING REPRODUCED HERE UNDER FOR A READY REFERENCE. 22. ANOTHER SUBMISSION WHICH WAS URGED ON BEHALF O F THE REVENUE IS THAT UNDER CL. (III) OF SUB-SEC. (4A) OF SEC. 80-IA, ONE OF THE CONDITIONS IMPOSED WAS THAT THE ENTERPRISE MUST START OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY ON OR A FTER 1 ST APRIL, 1995. THE SAME REQUIREMENT IS EMBODIES IN SUB-CL. (C) OF SUB-SEC. (4) OF THE AMENDED PROVISIONS OF SEC. 80-IA. ON THIS BASI S, IT WAS URGED THAT SINCE THE ASSESSEE WAS NOT OPERATING AND MAINT AINING THE FACILITY, HE DID NOT FULFIL THE CONDITION. THIS SU BMISSION IS FALLACIOUS BOTH IN FACT AND IN LAW. AS A MATTER OF FACT, THE TRIBUNAL HAS ENTERED A FINDING THAT THE ASSESSEE WAS OPERATING THE FACIL ITY AND THIS FINDING HAS BEEN CONFIRMED EARLIER IN THIS JUDGMENT. THAT THE ASSESSEE WAS MAINTAINING THE FACILITY IS NOT IN DISPUTE. THE FA CILITY WAS COMMENCED AFTER 1 ST APRIL, 1995. THEREFORE, THE REQUIREMENT WAS MET I N FACT. MOREOVER, AS A MATTER OF LAW, WHAT THE CONDITION ES SENTIALLY MEANS IS THAT THE INFRASTRUCTURE FACILITY SHOULD HAVE BEEN O PERATIONAL AFTER 1 ST APRIL, 1995. AFTER SEC. 80-IA WAS AMENDED BY THE F INANCE ACT OF 2001, THE SECTION APPLIED TO AN ENTERPRISE CARRYING ON THE BUSINESS OF (I) DEVELOPING; OR (II) OPERATING AND MAINTAINING; OR (III) DEVELOPING, OPERATING AND MAINTAINING ANY INFRASTRUCTURE FACILI TY WHICH FULFILS CERTAIN CONDITIONS. THOSE CONDITIONS ARE : (I) OWN ERSHIP OF THE ENTERPRISE BY A COMPANY 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 ST APRIL, 1995. THE REQUIREMENT THAT THE OPERATION AND MAINTENANCE OF THE INFRASTRU CTURE FACILITY SHOULD COMMENCE AFTER 1 ST APRIL, 1995 HAS TO BE HARMONIOUSLY CONSTRUED WITH THE MAIN PROVISION UNDER WHICH A DED UCTION IS AVAILABLE TO AN ASSESSEE WHO DEVELOPS OR OPERATES A ND 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 FI NANCE ACT OF 2001 WOULD BE DEFEATED. A HARMONIOUS READING OF TH E PROVISION IN ITS ENTIRETY WOULD LEAD TO THE CONCLUSION THAT THE DEDU CTION IS AVAILABLE TO AN ENTERPRISE WHICH (I) DEVELOPS; OR (II) OPERAT ES AND MAINTAINS; OR (III) DEVELOPS, MAINTAINS AND OPERATES THAT INFRAST RUCTURE FACILITY 5 ITA NO.433/PN/2007 SHOULD BE AFTER 1 ST APRIL, 1995. IN THE PRESENT CASE, THE ASSESSEE CLEARLY FULFILLED THIS CONDITION. 23. IN VIEW OF WHICH WE HAVE TAKEN, ALL THE ASSESS MENT YEARS IN QUESTION TO WHICH THIS BATCH OF APPEALS RELATES WOULD BE GOVERNED BY THE SAME PRINCIPLE. THE SUBSEQUENT AMENDMENT OF SEC. 80-IA(4A) OF THE ACT TO CLARIFY THAT THE PROVISION WOULD APPL Y TO AN ENTERPRISE ENGAGED IN (I) DEVELOPING; OR (II) OPERATING AND MA INTAINING; OR (III) DEVELOPING, OPERATING AND MAINTAINING AN INFRASTRUC TURE FACILITY WAS REFLECTIVE OF A POSITION WHICH WAS ALWAYS CONSTRUED TO HOLD THE FIELD. BEFORE THE AMENDMENT THAT WAS BROUGHT ABOUT BY PARL IAMENT BY FINANCE ACT OF 2001, WE HAVE ALREADY NOTED THAT THE CONSISTENT LINE OF CIRCULARS OF THE BOARD POSTULATED THE SAME POSIT ION. THE AMENDMENT MADE BY PARLIAMENT TO SEC. 80-IA(4) OF TH E ACT SET THE MATTER BEYOND ANY CONTROVERSY BY STIPULATING THAT T HE THREE CONDITIONS FOR DEVELOPMENT, OPERATION AND MAINTENAN CE WERE NOT INTENDED TO BE CUMULATIVE IN NATURE. 9. WE FIND FROM THE DECISION OF HONBLE BOMBAY HIGH COURT IN AFORESAID CASE OF CIT VS. ABG HEAVY INDUSTRIES LTD & ORS (SUPRA) THAT EVE N IN THE CASE BEFORE THE HONBLE HIGH COURT, THE ASSESSEE ACTED AS A CONTRACTOR FOR GOVERNMENT AGENCY, WAS HELD ELIGIBLE FOR THE PURPOSES OF CLAIM OF DEDUCTION U/S 80-IA(4) OF THE INCOME TAX ACT. AS PER THE SAID DECISION OF THE HONBLE HIGH COURT ASS ESSEE WHO ONLY DEVELOPS INFRASTRUCTURAL FACILITY (EVEN AS A CONTRACTOR) BUT DOES NOT HAVE AN OCCASION TO OPERATE AND MAINTAIN IS ALSO ELIGIBLE FOR CLAIM OF DEDUCTIO N U/S 80-IA(4) OF THE ACT. THE HONBLE HIGH COURT HAS BEEN PLEASED TO OBSERVE THAT QUA SUC H A PERSON THE CONDITION STATED IN SUB-SECTION (C) OF SEC.80-IA(4)(I) HAS TO BE READ H ARMONIOUSLY WITH THE MAIN PROVISION UNDER WHICH DEDUCTION IS AVAILABLE TO AN ASSESSEE, WHO DEVELOPS; OR OPERATES AND MAINTAIN; OR DEVELOPS, MAINTAINS AND OPERATES AN IN FRASTRUCTURAL FACILITY. IN OTHER WORDS A DEVELOPER WHO ONLY DEVELOPS (I.E., CONSTRUCTS) AN INFRASTRUCTURAL FACILITY IS NOT ENVISAGED TO OPERATE AND MAINTAIN SUCH FACILITY, CA NNOT BE ACCEPTED TO FULFIL THE CONDITION IN CLAUSE (C) OF SEC. 80-IA(4) SINCE IT W OULD BE AN IMPOSSIBILITY. THEREFORE, IN VIEW OF THE CONSTRUCTION PLACED BY THE HONBLE BOMB AY HIGH COURT ON THE REQUIREMENTS OF CLAUSE (C) OF SEC. 80-IA(4)(I) REQUIRING IT TO B E HARMONIOUSLY READ WITH THE MAIN SEC. 80-IA(4), WE DO NOT FIND SUBSTANCE IN THE OBJECTION RAISED BY THE REVENUE. WE THUS RESPECTFULLY FOLLOWING THE DECISION OF THE HONBLE BOMBAY HIGH COURT ON THE ISSUE IN THE CASE OF CIT VS. ABG HEAVY INDUSTRIES LTD & ORS (SUP RA) DECIDE THE MATTER IN FAVOUR OF 6 ITA NO.433/PN/2007 THE ASSESSEE WITH THIS FINDING THAT ASSESSEE IS ELI GIBLE TO CLAIM THE DEDUCTION IN QUESTION U/S 80-IA (4). THE ISSUE IS THUS DECIDED IN FAVOUR OF THE ASSESSEE. THE RELATED GROUNDS ARE THUS ALLOWED WITH THIS DIRECTION TO THE AO TO A LLOW THE CLAIMED DEDUCTION TO THE ASSESSEE. 10. CONSEQUENTLY THE APPEAL IS ALLOWED. ORDER PRONOUNCED IN THE OPEN COURT ON THIS 6 TH DAY OF FEBRUARY, 2012 SD/- SD/- (D. KARUNAKARA RAO) (I.C. SUDHIR) ACCOUNTANT MEMBER (JUDICIAL MEMBER) PUNE, DATED THE 6-2-2012 OKK COPY OF THE ORDER IS FORWARDED TO : 1. ASSESSEE AS MENTIONED IN THE CAUSE TITLE 2. ACIT, CIRCLE-2, KOLHAPUR 3. CIT (A), KOLHAPUR 4. CIT CONCERNED, 5. D.R. ITAT A BENCH, PUNE. 6. GUARD FILE BY ORDER ASSISTANT REGISTRAR I.T.A.T PUNE