, , , , INCOME-TAX APPELLATE TRIBUNAL CBENCH M UMBAI , , BEFORE S/SH. RAJENDRA,ACCOUNTANT MEMBER & PAWAN SINGH, JUDICIAL MEMBER ./I.T.A./7155/MUM/2008 , /ASSESSMENT YEAR: 2005-06 M/S. PATEL KNR, JV PATEL ESTATE ROAD, JOGESHWARI(W) MUMBAI-400 072. PAN:AAAAP 1494 N VS. ACIT, CIRCLE-24(1) PRATYAKSHAKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E) MUMBAI-400 051. ./I.T.A./7156/MUM/2008 , /ASSESSMENT YEAR: 2005-06 M/S. KNR PATEL, JV PATEL ESTATE ROAD, JOGESHWARI(W) MUMBAI-400 072. PAN:AAAAK 1639 A VS. ACIT, CIRCLE-24(1) PRATYAKSHAKAR BHAVAN, BANDRA KURLA COMPLEX, BANDRA (E) MUMBAI-400 051. ( /APPELLANT ) ( / RESPONDENT ) REVENUE BY: SHRI VIJAY KUMAR SONI-DR ASSESSEE BY: SHRI MAYUR KISHNADWALA-AR / DATE OF HEARING: 28.06.2016 / DATE OF PRONOUNCEMENT: 28.06.2016 ,1961 254(1) ORDER U/S.254(1)OF THE INCOME-TAX ACT,1961(ACT) PER RAJENDRA, AM - CHALLENGING THE ORDER DATED 12.11.2008 OF CIT(A)-XX IV, MUMBAI THE ASSESSEES HAVE FILED THE PRESENT APPEALS. BOTH THE APPEALS ARE BEING DEC IDED BY A SINGLE COMMON ORDER AS COMBINED ISSUES ARE INVOLVED. ASSESSEE AOP.S ARE ENGAGED IN EXECUTING CIVIL CONTRACTS AND CONSTRUCTION OF ROADS, HIGHWAYS ETC. ITA NO.7155/MUM/2008-(AY 2005-06) : 2. THE EFFECTIVE GROUND OF APPEAL IS ABOUT DISALLOWANC E OF CLAIM MADE BY THE ASSESSEE U/S.80IA(4) OF THE ACT IN RESPECT OF INCOME DERIVED FROM ACTIVITY OF DEVELOPMENT OF ELIGIBLE INFRASTRUCTURAL FACILITIES. IN THIS CASE ORIGINAL O RDER WAS COMPLETED ON 31.12.2007, U/S. 143(3) OF THE ACT BY THE AO. HE HELD THAT THE ASSESSEE WAS NOT ENTITLED TO CLAIM DEDUCTION U/S.80IA(4) OF THE ACT. 7155-56/M/2008-PATEL 2 3. AGGRIEVED BY THE ORDER OF THE AO, ASSESSEE PREFERR ED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY (FAA), WHO CONFIRMED THE ORDER OF THE AO. THE ASSESSEE, AGITATED THE ISSUE BEFORE THE TRIBUNAL WHO REMANDED BACK THE MATTER TO THE FI LE OF THE AO WITH CERTAIN DIRECTIONS. IN THE MEANWHILE, THE ASSESSEE JOINED AS AN INTERVENER ON THE ISSUE OF SECTION 80IA(4) OF THE ACT, IN THE THIRD MEMBER CASE OF B.T. PATIL & SONS (BEL GAUM) CONSTRUCTION PVT. LTD. (ITA NO.1048 & 1049/PUNE/2003) THAT ON 26.10.2009 THE TH IRD MEMBER DECIDED THE ISSUE AGAINST B.T. PATIL & SONS (BELGAUM) CONSTRUCTION PVT. LTD. AS PER THE PROVISIONS OF SECTION 255(4) OF THE ACT THE CASE OF BT PATIL WAS REFERRED BACK T O THE DIVISION BENCH OF THE TRIBUNAL TO GIVE EFFECT IN CONFORMITY WITH THE OPINION OF THE T HIRD MEMBER. THE REGULAR BENCH FOLLOWING THE JUDGMENT OF HON'BLE BOMBAY HIGH COURT DELIVERE D IN THE CASE OF ABG HEAVY INDUSTRIES LTD. (332 ITR323), GRANTED DEDUCTION TO THE ASSESSE E U/S. 80IA(4) OF THE ACT. CONSIDERING THE ABOVE FACTS, THE TRIBUNAL HELD THAT THE LAW INTERPR ETED BY THE 3 RD MEMBER WAS NO LONGER A GOOD LAW. THE TRIBUNAL DECIDED THE ISSUE IN CASE O F B.T PATIL AS UNDER : 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 CASE OF ABG HEAVY INDUSTRIES LTD. (SUPRA), THE ASSESSING OFFICER IS DIRECTED TO ALLOW DEDUCTION U/S. 80IA(4) OF THE ACT TO THE ASSESSEE WITH REGARD TO THE PROJECTS IN QUESTION FOR BOTH THE YEA RS. THE MATTER IS DISPOSED OFF ACCORDINGLY. ASSESSEE BROUGHT THE ABOVE FACTS BEFORE THE HON'BLE BOMBAY HIGH COURT THEREFORE, THE MATTER WAS REMANDED BACK TO THE TRIBUNAL. 4. DURING THE COURSE OF HEARING BEFORE US THE AUTHORIS ED REPRESENTATIVE BROUGHT TO OUR NOTICE THAT IN CASE OF PATEL KNR, JV THE TRIBUNAL HAD DEC IDED IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE (ITA NO.5230/MUM/2012, AY 2008-09, DATED 26.09.2014) .HE RELIED UPON THE SAID ORDER. DEPARTMENTAL REPRESENTATIVE (DR) LEFT THE I SSUE TO THE DISCRETION OF THE BENCH . 5. WE HAVE HEARD THE RIVAL SUBMISSION AND PERUSED THE MATERIAL AND FIND THAT IT IS A REMAND MATTER WHEREIN THE HON'BLE HIGH COURT HAS DIRECTED THE TRIBUNAL TO DECIDE THE ISSUE CONSIDERING THE AVAILABLE MATERIAL. WE FIND THAT IN THE CASE OF PATEL KNR, JV (SUPRA), THE TRIBUNAL HAS DELIBERATED UPON THE ISSUE AFTER RECOR DING THE BASIC FACTS AS UNDER : 3. BRIEFLY STATED RELEVANT FACTS OF THE CASE ARE THAT THE ASSESSEE IS A JOINT VENTURE(JV) BETWEEN PATEL ENGINEERING LTD. AND KNR CONSTRUCTIONS LTD. A ND IS ENGAGED IN BUSINESS OF CONSTRUCTION OF ROAD, HIGHWAYS AND OTHER INFRASTRUCTURE PROJECTS . ASSESSEE FILED THE RETURN OF INCOME DECLARING THE TOTAL INCOME OF RS. NIL AFTER 'CLAIMI NG DEDUCTION U/S. 801A ( 4) ON ONE PROJECT NAMELY AS-18 ' OF RS.9,95,41,994/- WHICH WAS RESTRI CTED TO GROSS TOTAL INCOME OF RS. 7155-56/M/2008-PATEL 3 3,02,81,419/-.ASSESSMENT WAS COMPLETED UNDER 143(3) OF THE ACT DETERMINING THE TOTAL INCOME AT RS.3,02,81,419/-. IN THE ASSESSMENT, AO DISALLO WED THE - ASSESSEE'S -CLAIM OF DEDUCTION U/S 80IA(4) BY HOLDING THAT NHAI SUPPLIES FUNDS, TECHNI CAL KNOWHOW, TECHNICAL PARAMETERS AND EVEN THE WORK OF THE 'ASSESSEE IS UNDER THE SUPERVI SION OF NHAI, HENCE, THE ASSESSEE IS ONLY 'WORKS CONTRACTOR FOR THE PURPOSE OF ONLY EXECUTI ON OF THE WORKS. AO ALSO HELD THAT THE ASSESSEE IS ONLY AS 'WORKS CONTRACTOR' AND NOT AS 'THE DEVELOPER AND AS SUCH, THE ASSESSEE COULD NOT SUBSTANTIATE ITS CLAIM THEREFORE, THE CLAIM OF THE ASSESSEE WAS NOT ACCEPTED. IN SUPPORT OF HIS DECISION, AO RELIED ON THE DECISION OF THE LAR GER BENCH OF THE ITAT IN THE CASE OF M/S. B.T. PATIL & SONS BELGAUM CONSTRUCTION PVT LTD REPORTED IN 126TTJ (MUM) TM WHEREIN THE ASSESSEE WAS ONE OF THE INTERVENER' AND IT WAS HEL D THAT, EXECUTING A MERE WORKS CONTRACT IS NOT ENTITLED TO DEDUCTION U/S 80IA(4). FURTHER, AO RESTRICTED THE TDS CREDIT TO RS. 5,41,78,411/-, WHICH IS PROPORTIONATE TO THE CONTRA CT RECEIPTS OFFERED BY THE ASSESSEE IN THE YEAR UNDER CONSIDERATION . AO INVOKED THE PROVISION S OF SECTION 199 OF THE ACT IN THIS REGARD. AGGRIEVED WITH THE DECISION OF THE AO, ASSESSEE FI LED AN APPEAL BEFORE THE FIRST APPELLATE AUTHORITY. 4. DURING THE PROCEEDINGS BEFORE THE FIRST APPELLAT E AUTHORITY, ASSESSEE MADE ELABORATE SUBMISSIONS BY MENTIONING THAT BOTH THE DENIAL OF D EDUCTION U/S.80IA(4) OF THE ACT AND RESTRICTION OF TDS CREDIT IS NOT PROPER. BEFORE THE CIT(A), ASSESSEE RELIED ON VARIOUS DECISIONS I.E., THE JUDGMENT OF THE JURISDICTIONAL HIGH COURT IN THE CASE OF ABG HEAVY INDUSTRIES LTD. W REPORTED IN 322 ITR 323 (BOM); ORDER OF THE ITAT, HYDERABAD 'BENCH IN THE CASE OF GVPR ENGINEERS LTD VS. ACIT [21 TAXMANN.COM 246] (MUM); LAXMI CIVIL ENGG. P. LTD VS. ADDL. CIT (ITA NO.766/PN/09, 254/PN/08, 431/PN/07). IT WAS DE MONSTRATED BEFORE THE CIT(A) THAT THE LARGER BENCH DECISION IN THE CASE OF B.T. PATIL & SONS BELGAUM CONSTRUCTIONS (P) LTD (SUPRA), IS NOT GOOD LAW IN VIEW OF THE SUBSEQUENT DEVELOPM ENTS ON THAT ORDER. CIT (A) CONSIDERED THE SAME AND PASSED A SPEAKING ORDER ALONG WITH THE APP EAL OF THE ASSESSEE ON BOTH THE ISSUES. WHILE GIVING THE DECISION, CIT (A) DISCUSSED THE RE LEVANT PROVISIONS OF SECTION 80IA( 4) AND THE DEFINITION OF 'INFRASTRUCTURE' AND MENTIONED THAT T HE PROVISIONS ARE PROGRESSIVELY LIBERALIZED TO HOLD THAT EVEN THE DEVELOPER IS ELIGIBLE FOR DE DUCTION UNDER THESE PROVISIONS. HE ALSO DISCUSSED THE MEANING OF 'CONTRACTOR' AND 'DEVELOP ER' AND ELABORATED THE SCOPE OF CONTRACT. PARA 2.15 OF THE CIT(A)'S ORDER IS RELEVANT 'IN TH IS REGARD. THERE WAS A DISCUSSION IN HIS ORDER ON THE VARIOUS CLAUSES OF THE CONTRACT TO CONCLUDE THAT THE ASSESSEE HAS ALL THE RESPONSIBILITY IN, EXECUTING THE CONTRACT WORKS. FURTHER, THE CIT(A) A NALYZED THE WAY THE AO REJECTED THE APPLICABILITY OF THE BINDING JUDGMENT OF THE HON'BL E HIGH COURT IN THE CASE OF ABG HEAVY INDUSTRIES LTD (SUPRA).' FURTHER, HE ALSO ANALYZED THE APPLICABILITY OF THE DECISION OF VARIOUS BENCHES OF THE TRIBUNAL. IN PARA 2.30 OF THE IMPUG NED ORDER, THE CIT(A) HELD THAT THE LARGER BENCH DECISION IN THE CASE OF B.T. PATIL & SONS BE LGAUM ,CONSTRUCTION PVT. LTD. (SUPRA), IS NO LONGER A GOOD LAW CONSIDERING THE BINDING JUDGMENT OF THE' HONBLE HIGH COURT IN THE CASE OF ABG, HEAVY INDUSTRIES LTD. (SUPRA) AND OTHER DECISI ONS OF THE TRIBUNAL. FURTHER, HE ANALYZED: ANOTHER JUDGMENT OF THE ITAT, HYDERABAD BENCH IN TH E CASE OF M/S. KMC CONSTRUCTIONS LTD VS. CIT, 21 TAXMANN.COM 138 (HYDERABAD), DATED 16.3 .2012 WHICH BELONGS TO THE SUBSEQUENT PERIOD TO THE CITED LARGER BENCH DECISION 'IN 'THE CASE OF B.T. PATIL & SONS BELGAUM CONSTRUCTION PVT LTD (SUPRA). IN FACT THE CIT(A) E XTRACTED THE PARA 46 TO 44 OF THE SAID ORDER OF THE TRIBUNAL IN THE, CASE OF M/S. KMC CONSTRUCT IONS LTD (SUPRA) AND DIRECTED THE AO TO ALLOW THE DEDUCTION CLAIMED U/S. 80IA( 4) OF THE A CT. PARA 2.31 OF THE IMPUGNED ORDER ISRELEVANT IN THIS REGARD. 'THE RATIO OF THE SAID DECISION IS THAT THE ASSESSEE, WHO IS ENGAGED IN THIS KIND ,OF CONTRACT WORK INVOLVING THE NHAI PRO JECTS IS NOT MERELY A WORKS CONTRACTOR AND HE IS A DEVELOPER WHO IS ELIGIBLE FOR DEDUCTION U/S 80IA( 4) OF THE ACT. IT 'IS THE FINDING OF THE CIT (A) THAT THE CONTRACTS EXECUTED BY THE M/S. KMC CONSTRUCTIONS LTD, (SUPRA) INVOLVING NHAI AND THE SCOPE OF THE WORKS ARE SIMILAR TO THAT OF THE WORKS ,EXECUTED BY THE ASSESSEE FOR NHAI. CIT(A) ANALYZED THE SCOPE OF THE CONTRACT WOR K BEFORE GIVING RELIEF TO THE ASSESSEE. THE TRIBUNAL DECIDED THE ISSUE AS UNDER :- 7. WE HAVE HEARD BOTH THE PARTIES ON THE ISSUE OF ALLOWABILITY OF DEDUCTION U/S. 80IA(4) OF THE ACT TO THE ASSESSEE WHO EXECUTED THE CONTRACT GRANT ED BY THE NHAI. IT IS THE FINDING OF THE 7155-56/M/2008-PATEL 4 HYDERABAD BENCH OF THE TRIBUNAL IN THE CASE OF' M/ S KMC CONSTRUCTIONS LTD (SUPRA) THAT THE CONTRACTOR, WHO UNDERTAKES FOR ROAD WIDENING OF TH E NATIONAL HIGHWAYS FROM 2 LINES TO 4 LINES, IS ELIGIBLE FOR DEDUCTION U/S 80IA(4) OF TH E ACT. THE ASSESSEES OF THIS KIND ARE DEEMED FULFILLING THE CONDITIONS SPECIFIED IN THE SAID SU B-SECTION (4) OF SECTION 80IA OF THE ACT. IT IS ALSO DEMONSTRATED BEFORE US THAT THE LARGER BENCH DECISION IN THE CASE OF B.T, PATIL & SONS BELGAUM CONSTRUCTION PVT LTD (SUPRA) IS NO LONGER A VALID LAW AS THE SAID JUDGMENT WAS REVERSED AFTER HEARING THE CASE IN COMPLIANCE WITH THE DIRECTIONS OF THE HON'BLE BOMBAY HIGH COURT. THEREFORE, WE ARE OF THE OPINION THAT THE DE CISION OF THE CIT(A) ON THIS ISSUE IS FAIR AND REASONABLE AND IT DOES NOT CALL FOR ANY INTERFERENC E. ACCORDINGLY, GROUND NO.1 IS ALLOWED IN FAVOUR OF THE ASSESSEE. RESPECTFULLY FOLLOWING THE ABOVE ORDER FOR 2008-09 WE DECIDE THE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE. ITA 7156/MUM/2008 (2005-06): 7. THE FACTS OF THE CASE ARE IDENTICAL TO THE FACTS OF THE EARLIER MATTER EXCEPT THE AMOUNT INVOLVED IS DIFFERENT. FOLLOWING OUR ORDER AT PARA NO. 5, WE DECIDE THE EFFECTIVE GROUND OF APPEAL IN FAVOUR OF THE ASSESSEE . AS A RESULT APPEALS FILED BY BOTH THE ASSESSEES STAND ALLOWED. ORDER PRONOUNCED I N THE OPEN COURT ON 28 TH JUNE, 2016. 28 , 2016 SD/- SD/- ( /PAWAN SINGH) ( / RAJENDRA) / JUDICIAL MEMBER / ACCOUNTANT MEMBER MUMBAI; DATED : 28 .06.2016. JV.SR.PS. / COPY OF THE ORDER FORWARDED TO : 1. APPELLANT / 2. RESPONDENT / 3. THE CONCERNED CIT(A)/ , 4. THE CONCERNED CIT / 5. DR G BENCH, ITAT, MUMBAI / , , . . 6. GUARD FILE/ //TRUE COPY// / BY ORDER, / DY./ASST. REGISTRAR , /ITAT, MUMBAI.