Navayuga-IVRCL&SEW Joint venture, Hyderabad V. ACIT, Hyderabad

ITA 607/HYD/2010

• Counselvise Citation: [2012] 140 COUNSELVISE.COM (IT) 66121 (ITAT-HYDERABAD)
• Duration Of Justice: 2 year(s) 3 month(s) 10 day(s)
• Appeal Type: Income Tax Appeal
• Pronouncement Date: 03-08-2012
• Appeal Filed By: Assessee
• Order Result: Allowed
• Bench Allotted: B
• Next Hearing Date: 21-12-2010
• Assessment Year: 2006-2007
• Appeal Filed On: 23-04-2010
• Result in Favour of: Assessee
• Court: TRIBUNAL
• Department Lawyers: B V PRASAD REDDY
• Assessee Lawyers: V RAGHAVENDRA RAO
• Keywords: Opportunity of being heard

Judgement Text

IN THE INCOME TAX APPELLATE TRIBUNAL HYDERABAD B BENCH, HYDERABAD BEFORE SHRI CHANDRA POOJARI, ACCOUNTANT MEMBER AND SHRI SAKTIJIT DEY, JUDICIAL MEMBER ITA NO.607/HYD/2010 ASSESSMENT YEAR : 2006-07 NAVAYUGA IVRCL & SEW JOINT VENTURE, HYDERABAD. .... APPELLANT PAN: AAAAN 3846 Q VS. ACIT, CIR-6(1), HYDERABAD. RESPONDENT APPELLANT BY : SHRI V. RAGHAVENDRA RAO RESPONDENT BY : SHRI B.V PRASAD REDDY DATE OF HEARING : 07-06-2012 DATE OF PRONOUNCEMENT : 03-08-2012 ORDER PER SAKTIJIT DEY, J.M.: THIS APPEAL FILED BY THE ASSESSEE IS DIRECTED AGAI NST THE ORDER DATED 29-1-2010 OF CIT (A)-IV, HYDERABAD PASSED IN APPEAL NO.1123/DC6(1)/CIT(A)-IV/08-09 AND IT PER TAINS TO THE ASSESSMENT YEAR 2006-07. 2. THOUGH THE ASSESSEE HAS RAISED SEVEN GROUNDS, AL L OF THEM PERTAIN TO THE SAME ISSUE OF DISALLOWANCE OF DEDUCT ION CLAIMED U/S 80IA (4) OF THE ACT. 3. BRIEFLY THE FACTS ARE, THE ASSESSEE IS A JOINT V ENTURE. IT ENTERED INTO CONTRACT WITH GOVERNMENT OF ANDHRA PRA DESH REPRESENTED BY THE PROJECT ADMINISTRATION AND SUPER INTENDING ENGINEER FOR EXECUTION OF IRRIGATION PROJECTS ON EP C (ERECTION, 2 ITA NO. 607 OF 2010 NAVAYUGA IVRCL & SEW JOINT VENTURE., HYD. PROCUREMENT AND CONSTRUCTION) BASIS. THE ASSESSEE FILED ITS RETURN OF INCOME FOR THE ASSESSMENT YEAR UNDER DISP UTE DECLARING INCOME AT NIL AFTER CLAIMING DEDUCTION OF RS.16,95, 430/- U/S 80IA(4) OF THE ACT. IN COURSE OF THE ASSESSMENT PR OCEEDING, THE ASSESSEE CLAIMED THAT SINCE IT HAS DEVELOPED AN INF RASTRUCTURE FACILITY, IT IS ENTITLED FOR DEDUCTION U/S 80IA(4) OF THE ACT. THE AO AFTER EXAMINING THE TERMS OF THE CONTRACT CAME TO T HE CONCLUSION THAT THE ASSESSEE IS NOT A DEVELOPER BUT ONLY A CON TRACTOR AND HAS ONLY CONSTRUCTED THE PROJECT. THE AO OBSERVED THAT THE ASSESSEE HAS NEITHER DEVELOPED THE FACILITY ON BOT (BUILD, OPERATE, TRANSFER) OR BOOT ( BUILD, OWN, OPERATE, TRANSFER) BASIS. HENCE DEDUCTION U/S 80IA (4) CANNOT BE ALLOWED TO THE ASS ESSEE. 4. THE ASSESSEE CHALLENGED THE DISALLOWANCE BY FILI NG APPEAL BEFORE THE CIT (A). THE CIT (A) AFTER EXAMINING TH E PROVISION OF SEC. 80IA AND CIRCULARS ISSUED BY THE CBDT EXPLAINI NG SEC. 80IA FOUND THE OBJECT BEHIND SUCH DEDUCTION IS TO BRING IN ADDITIONAL RESOURCES BY ATTRACTING CAPITAL INVESTMENT FROM PR IVATE SECTOR TO DEVELOP SUCH INFRASTRUCTURE FACILITIES WHICH ARE CA PITAL INTENSIVE, INVOLVE LONG GESTATION PERIOD AND CERTAIN AMOUNT OF RISK. THE BASIC AIM WAS TO SEEK PARTICIPATION OF PRIVATE SECT OR COMPANIES WHO COULD DEVELOP SUCH INFRASTRUCTURE FACILITIES FR OM OUT OF THEIR OWN FINANCIAL, TECHNICAL AND MAN POWER RESOURCES. THEY WERE SUPPOSED TO CONCEIVE, DESIGN, PLAN BUILD AND OPERAT E THE FACILITY AND ALSO TO INVEST THEIR OWN FUND TO CARRY OUT THE DEVELOPMENT. THE CIT (A) AFTER EXAMINING THE LEGISLATIVE INTENT BEHIND SEC. 80IA CAME TO A CONCLUSION THAT THE DEDUCTION WAS NE VER INTENDED TO BE ALLOWED TO A COMPANY WHICH SIMPLY BUILDS THE INFRASTRUCTURE FACILITY WITH THE RESOURCES PROVIDED BY THE GOVERNM ENT. ACCORDING TO THE CIT (A), THE CONCEPT OF DEVELOPER U/S 80IA IS A BUILDER CUM OPERATOR WHO COULD DEVELOP THE INFRASTR UCTURE FACILITY 3 ITA NO. 607 OF 2010 NAVAYUGA IVRCL & SEW JOINT VENTURE., HYD. AND LATER RECOVER THE COST BY OPERATING THE SAME. THE DEVELOPER CONCEIVES, PLANS, DESIGNS AND FINANCES THE PROJECT AND ALSO OPERATES IT FOR RECOVERY OF COST. WHEREAS A BUILDE R ONLY CONSTRUCTS OR BUILDS A PROJECT WITH FINANCES AND DE SIGNS WHICH ARE MADE AVAILABLE BY THE DEVELOPER. THE CIT (A) CONCL UDED THAT THE ASSESSEE HAS NOT DESIGNED OR PLANNED THE PROJECT. IT HAS SIMPLY CONSTRUCTED OR BUILT THE PROJECT THAT TOO WITH THE FINANCIAL RESOURCES OF THE GOVERNMENT. THEREFORE, THE ASSESS EE CANNOT BE SAID TO HAVE DEVELOPED THE INFRASTRUCTURE FACILITY. THE CIT (A) HELD THAT THE ASSESSEE HAS EXECUTED THE WORK ONLY A S A CONTRACTOR AND NOT A DEVELOPER IN RESPECT OF THE PROJECTS WHIC H WERE NEVER OWNED, OPERATED OR MAINTAINED BY IT. HE THEREFORE SUSTAINED DISALLOWANCE OF DEDUCTION CLAIMED U/S 80IA OF THE A CT. 5. WE HAVE HEARD RIVAL SUBMISSIONS AND PERUSED THE MATERIALS ON RECORD. SECTION 80IA(4)(I) ENVISAGES THAT DEDUC TIONS U/S 80IA IS APPLICABLE TO AN ENTERPRISE CARRYING ON THE BUSI NESS OF DEVELOPING OR OPERATING AND MAINTAINING OR DEVELOPI NG, OPERATING AND MAINTAINING ANY INFRASTRUCTURE FACILITY ON FUL FILLING ALL THE CONDITIONS ENUMERATED UNDER THE SAID CLAUSE. WE AGR EE WITH THE CIT (A) THAT THE CONTEXT IN WHICH THE WORD DEVELOP ING HAS BEEN USED IN SEC. 80IA (4)(I) IMPLIES A MUCH WIDER CONNO TATION THAN A BUILDER OR CONTRACTOR. THE WORD DEVELOPING USED IN THE AFORESAID PROVISION WOULD INVOLVE CONCEIVING, DESIGNING, PLAN NING, FINANCING BUILDING AND OPERATING THE INFRASTRUCTURE FACILITY. IT DOES NOT MEAN CARRYING OUT MERE BUILDING AND CONSTRUCTION WO RK ON THE SPECIFICATION OF THE OWNER LIKE A BUILDER OR CONTRA CTOR. WE FIND ADEQUATE MATERIAL HAS NOT BEEN BROUGHT ON RECORD ON THE BASIS OF WHICH EXACT NATURE OF WORK DONE BY THE ASSESSEE COU LD BE ARRIVED AT. A COPY OF THE AGREEMENT ENTERED INTO BETWEEN T HE ASSESSEE WITH THE GOVERNMENT HAS NOT BEEN SUBMITTED BEFORE U S WHICH 4 ITA NO. 607 OF 2010 NAVAYUGA IVRCL & SEW JOINT VENTURE., HYD. COULD HAVE REVEALED THE NATURE AND SCOPE OF WORK EX ECUTED BY THE ASSESSEE. THAT BESIDES SEC. 80IA (4)(I) MANDAT ES THAT THE SECTION APPLIES TO AN ENTERPRISE IF ALL THE CONDITI ONS ENUMERATED THEREIN HAVE BEEN FULFILLED. ONE OF THE CONDITIONS BEING IT HAS STARTED OR STARTS OPERATING AND MAINTAINING THE INF RASTRUCTURE FACILITY ON OR AFTER 1-4-1995. FROM THE TERMS OF T HE CONTRACT IT HAS TO BE SEEN WHETHER THE ASSESSEE HAS TO OPERATE AND MAINTAIN THE INFRASTRUCTURE FACILITY. SINCE CLARITY IS LACK ING ON THESE ISSUES, WE CONSIDER IT APPROPRIATE TO RESTORE THIS ISSUE TO THE FILE OF THE AO WHO SHALL DECIDE THE CLAIM OF DEDUCTION U/S 80IA AFRESH KEEPING IN VIEW OUR OBSERVATIONS MADE ABOVE. THE A O SHALL AFFORD REASONABLE OPPORTUNITY OF BEING HEARD TO THE ASSESSEE IN THE MATTER. 6. IN THE RESULT, THE APPEAL FILED BY THE ASSESSEE IS TREATED AS ALLOWED FOR STATISTICAL PURPOSES. ORDER PRONOUNCED IN THE COURT ON 3 - 8-2012. SD/- S D/- (CHANDRA POOJARI) ACCOUNTANT MEMBER (SAKTIJIT DEY) JUDICIAL MEMBER HYDERABAD, DATED THE 3 RD AUGUST, 2012. COPY TO:- 1) M/S NAVAYUGA- IVRCL & SEW JOINT VENTURE, ROAD NO .36, LAKSHMI TOWERS, JUBILEE HILLS, HYDERABAD. 2) ACIT, CIR-6(1), HYDERABAD. 3) THE CIT (A)-IV, HYDERABAD 4) THE CIT CONCERNED, HYDERABAD 5) THE DEPARTMENTAL REPRESENTATIVE, I.T.A.T., HYDERABA D. JMR* 5 ITA NO. 607 OF 2010 NAVAYUGA IVRCL & SEW JOINT VENTURE., HYD.