DCIT, Circle-2(1), Hyderabad, Hyderabad V. Koya and Company Construction Limited, Hyd, Hyderabad

ITA 507/HYD/2015

• Counselvise Citation: [2016] 132 COUNSELVISE.COM (IT) 6414 (ITAT-HYDERABAD)
• Duration Of Justice: 1 year(s) 1 month(s) 28 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 29-06-2016
• Appeal Filed By: Department
• Order Result: Dismissed
• Bench Allotted: A
• Next Hearing Date: 22-06-2016
• Assessment Year: 2006-2007
• Appeal Filed On: 01-05-2015
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: M JAGDISH BABU
• Section: 143(3)

Judgement Text

ITA NO 507 OF 2015 KOYA AND CO. HYD PAGE 1 OF 11 IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD A BENCH, HYDERABAD BEFORE SHRI B. RAMAKOTAIAH, ACCOUNTANT MEMBER & SHRI PARTHA SARATHI CHAUDHURI, JUDICIAL MEMBER ITA NO.507/HYD/2015 (ASSESSMENT YEAR: 2006-07) DY. COMMISSIONER OF INCOME TAX, CIRCLE 2(1) HYDERABAD VS. M/S. KOYA & COMPANY CONSTRUCTIONS LTD HYDERABAD PAN: AACCK 3240 R (APPELLANT) (RESPONDENT) FOR REVENUE : SHRI M. JAGDISH BABU, DR FOR ASSESSEE : SHRI K.C.DEVDAS DATE OF HEARING : 22 .06.2016 DATE OF PRONOUNCEMEN T : 27 .06.2016 O R D E R PER SHRI PARTHA SARATHI CHAUDHURI, J.M. THIS IS REVENUES APPEAL DIRECTED AGAINST THE ORDER OF THE LEARNED CIT (A) DATED 12.02.2015 FOR THE RELEVANT A .Y 2006-07. THE REVENUE HAS RAISED THE FOLLOWING GROUNDS OF APP EAL: I) THE CIT (A) ERRED ON FACTS AND IN LAW IN ALLOWING APPEAL OF THE ASSESSEE. II) THE CIT (A) ERRED IN LAW IN CONSIDERING THE WORKS CONTRACTS ELIGIBLE FOR DEDUCTION U/S 80IA THOUGH THEY ARE NOT ELIGIBLE UNDER LAW FOR SUCH DEDUCTION. III) THE CIT (A) ERRED IN NOT LAW IN NOT APPRECIATING THE FACT THAT THE AO HAS RIGHTLY DISALLOWED THE DEDUCTION CLAIMED BY THE U/S 80 IA OF THE IT ACT, 1961 ITA NO 507 OF 2015 KOYA AND CO. HYD PAGE 2 OF 11 2. BRIEF FACTS OF THE CASE ARE THAT THE ASSESSEE CO MPANY IS ENGAGED IN THE BUSINESS OF MANUFACTURE AND EXECUTIO N OF MEDIUM AND LARGE DIAMETER TURNKEY PIPELINE CONTRACT S, FILED ITS RETURN OF INCOME FOR A.Y 2006-07 ON 29.11.2006 ADMI TTING TOTAL INCOME OF RS.3,33,11,070. THE ASSESSMENT WAS COMPLE TED U/S 143(3) R.W.S. 254 OF THE I.T. ACT, DETERMINING THE TOTAL INCOME AT RS.9,88,39,403. 3. THE 1 ST AND 4 TH GROUNDS RAISED BY THE REVENUE ARE GENERAL IN NATURE, WHILE GROUND NOS. 2 & 3 RELATES TO WHETH ER THE ASSESSEE IS ENTITLED TO DEDUCTION U/S 80IA OF THE A CT. THE QUESTION ON ELIGIBILITY OF DEDUCTION U/S 80IA(4) OF THE ACT CAME UP IN APPEAL BEFORE THE ITAT FOR THE A.YS 2003-04 T O 2006-07 IN ITA NOS.180/H/2006, 167/H/2008, 168/H/2008 & 221/H/2009 RESPECTIVELY. THE ITAT IN ITS ORDER DATE D 22.03.2012 IN THE FOLLOWING PARAGRAPHS AFTER APPRAI SING THE VARIOUS DATA FURNISHED BY THE ASSESSEE GIVING FULL DETAILS OF THE INFRASTRUCTURE PROJECT AS LAID DOWN IN SECTION 80IA (4) OF THE ACT CAME TO THE CONCLUSION THAT THE ASSESSEE WAS ENTITL ED FOR DEDUCTION U/S 80IA(4) OF THE ACT. THE RELEVANT PORT IONS OF THE ITATS ORDER HAVE BEEN PLACED IN ASSESSEES SUBMISS IONS BEFORE THE CIT (A), WHICH ARE REPRODUCED BELOW: '24. WE HAVE CONSIDERED THE ELABORATE SUBMISSIONS MADE 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 THAT THE PROVISIONS OF SECTION 80 IA (4) OF TH E ACT WHEN INTRODUCED AFRESH BY THE FINANCE ACT, 1999, TH E PROVISIONS UNDER SECTION 80IA (4A) OF THE ACT WERE ITA NO 507 OF 2015 KOYA AND CO. HYD PAGE 3 OF 11 DELETED FROM THE ACT. THE DEDUCTION AVAILABLE FOR A NY ENTERPRISE EARLIER UNDER SECTION 80IA (4A) ARE ALSO MADE AVAILABLE UNDER SECTION 80IA (4) ITSELF. FURTH ER, THE VERY FACT THAT THE LEGISLATURE MENTIONED THE WO RDS (I) 'DEVELOPING' OR (II) 'OPERATING AND MAINTAINING ' OR (III) 'DEVELOPING, OPERATING AND MAINTAINING CLEAR LY INDICATES THAT ANY ENTERPRISE WHICH CARRIED ON ANY OF THESE THREE ACTIVITIES WOULD BECOME ELIGIBLE FOR DEDUCTION. THEREFORE, THERE IS NO AMBIGUITY IN THE I.T. ACT. WE FIND THAT WHEN AN ASSESSEE INCURRED EXPENDITURE FOR PURCHASE OF MATERIAL HIMSELF AND EXECUTES THE DEVELOPMENT WORK I.E., CARRIES OUT THE CIVIL CONSTRUCTION WORK, HE WILL BE ELIGIBLE FOR TA X BENEFIT UNDER SECTION 80 IA OF THE ACT. IN CONTRAST TO THIS, A ASSESSEE, WHO ENTERS INTO A CONTRACT WITH ANOTHER PERSON INCLUDING GOVERNMENT OR AN UNDERTAKING OR ENTERPRISE REFERRED TO IN SECTION 80 IA OF THE ACT, FOR EXECUTING WORKS CONTRACT, WILL NOT BE ELIGIBLE FOR THE TAX BENEFIT UNDER SECTION 80IA OF THE ACT. WE FIND THAT THE WORD 'OWNED' IN SUB - CLAUSE (A) OF CLAUSE (1) OF SUB SECTION (4) OF SECTION 80IA OF THE ACT REFER TO THE ENTERPRISE. BY READING OF THE SECT ION, IT IS CLEARS THAT THE ENTERPRISES CARRYING ON DEVELOPM ENT OF INFRASTRUCTURE DEVELOPMENT SHOULD BE OWNED BY TH E COMPANY AND NOT THAT THE INFRASTRUCTURE FACILITY SH OULD BE OWNED BY A COMPANY. THE PROVISIONS ARE MADE APPLICABLE TO THE PERSON TO WHOM SUCH ENTERPRISE BELONGS TO IS EXPLAINED IN SUB-CLAUSE (A). THEREFOR E, THE WORD 'OWNERSHIP' IS ATTRIBUTABLE ONLY TO AN ENTERPR ISE CARRYING ON THE BUSINESS WHICH WOULD MEAN THAT ONLY COMPANIES ARE ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA (4) AND NOT ANY OTHER PERSON LIKE INDIVIDUAL, HUF, FIRM ETC. 25. WE ALSO FIND THAT ACCORDING TO THE SUB-CLAUSE ( A), CLAUSE (I) OF SUB SECTION (4) OF SECTION 80-IA THE WORD 'IT' DENOTES THE ENTERPRISE CARRYING ON THE BUSINES S. THE WORD 'IT' CANNOT BE RELATED TO THE INFRASTRUCTU RE FACILITY, PARTICULARLY IN VIEW OF THE FACT THAT INFRASTRUCTURE FACILITY INCLUDES RAIL SYSTEM, HIGHW AY PROJECT, WATER TREATMENT SYSTEM, IRRIGATION PROJECT , A PORT, AN AIRPORT OT AN INLAND PORT WHICH CANNOT BE OWNED BY ANYONE. EVEN OTHERWISE, THE WORD 'IT' IS ITA NO 507 OF 2015 KOYA AND CO. HYD PAGE 4 OF 11 USED TO DENOTE AN ENTERPRISE. THEREFORE, THERE IS N O REQUIREMENT THAT THE ASSESSEE SHOULD HAVE BEEN THE OWNER OF THE INFRASTRUCTURE FACILITY. 26. THE NEXT QUESTION IS TO BE ANSWERED IS WHETHER THE ASSESSEE IS A DEVELOPER OR MERE WORKS CONTRACTO R. THE REVENUE RELIED ON THE AMENDMENTS BROUGHT IN BY THE FINANCE ACT 2007 AND 2009 TO MENTION THAT THE ACTIVITY UNDERTAKEN BY THE ASSESSEE IS AKIN TO WORK S CONTRACT AND HE IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA (4) OF THE ACT. WHETHER THE ASSESSEE I S A DEVELOPER OR WORKS CONTRACTOR IS PURELY DEPENDS ON THE NATURE OF THE WORK UNDERTAKEN BY THE ASSESSEE. EACH OF THE WORK UNDERTAKEN HAS TO BE ANALYZED AND A CONCLUSION HAS TO BE DRAWN ABOUT THE NATURE OF TH E WORK UNDERTAKEN BY THE ASSESSEE. THE AGREEMENT ENTERED INTO WITH THE GOVERNMENT OR THE GOVERNMENT BODY MAY BE A MERE WORKS CONTRACT OR FOR DEVELOPMENT OR INFRASTRUCTURE. IT IS TO BE SEEN FRO M THE AGREEMENTS ENTERED INTO BY THE ASSESSEE WITH THE GOVERNMENT. WE FIND THAT THE GOVERNMENT HANDED OVER THE POSSESSION OF THE PREMISES OF PROJECTS TO THE ASSESSEE FOR THE DEVELOPMENT OF INFRASTRUCTURE FACI LITY. IT IS ASSESSEE'S RESPONSIBILITY TO DO ALL ACTS TILL THE POSSESSION OF PROPERTY IS HANDED OVER TO THE GOVERNMENT. THE FIRST PHASE IS TO TAKE- OVER THE EXISTING PREMISES OF THE PROJECTS AND THEREAFTER DEVELOPING THE SAME INTO INFRASTRUCTURE FACILITY. SECONDLY, THE ASSESSEE SHALL FACILITATE THE PEOPLE TO USE THE AVAILABLE EXISTING FACILITY EVEN WHILE THE PROCESS OF DEVELOPMENT IS IN PROGRESS. ANY LOSS TO THE PUBLIC CAUSED IN THE PROCESS WOULD BE RESPONSIBILIT Y OF THE ASSESSEE. THE ASSESSEE HAS TO DEVELOP THE INFRASTRUCTURE FACILITY. IN THE PROCESS, ALL THE WO RKS ARE TO BE EXECUTED BY THE ASSESSEE. IT MAY BE LAYING OF THE DRAINAGE SYSTEM, MAY BE CONSTRUCTION OF A PROJECT, PROVISION OF WAY FOR THE CATTLE AND BULLOCK CARTS I N THE VILLAGE; PROVISION FOR TRAFFIC WITHOUT ANY HINDRANC E, THE ASSESSEE'S DUTY IS TO DEVELOP INFRASTRUCTURE WHETHE R IT INVOLVES CONSTRUCTION OF A PARTICULAR ITEM AS AGREE D TO IN THE AGREEMENT OR NOT. THE AGREEMENT IS NOT FOR A SPECIFIC WORK, IT IS FOR DEVELOPMENT OF FACILITY AS A WHOLE. THE ASSESSEE IS NOT ENTRUSTED WITH ANY SPECI FIC ITA NO 507 OF 2015 KOYA AND CO. HYD PAGE 5 OF 11 WORK TO BE DONE BY THE ASSESSEE. THE MATERIAL REQUIRED IS TO BE 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 ASSESSEE. IT PROVIDES T HE WORKS IN PACKAGES AND NOT AS A WORKS CONTRACT. THE ASSESSEE UTILIZES ITS FUNDS, ITS EXPERTISE, ITS EMP LOYEES AND TAKES THE RESPONSIBILITY OF DEVELOPING THE INFRASTRUCTURE FACILITY. THE LOSSES SUFFERED EITHER BY THE GOVT. OR THE PEOPLE IN THE PROCESS OF SUCH DEVELOPM ENT WOULD BE THAT OF THE ASSESSEE. THE ASSESSEE HANDS OVER THE DEVELOPED INFRASTRUCTURE FACILITY TO THE GOVERNMENT ON COMPLETION OF THE DEVELOPMENT. THEREAFTER, THE ASSESSEE HAS TO UNDERTAKE MAINTENANCE OF THE SAID INFRASTRUCTURE FOR A PERIOD OF 12 TO 24 MONTHS. DURING 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 TRAFFIC. THEREFORE, IT IS CLEAR THAT FROM AN UN-DEV ELOPED AREA, INFRASTRUCTURE IS DEVELOPED AND HANDED OVER T O THE GOVERNMENT AND AS EXPLAINED BY THE CBDT VIDE ITS CIRCULAR DATED 1805-2010, SUCH ACTIVITY IS ELIG IBLE FOR DEDUCTION UNDER SECTION 80IA (4) OF THE ACT. TH IS CANNOT BE CONSIDERED AS A MERE WORKS CONTRACT BUT HAS 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, REL IED ON BY LEARNED COUNSEL FOR THE ASSESSEE, CLEARLY INDICATE THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTIO N UNDER SECTION 80IA (4) OF THE ACT. 4. AFTER GIVING A FINDING THAT DEVELOPMENT CONTRACT S ARE/WERE THE ASSESSEE IS UNDERTAKING IN THE INFRASTRUCTURE P ROJECTS ARE ELIGIBLE FOR DEDUCTION U/S 80IA(4) ON JUDICIAL PRIN CIPLES. THE ITAT HOWEVER, COULD NOT QUANTIFY THE DEDUCTION AS IT WAS FELT THAT EXAMINATION OF THE CONTRACTS IS REQUIRED TO SEGREGA TE THEM INTO CONTRACTS FOR DEVELOPMENT ON INFRASTRUCTURE FACILIT Y OR WORKS ITA NO 507 OF 2015 KOYA AND CO. HYD PAGE 6 OF 11 CONTRACTS SIMPLICITOR. THE DIRECTIONS OF THE ITAT V IDE PARA 31 IS AS UNDER: 31. ACCORDINGLY, THE ASSESSEE IS ENTITLED FOR DEDU CTION UNDER SECTION 80IA OF THE ACT ON THE PROJECTS WHICH INVOLVE ABOVE ACTIVITIES. THEREFORE, IN OUR CONSIDE RED VIEW, THE ASSESSEE SHOULD NOT BE DENIED THE DEDUCTI ON UNDER SECTION 80IA OF THE ACT IF THE CONTRACT INVOL VES DEVELOPMENT, OPERATING, MAINTENANCE, FINANCIAL INVOLVEMENT, AND DEFECT CORRECTION AND LIABILITY PE RIOD, THEN SUCH CONTRACTS CANNOT BE CALLED AS SIMPLE WORK S CONTRACT TO DENY THE DEDUCTION U/S 80IA OF ACT. IN OUR OPINION THE CONTRACTS WHICH CONTAIN ABOVE FEATURES HAVE TO BE SEGREGATED AND ON THIS DEDUCTION U/S. 80 IA HAS TO BE GRANTED AND THE OTHER AGREEMENTS WHICH AR E PURE WORKS CONTRACTS HIT BY THE EXPLANATION SECTION 80IA 13), THOSE WORK ARE NOT ENTITLED FOR DEDUCTION U/S 80IA OF THE ACT. THE PROFIT FROM THE CONTRACTS WHIC H INVOLVES DEVELOPMENT, OPERATING, MAINTENANCE, FINANCIAL INVOLVEMENT, AND DEFECT CORRECTION AND LIABILITY PERIOD IS TO BE COMPUTED BY ASSESSING OFF ICER ON PRO-RATA BASIS OF TURNOVER. THE ASSESSING OFFICE R IS DIRECTED TO 'EXAMINE THE RECORDS ACCORDINGLY AND GR ANT DEDUCTION ON ELIGIBLE TURNOVER AS DIRECTED ABOVE. I T IS NEEDLESS TO SAY THAT SIMILAR VIEW HAS BEEN TAKEN BY THE CHENNAI BENCH OF THE TRIBUNAL AND DEDUCTION U/S . 80IA WAS GRANTED IN THE CASE OF MIS. CHETTINAD LIGN ITE TRANSPORT SERVICES (P) LTD., IN ITA NO. 2287/MDS/06 ORDER DATED 27TH JULY, 2007 FOR THE ASSESSMENT YEAR 2004-05. LATER IN ITA NO. 1179/MDS/08 VIDE ORDER DATED 26TH FEBRUARY, 2010 THE TRIBUNAL HAS TAKEN TH E SAME VIEW BY INTER-ALIA HOLDING AS FOLLOWS: 'MOREOVER, THE REASONS FOR INTRODUCING THE EXPLANATION WERE CLARIFIED AS PROVIDING A TAX BENEFIT BECAUSE MODERNISATION REQUIRES A MASSIVE EXPANSION AND QUALITATIVE IMPROVEMENT IN INFRASTRUCTURE LIKE EXPRESSWAYS, HIGHWAYS, AIRPORTS, PORTS AND RAPID URBAN RAIL TRANSPORT SYSTEMS. FOR THAT PURPOSE, PRIVATE SECTOR PARTICIPATION BY WAY OF INVESTMENT IN DEVELOPMENT OF THE INFRASTRUCTURE SECTOR AND NOT FOR THE PERSON S WHO MERELY EXECUTE THE CIVIL CONSTRUCTION WORK OR ANY OTHER WORK CONTRACT HAS BEEN ENCOURAGED BY ITA NO 507 OF 2015 KOYA AND CO. HYD PAGE 7 OF 11 GIVING TAX BENEFITS. THUS THE PROVISIONS OF SECTION 80IA SHALL NOT APPLY TO A PERSON WHO EXECUTES A WORKS CONTRACT ENTERED INTO WITH THE UNDERTAKING OR ENTERPRISE REFERRED TO IN THE SECTION BUT WHERE A PERSON MAKES THE INVESTMENT AND HIMSELF EXECUTES THE DEVELOPMENT WORK, HE CARRIES OUT THE CIVIL CONSTRUCTION WORK, HE WILL BE ELIGIBLE FOR THE TAX BENEFIT UNDER SECTION 80IA.'' 4.1 CONSEQUENT TO THE ABOVE DIRECTIONS OF THE ITAT, IT SEEMS ASSESSEE HAS FURNISHED DETAILED LIST OF CONTRACTS I DENTIFIED WORK ON CONTRACTS AND INFRASTRUCTURE CONTRACTS ON THE BA SIS OF THE DIRECTIONS OF THE ITAT. HOWEVER, THE DCIT HYDERABAD , AFTER A PERIOD OF ONE YEAR FROM THE DATE OF ORDER DENIED TH E CLAIM OF EXEMPTION ON THE GROUND THAT THE ASSESSEE WAS ONLY A WORKS CONTRACTOR AND NOT A DEVELOPER FOLLOWING THE DECISI ON OF THE HON'BLE GUJARAT HIGH COURT IN THE CASE OF KATIRA CO NSTRUCTIONS LTD VS. UNION OF INDIA AND TWO OTHER RESPONDENTS. T HUS, THE CLAIM OF DEDUCTION U/S 80IA WERE DENIED FOR THE IMP UGNED YEAR. 5. THE ASSESSEE CARRIED THE MATTER TO THE LEARNED C IT (A) WITH A PRAYER THAT THE ASSESSEE ITSELF HAS SEGREGATED TH E CONTRACTS AND QUANTIFIED THE DEDUCTION AS PER THE DIRECTIONS OF T HE ITAT. ON THE BASIS OF THE WRITTEN SUBMISSIONS FILED BY THE A SSESSEE, A REMAND REPORT WAS CALLED FOR BY THE LEARNED CIT (A) . IN THE DETAILED REMAND REPORT SUBMITTED BY THE AO, IT WAS ALSO MENTIONED THAT THE ASSESSEE PREFERRED A MA NO.119 T O 122 FOR THE A.YS 2003-04 TO 2006-07 BEFORE THE ITAT AND IN THAT ORDER DATED 23.08.2013, HELD AS UNDER: IT IS NEEDLESS TO MENTION HERE THAT THE TRIBUNAL H AS NOT REJECTED THE CLAIM OF THE ASSESSEE U/S 80IA AND ON THE OTHER HAND, IT WAS HELD THAT THE ASSESSEE IS ITA NO 507 OF 2015 KOYA AND CO. HYD PAGE 8 OF 11 ENTITLED FOR DEDUCTION U/S 80IA OF THE ACT, AS NOTE D IN PARA 31 OF ITS ORDER, IF THE ASSESSEE HAS CARRIED O N INFRASTRUCTURE PROJECTS, IF ANY WHICH ARE NOT IN TH E NATURE OF WORKS CONTRACTS, AND TO QUANTIFY THE DEDUCTION, THE ISSUE WAS REMITTED BACK TO THE FILE OF THE AO . 6. FROM THE ABOVE WORDING OF THE ITAT, IT IS CLEAR THAT THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80IA AND MOR E SO IN THE CASE OF PROJECTS NOT IN NATURE OF WORKS CONTRACT. H OWEVER, IN THE REMAND REPORT THE AO WAS THE OPINION THAT THE CONTR ACT WORKS OF THE ASSESSEE ARE IN THE NATURE OF WORKS CONTRACT AN D NOT ELIGIBLE FOR DEDUCTION U/S 80IA. A COPY OF THE REMAND REPORT WAS ALSO FORWARDED TO THE ASSESSEE FOR HIS COMMENTS AND IN T HE ORDER OF THE LEARNED CIT (A) THE SUBMISSIONS OF THE ASSESSEE ON THE REMAND REPORT ALSO FINDS PLACE. THE ASSESSEE BEFORE THE LEARNED CIT (A) ALSO RELIED ON THE DECISION OF THE ITAT HYD ERABAD BENCH IN THE CASE OF M/S KMC CONSTRUCTIONS LTD IN MA NO.64/HYD/2013 (ITA NO.558/HYD/2006), MA NO.65/HYD/ 2013 (ITA NO.1223/HYD/2007), MA NO.66/HYD/2013 (ITA NO.1 027/ HYD/2007), MA NO.67/HYD/2013 (ITA NO.338/HYD/2009) AND MA NO.68/HYD/2013 (ITA 84/HYD/2010) DATED 4.7.2013. THE ASSESSEE HAD SUBMITTED A DETAILED SUBMISSIONS BEFOR E THE CIT (A), BUT THE ESSENTIAL CRUX IS WHETHER THE ASSESSEE IS ELIGIBLE FOR DEDUCTION U/S 80IA OF THE ACT FOR CARRYING OUT THE DEVELOPMENTAL ACTIVITIES AND SINCE THE TRIBUNAL HAS ALREADY DIREC TED THE DCIT IN EARLIER ORDERS TO ALLOW THE DEDUCTION THAT SHOULD H AVE BEEN FOLLOWED BY THE SUBORDINATE AUTHORITY. ITA NO 507 OF 2015 KOYA AND CO. HYD PAGE 9 OF 11 6.1 HOWEVER, THE LEARNED CIT (A) HAS ALLOWED THE DE DUCTION WITH BRIEF ORDER AS UNDER: 10. KEEPING IN VIEW THE SUBMISSIONS OF THE APPELLA NT, FINDINGS OF THE AO AND RESPECTFULLY FOLLOWING THE DECISION OF THE HON'BLE ITAT, THE GROUNDS OF APPEAL NO.2 TO 7 TAKEN BY THE APPELLANT ARE ALLOWED. 6.2 AGGRIEVED, THE REVENUE IS IN APPEAL BEFORE US. 6.3 THE LEARNED DR ASSAILED THE ORDER OF THE CIT (A ) STATING THAT IT IS NOT A SPEAKING ORDER AND THE REASONS FOR ALLOWING DEDUCTION WERE NOT FORTHCOMING FROM THE ORDER OF TH E CIT (A). THE LEARNED DR REFERRED TO THE ORDER OF THE AO AND SUBMITTED THAT AS PER THE ANALYSIS DONE BY THE AO, ASSESSEE W AS DOING ONLY WORK CONTRACT AND HENCE IS NOT ELIGIBLE FOR DEDUCTI ON. PER CONTRA, THE LEARNED COUNSEL SUBMITTED THAT AS PER THE DIREC TIONS OF THE ITAT, ASSESSEE COMPANY FURNISHED DETAILED SUBMISSIO NS SEGREGATING THE DEVELOPMENT CONTRACTS AND WORK CONT RACTS AND THE CLAIM OF 80IA WAS RESTRICTED TO THE PROFITS EAR NED ON DEVELOPMENT CONTRACTS. HE, HOWEVER, SUPPORTED THE O RDER OF THE CIT (A). 7. WE HAVE PERUSED THE FACTS ON RECORD AND CIRCUMST ANCES IN THIS CASE, THE LEGAL PRINCIPLES ARISING HEREIN AND WE ARRIVE AT OUR CONSIDERED VIEW THAT SO FAR AS THE LEGAL PARAMETERS ARE CONCERNED, IT HAS BEEN VERY ELABORATELY ANALYSED BY THE ITAT IN THE ASSESSEES OWN CASE THAT IF THE ASSESSEE IS CON DUCTING DEVELOPMENTAL ACTIVITIES, THEN THE DEDUCTION IS ALL OWABLE, BUT IF IT IS ONLY RELATE TO THE WORK CONTRACTS, THEN SUCH DED UCTION IS NOT ALLOWABLE. WE ALSO FIND AS PER THE MA FILED BY THE ASSESSEE THE ITA NO 507 OF 2015 KOYA AND CO. HYD PAGE 10 OF 11 TRIBUNAL HAD DIRECTED THE AO TO SEGREGATE AS REGARD S THE TOTAL CONTRACTS WHICH ONE IS DEVELOPMENT CONTRACTS AND WH ICH ARE ONLY WORKS RELATED CONTRACTS. CONTRACTS WHICH ARE D EVELOPMENT CONTRACTS, TO THAT EXTENT DEDUCTION IS ALLOWABLE U/ S 80IA OF THE ACT. AO WITHOUT EXAMINING THE NATURE OF CONTRACT AS DIRECTED HAS TREATED ALL OF THEM AS WORK CONTRACTS. COMING TO T HE ORDER OF THE LEARNED CIT (A), ALL THESE AFORESAID PARAMETERS WER E TO BE EXAMINED AND PUT FORTH IN HIS OTHERWISE ELABORATE A ND EXTENSIVE ORDER. BUT HOWEVER, FOR REASONS BEST KNOWN TO HIM, THOUGH HE HAS ALLOWED THE SAID DEDUCTION TO THE ASSESSEE, BUT THE REASONS FOR ALLOWING THOSE DEDUCTIONS WERE NOT AT ALL FORTH COMING IN HIS ORDER. THE ORDER OF THE LEARNED CIT (A) IS NOT AT A LL A SPEAKING ORDER, NOR IT HAS EXPRESSED IN ANY WAY ALL THE COGE NT REASONS FOR WHICH THE ASSESSEE IS ELIGIBLE FOR THE DEDUCTION CL AIMED FOR. IT IS A MATTER OF JUDICIAL EXERCISE AND KNOWLEDGE THAT AS PER THE RULING OF THE APEX COURT IN SEVERAL CASES, THE QUASI JUDIC IAL AUTHORITY ARE SUPPOSED TO PROVIDE A SPEAKING ORDER WHEREBY TH E WAY OF THOUGHT IS SPECIFICALLY MENTIONED THEREIN AND IF IT IS NOT A SPEAKING ORDER, THEN IT IS BAD IN LAW. THIS SO BECA USE THE MENTAL PROCESS AND THOUGHT LEADING TO THE DECISION IS VERY MUCH UNCLEAR. IN THE INSTANT CASE, THOUGH THE ASSESSEE H AS GONE BEFORE THE ITAT, WE FIND IN OUR CONSIDERED VIEW THE ORDER OF THE ITAT IS ESSENTIALLY CLARIFICATORY IN NATURE REGARDI NG THE LEGAL POSITION OF THE ASSESSEE, BUT IT IS NOT DECISIVE IN NATURE SO AS TO CLEARLY DECIDE WHETHER IN THE GIVEN FACTS AND SITUA TION, THE ASSESSEE IS ELIGIBLE FOR DEDUCTION OR NOT. NEITHER WE FIND THE CIT (A) HAS GIVEN A REASONED ORDER FOR HIS DECISION. TH EREFORE, UNDER THE CIRCUMSTANCES AND IN THE INTEREST OF JUSTICE, W E FIND IT DEEM AND PROPER TO SEND THIS FILE BACK TO THE CIT (A) TO GIVE A FINDING ITA NO 507 OF 2015 KOYA AND CO. HYD PAGE 11 OF 11 ABOUT THE NATURE OF THE CONTRACTS UNDERTAKEN BY THE ASSESSEE AND WHETHER THE SEGREGATION UNDERTAKEN BY THE ASSES SEE VIS-- VIS THE DEVELOPMENT CONTRACT AND WORK CONTRACTS IS CORRECT OR NOT. WE EXPECT THE LEARNED CIT (A) TO EXAMINE ALL C ONTRACTS AND GIVE A FINDING ON EACH OF THE CONTRACTS AND DETERMI NE THE ISSUE OF DEDUCTION IN A MUCH MORE DEFINITE WAY, BY WAY OF A SPEAKING ORDER. ACCORDINGLY THE APPEAL OF THE REVENUE IS ALL OWED FOR STATISTICAL PURPOSES. 8. IN THE RESULT, APPEAL FILED BY THE REVENUE IS AL LOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE OPEN COURT ON 29 TH JUNE, 2016. S D/ - S D/ - (B. RAMAKOTAIAH) (PARTH SARATHI CHAUDHURI) ACCOUNTANT MEMBER JUDICIAL MEMBER HYDERABAD, DATED 29 TH JUNE, 2016. VNODAN/SPS COPY TO: 1. DY.COMMISSIONER OF INCOME TAX, CIRCLE 2(1) 8 TH FLOOR, B BLOCK, IT TOWERS, AC GUARDS, HYDERABAD 2. M/S. KOYA & COMPANY CONSTRUCTIONS LTD NO.12-2-831/ 38, 72 MIGH MEHDIPATNAM, HYDERABAD 500029 3. CIT-(A)-2 HYDERABAD 4. CIT-2, HYDERABAD 5. THE DR, ITAT, HYDERABAD 6. GUARD FILE BY ORDER