Appeal Details
Counselvise Citation
91123114 RSA 2010
Assessee PAN
Bench
Appeal Number
CRN Number
Duration Of Justice
1 year(s) 23 day(s)
Appellant
Respondent
Appeal Type
Income Tax Appeal
Pronouncement Date
05-08-2011
Appeal Filed By
Assessee
Order Result
Partly Allowed
Bench Allotted
A
Assessment Year
2007-2008
Appeal Filed On
13-07-2010
Judgement Text
1 ITA 911-10 IN THE INCOME TAX APPELLATE TRIBUNAL JAIPUR BENCH A JAIPUR ( BEFORE SHRI R.K. GUPTA AND SHRI N.L. KALRA ) ITA NO. 911/JP/2010 ASSTT. YEAR : 2007-08. OM METALS INFRAPROJECTS LTD., VS. THE ADDL. CIT, RANGE-2, OM TOWER, M.I. ROAD, JAIPUR. JAIPUR. PAN : AAACO 8245 J (APPELLANT) (RESPONDENT) APPELLANT BY : SHRI VIJAY MEHTA, MAYUR KISHNA DWALA & B.V. MAHESHWARI RESPONDENT BY : SHRI SUNIL MATHUR ORDER DATED : 05/08/2011. PER R.K. GUPTA, J.M. THIS IS AN APPEAL BY ASSESSEE AGAINST THE ORDER OF LD. CIT (A) RELATING TO ASSESSMENT YEAR 2007-08. 2. FIRST ISSUE IN THE APPEAL OF THE ASSESSEE IS AGA INST REJECTING THE CLAIM OF DEDUCTION UNDER SECTION 80IA(4) ON INCOME OF GOSHI KHURD PROJ ECT BY RS. 16,89,16,692/-. 3. THE BRIEF FACTS OF THE CASE ARE THAT THE ASSESSE E IS A PUBLIC LIMITED COMPANY AND CLAIMED DEDUCTION OF RS. 16,89,16,692/- UNDER SECTI ON 80IA(4) IN RESPECT OF GOSHI KHURD PROJECT, WHICH IS AN IRRIGATION PROJECT PROMOTED BY GOVERNMENT OF MAHARASHTRA. THE PROJECT ENVISAGES CONSTRUCTION OF EARTHEN DAM TO PR OVIDE IRRIGATION TO CERTAIN PARTS OF 2 MAHARASHTRA AND ALSO PROVIDE DRINKING WATER. THE P ROJECT WAS IMPLEMENTED BY GOVT. OF MAHARASHTRA UNDERTAKING, NAMELY VIDARBHA IRRIGATION DEV. CORPORATION, NAGPUR. THE DIFFERENT CONTRACTORS HAVE BEEN AWARDED SPECIFIC WO RKS WITH REGARD TO EXECUTION OF THIS PROJECT BY THE CORPORATION IN A JOINT VENTURE. 3.1. THE AO OBSERVED THAT BY FINANCE ACT, 2007 AN E XPLANATION WAS ADDED WITH RETROSPECTIVE EFFECT MAKING IT CLEAR THAT THE PROVI SIONS OF SECTION 80IA(4) WILL NOT APPLY TO A PERSON WHO EXECUTES A WORKS CONTRACT ENTERED I NTO THE UNDERTAKING OR THE ENTERPRISE, AS THE CASE MAY BE. FURTHER, BY FINANCE ACT, 2009 AN EXPLANATION WAS ADDED WITH RETROSPECTIVE EFFECT FROM 1.4.2000 AND, THEREFORE, THE SAME WAS APPLICABLE DURING THE YEAR UNDER CONSIDERATION I.E. ASSESSMENT YEAR 2007-08. I T WAS MADE CLEAR THAT NOTHING CONTAINED IN SECTION 80IA(4) SHALL APPLY WHICH IS I N THE NATURE OF A WORKS CONTRACT AWARDED BY ANY PERSON (INCLUDING THE CENTRAL OR STA TE GOVT.) AND EXECUTED BY THE UNDERTAKING OR ENTERPRISE. AS THE ASSESSEE WAS AWA RDED A WORKS CONTRACT BY THE STATE GOVT. OF MAHARASHTRA WHICH IS PART OF TOTAL WORKS O F CONSTRUCTION, DEVELOPMENT AND OPERATION OF IRRIGATION PROJECT, THE CLAIM OF ASSES SEE WAS JUST NOT FOUND TENABLE AND ACCORDINGLY CLAIM OF DEDUCTION OF RS. 16,89,16,692/ - UNDER SECTION 80IA(4) WAS REJECTED. 3.2. IT WAS CONTENDED BEFORE LD. CIT (A) THAT THE P ROJECT IS AN IRRIGATION INFRASTRUCTURAL DEVELOPMENT PROJECT OF THE COMPANY ON WHICH DEDUCTI ON WAS ALLOWED U/S 80IA(4) IN ASSESSMENT YEARS 2003-04 TO 2006-07 AND ALLOWABILIT Y WAS UPHELD BY HONBLE ITAT. IT IS CONTINUOUSLY 5 TH YEAR OF THE SAME PROJECT. THAT THE AO IS NOT JUSTI FIED IN DISALLOWING THE CLAIM AS AFTER THE AMENDMENT IN SECTION 80IA(4) FOR ASSESSMENT YEAR 2003-04 ACTIVITY DONE BY THE COMPANY WAS ELIGIBLE FOR DEDUCTION UNDE R SECTION 80IA(4). RELIANCE WAS PLACED ON THE DECISION REPORTED IN 84 TTJ (MUM) 646 IN THE CASE OF PATEL ENGINEERING 3 CO. LTD. VS. DCIT. THE AMENDMENT MAKES IT CLEAR TH AT ANY ENTERPRISES CARRYING ON THE BUSINESS OF EITHER DEVELOPING OR OPERATING AND MAIN TAINING OR DEVELOPING, OPERATING AND MAINTAINING ANY INFRASTRUCTURAL FACILITY THAN THE D EDUCTION WAS ALLOWABLE. THAT THE ASSESSEE IS THE DEVELOPER OF THE PROJECT AS IT HAS DONE THE WORK OF DESIGNING, FABRICATION, TRANSPORTATION, SUPPLY, ERECTION AND COMMISSIONING OF GATES. THESE ACTIVITIES ALSO QUALIFY THE ASSESSEE FOR MAINTAINING OF INFRASTRUCT URE. THE CONTRACT BETWEEN THE ASSESSEE AND VIDARBHA IRRIGATION DEV. CORPORATION CLEARLY ST ATES THAT THE ASSESSEE WAS RESPONSIBLE FOR OPERATION AND MAINTENANCE. THE PAYMENT WAS REC EIVABLE BY THE ASSESSEE ON THE CONDITION THAT OPERATION AND MAINTENANCE OF THE GAT ES WERE MAINTAINED FOR TWO YEARS AFTER COMMISSIONING AND TESTING OF ALL GATES AND TRAINING OF O& M TO STAFF OF VIDHARBHA IRRIGATION DEVELOPMENT CORPORATION. THAT THE WORDS USED BY LEGISLATURE INTENDED TO ALLOW DEDUCTION TO ENTERPRISE ENGAGING IN ALL THE A CTIVITIES ENUMERATED IN SECTION 80IA(4). THE CORPORATION IS A MONITORING AGENCY AND DEVELOPE R IS THE PERSON WHO EXECUTES THE WORK OR DEVELOPS SOMETHING ON THE SURFACE OR EARTH . THUS THE DEVELOPER IS THE ASSESSEE COMPANY. AS ANY WORK DONE FOR OTHER AGENCY IS ALWA YS DONE UNDER A CONTRACT, HENCE TO DO WORK WITH GOVT. IS TO BE DONE ON AGREED TERMS AN D IT IS CALLED CONTRACT. THAT ANY PERSON WHO IS ENGAGED IN THE WORK WILL DO ON CONTRA CT BASIS ONLY AND, THERE IS NO OTHER ALTERNATIVE. ALL THE WORK OF INFRASTRUCTURE BELONG S TO GOVT. AND HENCE THE REAL DEVELOPER IS THE PVT. AGENCY. THE GOVT. IS ONLY A PLANNER AN D MONITORING AGENCY, 3.3. ON THIS ISSUE ORDER PASSED UNDER SECTION 263 B Y THE CIT, JAIPUR WAS APPEALED BEFORE HONBLE ITAT, JAIPUR WHO HELD THE ORDER UND ER SECTION 263 NULL AND VOID. THE ITAT HELD THAT THE COMPANY WAS ELIGIBLE TO CLAIM DE DUCTION UNDER SECTION 80IA(4). IN ASSESSMENT YEAR 2005-06 AND 2006-07 IN FIRST APPEAL THE APPEALS WERE DECIDED IN FAVOUR 4 OF THE ASSESSEE AND WHICH WAS HELD UP IN SECOND APP EAL ALSO. WITH THIS, IT WAS SUBMITTED THAT DEDUCTION MAY BE ALLOWED. 4. AFTER TAKING INTO CONSIDERATION THE PROVISIONS O F LAW AMENDED BY FINANCE ACT, 2007 AND 2009 AND TAKING INTO CONSIDERATION THE SUB MISSIONS OF THE ASSESSEE, THE LD. CIT (A) FOUND THAT AO WAS CORRECT IN DENYING THE DEDUCT ION UNDER SECTION 80IA(4). ACCORDINGLY, HE UPHELD THE ORDER OF AO. WHILE UPHO LDING, THE FOLLOWING FINDING HAVE BEEN GIVEN BY LD. CIT (A) :- IN EARLIER YEARS THE ISSUE WAS DECIDED IN FAVOUR OF THE APPELLANT AT BOTH THE APPELLATE4 STAGES. HOWEVER, FINANCE ACT, 2 009 HAS MADE CHANGE IN THE LAW. BY FINANCE ACT, 2009 AN EXPLANATION WAS ADDED T THE END OF SECTION 80IA AND IT WAS CLARIFIED THAT WITH REFEREN CE TO SUB SECTION 4 IN RESPECT OF WORKS CONTRACT AWARDED BY CENTRAL OR STA TE GOVT. AND EXECUTED BY THE UNDERTAKING THE PROVISIONS OF SUB SECTION 4 WILL NOT BE APPLICABLE. THE EXPLANATION WAS ADDED RETROSPECTIVELY W.E.F. 1. 4.2000 AND, THEREFORE, WHERE EVER THERE IS WORKS CONTRACT AWARDED BY CENTR AL OR STATE GOVT. AND EXECUTED BY THE UNDERTAKING, BENEFIT OF DEDUCTION U NDER SECTION 80IA(4) WILL NOT BE APPLICABLE. AS THE EXPLANATION HAS BEE N INSERTED RETROSPECTIVELY, IN THE YEAR UNDER CONSIDERATION I. E. ASSESSMENT YEAR 2007-08, IT WILL BE APPLICABLE. IN THE PRESENT CAS E THE WORK WAS DONE AS PER CONTRACT AWARDED BY MAHARASHTRA GOVT. TO THE AP PELLANT, DEDUCTION UNDER SECTION 80IA(4) WILL NOT BE APPLICABLE. THE ACTION OF AO OF WITHDRAWING DEDUCTION CLAIMED BY THE APPELLANT UNDE R SECTION 80IA(4) IS, THEREFORE, UPHELD. 5. THE LD. COUNSEL OF THE ASSESSEE FILED BRIEF WRIT TEN SUBMISSIONS AND THEREAFTER HE EXPLAINED HIS WRITTEN SUBMISSIONS IN DETAIL. IT WA S SUBMITTED BY LD. A/R THAT THE TRIBUNAL HAS CONSIDERED THE EXPLANATION ADDED BY THE FINANCE ACT, 2007 WHILE DISPOSING OFF THE 5 APPEAL FOR ASSESSMENT YEAR 2006-07. IT WAS FURTHER SUBMITTED THAT IN FACT THE TRIBUNAL HAS PASSED A DETAILED ORDER FOR ASSESSMENT YEARS 2003-0 4 AND 05-06 WHICH HAS BEEN FOLLOWED BY THE TRIBUNAL WHILE DISPOSING THE APPEAL FOR ASSE SSMENT YEAR 2006-07. WHILE DISPOSING THE APPEAL FOR ASSESSMENT YEAR 2003-04, THE TRIBUNA L HAS CONSIDERED THE EXPLANATION ADDED IN SECTION 80IA(4) BY FINANCE ACT, 2007 AND A FTER TAKING INTO CONSIDERATION THE EXPLANATION THEN ONLY THE CLAIM OF DEDUCTION WAS AL LOWED BY THE TRIBUNAL. ATTENTION OF THE BENCH WAS DRAWN ON COPIES OF ORDERS OF TRIBUNAL PLACED IN THE RECORD. IT WAS FURTHER SUBMITTED THAT THERE IS NO MATERIAL DIFFERENCE BETW EEN THE EXPLANATION ADDED BY FINANCE ACT, 2007 AND THEREAFTER AMENDED BY FINANCE ACT, 20 09. WORDING IS THE SAME AND, THEREFORE, THE ISSUE IS COVERED BY THE DECISION OF TRIBUNAL IN CASE OF ASSESSEE ITSELF. REGARDING THE AMENDED EXPLANATION ADDED BY FINANCE ACT, 2007, IT WAS SUBMITTED THAT AS THERE IS NO SUBSTANTIAL CHANGE, ONLY THE WORDS ADDE D I.E. INCLUDING THE CENTRAL OR STATE GOVERNMENT. OTHERWISE, THE MAIN PROVISIONS IN EXPL ANATION ADDED TO SECTION 80IA(4) ARE SAME. ATTENTION OF THE BENCH WAS DRAWN ON BOTH THE EXPLANATIONS ADDED UNDER SECTION 80IA(4) (BY FINANCE ACT, 2007 AND FINANCE ACT, 2009 RESPECTIVELY). THEREAFTER RELEVANT PORTION OF THE ORDER OF THE TRIBUNAL FOR ASSESSMENT YEAR 2003-04 AND 2005-06 WERE READ BY LD. A/R. THEREAFTER THE MEANING OF CONTRACTOR WAS EXPLAINED. ATTENTION OF THE BENCH WAS DRAWN ON PAGE 44 OF THE PAPER BOOK AND PA GE 59 OF THE PAPER BOOK. IT WAS EXPLAINED THAT OF COURSE, THERE IS A CONTRACT BETWE EN THE ASSESSEE AND MAHARASHTRA GOVERNMENT BUT IT IS TO BE SEEN WHAT DUTY HAS TO BE PERFORMED BY THE ASSESSEE BY THAT CONTRACT. IT WAS EXPLAINED THAT THE ASSESSEE HAS T O DEVELOP THE DESIGN OF GATES AND MANY OTHER ITEMS WHICH THE GOVERNMENT OF MAHARASHTRA WAS NOT HAVING THIS TYPE OF DESIGN. ATTENTION OF THE BENCH WAS DRAWN ON COPY OF TENDER PUBLISHED BY THE MAHARASHTRA 6 GOVERNMENT AND COPY OF AGREEMENT. ATTENTION OF THE BENCH WAS DRAWN ON RELEVANT CLAUSES OF THE TENDER FORM AS WELL AS CLAUSES OF TH E AGREEMENT ENTERED INTO BETWEEN THE ASSESSEE AND MAHARASHTRA GOVERNMENT TO DEVELOP THE DESIGN TO MAKE IT CLEAR THAT ONLY DEVELOPER CAN DEVELOP THE DESIGN AND ONCE IT IS FOU ND THAT A DEVELOPER HAS DEVELOPED THE DESIGN THEN AS PER PROVISIONS OF SECTION 80IA(4) TH E DEDUCTION HAS TO BE ALLOWED. IN THE PRESENT CASE THE ASSESSEE HAS DEVELOPED THE DESIGN AND, THEREFORE, THE ASSESSEE IS NOT MERELY A CONTRACTOR BUT IS A DEVELOPER. ACCORDINGLY IT WAS SUBMITTED THAT ASSESSEE IS ENTITLED FOR DEDUCTION. IT WAS FURTHER SUBMITTED T HAT THE SPECIAL BENCH IN THE CASE OF B.T. PATIL HAVE DECIDED THIS ISSUE IN FAVOUR OF THE DEPA RTMENT. HOWEVER, THERE ARE SO MANY DISCREPANCIES IN THE ORDER OF SPECIAL BENCH. RELEV ANT DISCREPANCIES WERE EXPLAINED BY THE LD. A/R IN RESPECT TO DISCREPANCIES IN THE ORDE R OF SPECIAL BENCH. IT WAS FURTHER SUBMITTED THAT THE ORDER OF SPECIAL BENCH DECISION HAS BEEN OVER RULED BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF M/S. ABG HEAVY IND USTRIES. THE RELEVANT PORTION OF THE DECISION OF HONBLE BOMBAY HIGH COURT WAS READ BY LD. A/R. ACCORDINGLY IT WAS SUBMITTED THAT NOW IN VIEW OF THE DECISION OF HONB LE BOMBAY HIGH COURT THE ASSESSEE IS ENTITLED FOR DEDUCTION UNDER SECTION 80IA(4). I T WAS FURTHER SUBMITTED THAT THE PUNE BENCH OF THE TRIBUNAL IN THE CASE OF M/S. LAXMI CIV IL ENGINEERING PVT. LTD. HAS CLEARLY HELD THAT THE DECISION OF SPECIAL BENCH HAS BEEN OV ERRULED BY THE HONBLE BOMBAY HIGH COURT. IT WAS EXPLAINED THAT IN FACT THE PUNE BENC H IN THE ABOVE CASE HAVE DECIDED THE ISSUE AGAINST THE ASSESSEE. HOWEVER, ON FILING MIS CELLANEOUS APPLICATION THAT THE DECISION OF SPECIAL BENCH HAS BEEN OVERRULED AND TH EREAFTER THE SAID PUNE BENCH HAS REVERSED ITS OWN EARLIER ORDER BY HOLDING THAT THE ISSUE HAS BEEN DECIDED BY THE BOMBAY HIGH COURT NOW. IT WAS FURTHER STATED THAT THE RAJ KOT BENCH OF THE TRIBUNAL ALSO IN CASE 7 OF M/S. KCL BEL TARMAT JV. VS. ITO HAVE DECIDED THE IDENTICAL ISSUE IN FAVOUR OF THE ASSESSEE BY TAKING INTO CONSIDERATION THE EXPLANATI ON ADDED BY FINANCE ACT, 2007 AND AMENDED BY FINANCE ACT, 2009, COPIES OF THESE ORDER S WERE ALSO FILED. COPY OF BOARD CIRCULAR WAS ALSO FILED. THE RATIO OF THE DECISION OF HONBLE SUPREME COURT IN CASE OF BAJAJ TEMPO WAS ALSO RELIED UPON. 6. THE LD. CIT D/R ON THE OTHER HAND ALSO FILED A C OPY OF BRIEF WRITTEN NOTE AND THEY WERE EXPLAINED ALSO. IT WAS SUBMITTED BY LD. CIT D /R THAT THE TRIBUNAL WHILE DISPOSING THE APPEAL FOR ASSESSMENT YEARS 2003-04 AND 2004-05 HAVE FOLLOWED THE ORDER OF PATEL ENGINEERING CO. LTD. VS. ACIT, 94 ITD 411(MUM.) WHI CH HAS ALREADY BEEN REVERSED BY THE SPECIAL BENCH OF THE TRIBUNAL IN THE CASE OF B. T. PATIL. IT WAS SUBMITTED THAT THE DECISION OF HONBLE BOMBAY HIGH COURT IN THE CASE O F ABG HEAVY INDUSTRIES IS NOT APPLICABLE ON THE FACTS OF THE PRESENT CASE AS THE FACTS ARE DIFFERENT IN THE CASE IN HAND. IT WAS FURTHER SUBMITTED THAT THE TRIBUNAL WHILE DISPO SING THE APPEAL OF THE ASSESSEE FOR ASSESSMENT YEARS 2003-04 TO 06-07 HAVE NOT GIVEN AN Y FINDING IN RESPECT OF EXPLANATION ADDED BY FINANCE ACT, 2007 OR AMENDED BY FINANCE AC T, 2009 AS THE TRIBUNAL HAS SIMPLY FOLLOWED THE DECISION OF PATEL ENGINEERING CO. LTD. ATTENTION OF THE BENCH WAS DRAWN ON OPERATIVE PARA OF THE ORDER OF THE TRIBUNAL FOR EARLIER YEAR. FURTHER STRONG RELIANCE WAS ON THE ORDER OF AO AS WELL AS ORDER OF LD. CIT (A). IT WAS FURTHER STATED THAT THE AO HAS TAKEN INTO CONSIDERATION THE AMENDED EXPLANATION AN D THE REASONS FOR DENYING THE DEDUCTION IN EARLIER YEAR. IT WAS FURTHER SUBMITTED THAT ASSESSEE IS PURELY A CONTRACTOR AND NOTHING IS DOING IN RESPECT TO DEVELOPING AS THE GA TES ARE MANUFACTURED BY THE ASSESSEE AS PER CONTRACT. EVEN ASSESSEE IS NOT INVESTING ITS O WN FUNDS AS THEY WERE FUNDED BY MAHARASHTRA GOVERNMENT. IN FACT, MAHARASHTRA GOVER NMENT HAS HIRED THE ASSESSEE TO 8 SUPPLY AND FIT THE GATES IN THE DAM. VARIOUS OTHER PARTIES WERE ALSO INVOLVED, THEREFORE, IT CANNOT BE SAID THAT ASSESSEE HAS DEVELOPED THE PROJ ECT AND, THEREFORE, AO AND LD. CIT (A) WERE JUSTIFIED IN DENYING THE DEDUCTION CLAIMED BY THE ASSESSEE. IT WAS FURTHER SUBMITTED THAT THE ASSESSEE WAS ALLOWED WORK OF FITTING THE G ATES AND TO MAINTAIN DAM FOR ONLY TWO YEARS SO THAT THE EMPLOYEES OF THE MAHARASHTRA GOVE RNMENT COULD BE TRAINED, THEREFORE, IT CANNOT BE SAID THAT ASSESSEE HAS DEVELOPED ANY DESI GN OF THE GATE AND IS MAINTAINING FOR LONG. THE CASE LAWS RELIED UPON BY THE ASSESSEE WE RE STATED TO BE DISTINGUISHABLE ON FACTS. IT WAS FURTHER SUBMITTED THAT THE DECISION OF B.T. PATIL DELIVERED BY THE SPECIAL BENCH OF THE TRIBUNAL STILL HOLDS GOOD AND IS APPLI CABLE ON THE FACTS OF THE PRESENT CASE. RELEVANT PARAS OF THE SPECIAL BENCH DECISION I.E. P ARAS 40, 41 AND 50 WERE READ BY LD. CIT D/R. ATTENTION OF THE BENCH WAS DRAWN ON PAGE 400 OF THE DECISION OF HONBLE BOMBAY HIGH COURT AND STATED THAT THE FACTS ARE TOT ALLY DIFFERENT. IT WAS FURTHER SUBMITTED THAT JAIPUR BENCH IN CASE OF SHIVA CONSTR UCTION CO. (PVT. LTD.) HAS DISALLOWED THE DEDUCTION CLAIMED UNDER SECTION 80IA(4) BY FOLL OWING THE DECISION OF SPECIAL BENCH (SUPRA). 7. IN REPLY, THE LD. COUNSEL OF THE ASSESSEE STATED THAT IT IS WRONG TO STATE THAT THE TRIBUNAL HAS FOLLOWED PATEL ENGINEERING DECISION AN D NOT THE EXPLANATION ADDED BY FINANCE ACT, 2007 HAS NOT BEEN CONSIDERED. ATTENTI ON OF THE BENCH WAS DRAWN ON WHOLE OF THE ORDER OF THE TRIBUNAL AND IT WAS SUBMITTED T HAT TOTALITY OF THE DECISION OF THE TRIBUNAL HAS TO BE TAKEN INTO CONSIDERATION AND NOT A PART OF THE DECISION. IT WAS FURTHER SUBMITTED THAT IT IS WRONG TO STATE THAT THE DECISI ON OF SPECIAL BENCH IN THE CASE OF B.T. PATEL & SONS HAS NOT BEEN REVERSED BY THE ORDER OF HONBLE HIGH COURT AS THE ISSUE WAS SAME AND HONBLE BOMBAY HIGH COURT HAS HELD THAT EV EN A CONTRACTOR IS ELIGIBLE FOR 9 DEDUCTION. THE ISSUE BEFORE THE HONBLE BOMBAY HIG H COURT WAS FOR SUPPLY OF CRANE AND IT WAS FOUND BY THE HONBLE BOMBAY HIGH COURT T HAT SUPPLY OF SPECIFIC CRANE BY THAT ASSESSEE WAS ELIGIBLE FOR DEDUCTION UNDER SECTION 8 0IA(4). THE DECISION OF HONBLE BOMBAY HIGH COURT IS OF A LATER DATE, THEREFORE, IT HAS TO BE PRESUMED THAT THE DECISION OF SPECIAL BENCH IN THE CASE OF B.T. PATIL & SONS HAS BEEN TAKEN INTO CONSIDERATION. IT LAWS FURTHER SUBMITTED THAT EVEN AND OTHERWISE THE DECIS ION OF HONBLE BOMBAY HIGH COURT WILL PREVAIL UPON THE DECISION OF SPECIAL BENCH. I T WAS FURTHER SUBMITTED THAT THE TRIBUNAL HAS SPECIFICALLY HELD WHILE DECIDING THE A PPEAL FOR ASSESSMENT YEARS 2003-04 TO 06-07 THAT ASSESSEE IS DEVELOPER AND NOW IT CANNOT BE SAID THAT ASSESSEE IS NOT DEVELOPER IN THE YEAR UNDER CONSIDERATION. ATTENTION OF THE BENCH WAS DRAWN ON RELEVANT FINDING OF THE TRIBUNAL GIVEN IN THE APPELLATE ORDER FOR ASSES SMENT YEARS 2003-04 AND 04-05. THE RATIO OF DECISION OF HONBLE BOMBAY HIGH COURT WAS AGAIN READ BY LD. A/R AND IT WAS STATED THAT THIS IS ON THE IDENTICAL FACTS AND, THE REFORE, THE SAME IS APPLICABLE. IN RESPECT TO THE ARGUMENT OF LD. CIT D/R THAT NO FUNDS HAVE B EEN INVESTED BY THE ASSESSEE, IT WAS SUBMITTED THAT IT WAS TOTALLY INCORRECT. ASSESSEE HAS INVESTED ITS OWN FUNDS AND BEFORE GRANTING THE CONTRACT TO THE ASSESSEE, THE MAHARASH TRA GOVERNMENT HAS ASKED FOR BANK GUARANTEE WHICH HAS BEEN GIVEN BY THE ASSESSEE. TH EREFORE, THIS IS TOTALLY WRONG THAT ASSESSEE HAS NOT INVESTED ITS OWN FUNDS. THE ASSESS EE AFTER COMPLETING THE PROJECT HAS RAISED THE BILL ON THE CORPORATION AND THEREAFTER A FTER INSPECTING THE WORK DONE BY THE ASSESSEE THEN ONLY PAYMENT WAS CLEARED BY THE CORPO RATION TO THE ASSESSEE. THEREFORE, THIS IS NOT A CASE THAT CORPORATION INVESTED ITS OW N FUND AND NOT THE ASSESSEE. 8. WE HAVE HEARD RIVAL SUBMISSIONS AND WE HAVE CONS IDERED THEM CAREFULLY. THOUGH WE HAVE NOTED ALL THE ARGUMENTS ADVANCED BY LD. A/R AND LD. CIT D/R, HOWEVER, WE 10 WOULD LIKE TO REPRODUCE THE WRITTEN SUBMISSIONS ADV ANCED BY LD. A/R AS WELL AS BY LD. CIT D/R HERE IN THE ORDER OF TRIBUNAL SO THAT NO AR GUMENT OF ANY PARTY COULD BE MISSED. BRIEF SUBMISSION OF THE ASSESSEE 1. DE HORS EXPLANATION INSERTED VIDE FINANCE ACT, 2 009 AND SPECIAL BENCH DECISION IN THE CASE OF B.T. PATIL, THE ISSUE HAS BEEN DECID ED IN FAVOUR OF THE ASSESSEE BY ITAT, IN ASSESSEES OWN CASE FOR A.Y. 2003-04 AND 2 004-05 (PG.1 OF 24 OF PB-1). 2. ORDER OF ITAT IN A.Y. 2003-04 AND 2004-05 : (I) ENTIRE FACTS INCLUDING VARIOUS CLAUSES OF AGREE MENT WITH VIDCN HAVE BEEN CONSIDERED IN DETAIL BY THE HONBLE BENCH (PG. 6 OF PB 1, PARA 6). (II) ARGUMENT OF THE LD. DR, BASED ON EXPLANATION I NSERTED VIDE FINANCE ACT, 2007, CONSIDERED BY HONBLE BENCH (PG. 10 OF PB-1). (III) ON MERIT, ISSUE CONSIDERED IN DETAIL BY THE H ONBLE BENCH AND IT HAS BEEN HELD THAT ASSESSEE IS A DEVELOPER OF THE INFRASTRUC TURAL FACILITY (PG. 14 TO 16 OF PB-1). (IV) SPECIFIC OBSERVATIONS MADE BY HONBLE BENCH RE GARDING FUNCTIONS PERFORMED BY THE ASSESSEE AND IT HAS BEEN CONCLUDED THAT IN SPITE OF EXPLANATION INSERTED VIDE FINANCE ACT, 2007, ASSESS EE IS A DEVELOPER AND NOT CONTRACTOR (PG. 18 OF PB-1). 3. THIS HAS BEEN FOLLOWED BY SUBSEQUENT BENCH OF IT AT IN ASSESSEES OWN CASE FOR A.Y. 2005-06 AND 2006-07 (PG. 25 TO 38 OF PB-1). 4. ENTIRE AGREEMENT WITH VIDCN IS FILED AT PB-1 (PG . 39 TO 125) AND PB-2 (PG. 126 TO 319). THE TERMS AND CONDITIONS OF THIS AGREEMEN T WOULD CLEARLY SUGGEST THAT ASSESSEE HAS BEEN INVOLVED FROM THE STAGE OF DESIGN ING UP TO MAINTENANCE. ALL THESE TERMS HAVE BEEN CONSIDERED BY THE HONBLE BEN CH IN A.Y. 2003-04 AND ASSESSEE HAS BEEN HELD TO BE DEVELOPER. 5. DECISION OF THE HONBLE SPECIAL BENCH IN THE CAS E OF B.T. PATIL, RENDERED AFTER CONSIDERING SUBSEQUENT INSERTION OF EXPLANATION VID E FINANCE ACT, 2009 WOULD NOT AFFECT ELIGIBILITY OF ASSESSEE TO CLAIM DEDUCTI ON UNDER SECTION 80IA(4) OF THE 11 ACT. THE DECISION OF THE SPECIAL BENCH (PG. 322 TO 389 OF PB-3) HAS BEEN ANALYSED AS UNDER : (A) PARA 1 TO 30 (PG. 355 TO 372 OF PB-3) REFERS TO OTHER INCIDENTAL ISSUES AND ARGUMENTS OF THE PARTIES. (B) PARA 31 AND 32 ARE PREFACE. (C) IN PARAS 33 TO 36, THE TRIBUNAL HAS HELD THAT D EDUCTION CANNOT BE GIVEN TO DEVELOPER FOR A.YS. 2000-01 AND 2001-02. THIS HAS BEEN HELD IN VIEW OF PROVISION EXISTED BEFORE A.Y. 2003-04 (PG. 320 OF P B-3). HOWEVER, IN PARA 36, THE TRIBUNAL HAS CLARIFIED THAT DEDUCTION WOULD BE AVAILABLE TO THE DEVELOPER WITH EFFECT FROM A.Y. 2002-03. HENCE, THI S PART IS NOT RELEVANT AS THE PRESENT CASE PERTAINS TO A.Y. 2007-08. IN A NY CASE, THIS PROPOSITION HAS BEEN LATER ON REVERSED BY THE BOMBAY HIGH COURT IN THE CASE OF ABG HEAVY INDUSTRIES (PARA 25 OF PG 405 OF PB-3). (D) IN PARAS 37 TO 43, THE TRIBUNAL HAS HELD THAT T HE ASSESSEE IN THAT CASE IS NOT A DEVELOPER BUT MERELY A CONTRACTOR. THIS IS FACTU AL FINDING AND IN THE PRESENT CASE THE QUESTION HAS TO BE DECIDED BASED O N THE FACTS OF THE CASE. - IN EARLIER YEARS, THE ASSESSEE HAS BEEN HELD TO BE DEVELOPER AND NOT MERELY CONTRACTOR. - THE TRIBUNAL IN THOSE YEARS HAS CONSIDERED 2007 EXP LANATION AND THEREAFTER HAS HELD THAT THE ASSESSEE IS NOT MERELY CONTRACTOR. - THE ISSUE IS SQUARELY COVERED IN FAVOUR OF ASSESSEE VIDE THE DECISION OF THE RAJKOT BENCH OF THE TRIBUNAL IN THE CASE OF M/S. KC L BEL TARMAT JV. V. ITO FOR A.Y. 2007-08 IN ITA NO. 1112/RJT/2010 (PG. 406 TO 416 OF PB- 3). THIS DECISION HAS BEEN RENDERED AFTER CONSIDERI NG THE SPECIAL BENCH DECISION IN THE CASE OF B.T. PATIL. - FURTHER, IT HAS BEEN HELD BY THE HONBLE BOMBAY HIG H COURT (SUBSEQUENT TO MUMBAI SPECIAL BENCH DECISION) IN THE CASE OF AB G HEAVY INDUSTRIES THAT PROVIDING CRANE TO PORT WOULD ALSO AMOUNT TO A CTIVITY OF DEVELOPERS (PARA 7, 8, 18 ON PG. 395 TO 401 OF PB-3). 12 (E) IN PARAS 44 AND 45, THE TRIBUNAL HAS HELD THAT INFRASTRUCTURE FACILITY SHOULD BE OWNED BY THE ASSESSEE. THIS IS INCORRECT INTERPRET ATION VERY EVIDENT FROM THE SECTION ITSELF AND IN ANY CASE, SUBSEQUENT DECISI ON OF THE BOMBAY HIGH COURT HAS CORRECTLY INTERPRETED THIS PROVISION. (PA RA 9 ON PG.396 AND PARA 24 ON PG. 405 OF PB-3). APART FROM THIS, THE OBSERVAT IONS MADE IN ABOVE PARAS BY THE HONBLE SPECIAL BENCH ARE IN CONTRADICTION W ITH OBSERVATIONS MADE IN PARA 49 OF THE SAME ORDER. (F) IN PARA 46, THE TRIBUNAL HAS HELD THAT THE ASSE SSEE HAS NOT ENTERED INTO ANY AGREEMENT FOR TRANSFER OF FACILITY. FOR THE YEAR U NDER CONSIDERATION, THERE IS NO SUCH CONDITION AND, HENCE, THIS BECOMES IRRELEVANT. (G) PARAS 47 AND 48, TALKS ABOUT THE MAINTENANCE AN D OPERATION OF THE FACILITY. IN LIGHT OF THE FACT THAT A PERSON WHO IS MERELY A DEV ELOPER WOULD ALSO BE ENTITLED TO DEDUCTION (PEASE SEE SUB-PARA (C) HEREINABOVE), THIS ISSUE BECOMES IRRELEVANT. (H) IN PARA 49, THE TRIBUNAL HAS HELD THAT THE WORD IT HAS BEEN USED INTERCHANGEABLY THIS IS INCORRECT AND IN ANY CASE SUBSEQUENTLY DISAPPROVED BY THE HIGH COURT IN THE CASE OF ABG HEAVY INDUSTRI ES APART FROM THIS, THIS OBSERVATION IS CONTRADICTORY TO PARA 45. (I) IN PARA 50, THE TRIBUNAL HAS HELD THAT THE WHO LE DOES NOT INCLUDE PART. THIS HAS BEEN SUBSEQUENTLY REVERSED BY THE BOMBAY HIGH C OURT IN ABG HEAVY INDUSTRIES. (PARA 19 OF PG. 401 OF PB-3). APART FRO M THIS, IT HAS BEEN HELD BY THE SUPREME COURT IN THE CASE OF GUJARAT INDUSTRIAL DEVELOPMENT CORPORATION V. CIT (227 ITR 414)(PG. 417 OF PB-3) THAT ASSESSEE DEVELOPING INDUSTRIAL AREAS SATISFIES REQUIREMENT OF DEVELOPMENT OF CIT IES, TOWNS AND VILLAGES. DEVELOPMENT OF CORE COMPONENT OR SUBSTANTIAL COMPON ENT OF FACILITY SHOULD BE HELD SUFFICIENT FOR THE REQUIREMENT OF DEVELOPME NT OF FACILITY. RELIANCE IS ALSO PLACED UPON THE ABOVE REFERRED DECISION OF BOM BAY HIGH COURT WHEREIN, AFTER RELYING UPON THE DECISION OF SUPREME COURT IN THE CASE OF BAJAJ TEMPO (196 ITR 188), IT HAS BEEN HELD THAT PROVISIONS GRA NTING INCENTIVES ARE TO BE CONSTRUED LIBERALLY. APART FROM THIS CBDT CIRCULAR NO. 4/2010 DATED 18.05.2010 (PG. 424 OF PB 3) ITSELF SUGGEST THAT WI DENING OF EXISTING ROAD 13 WOULD BE ELIGIBLE FOR DEDUCTION. ADMITTEDLY, WIDEN ING OF ROAD DOES NOT AMOUNT TO DEVELOPMENT OF WHOLE FACILITY. (J) IN PARAS 51 TO 57, THE TRIBUNAL HAS CONSIDERED 2007 AS WELL AS 2009 EXPLANATION. IN THE ASSESSEES CASE AFTER CONSIDER ING 2007 EXPLANATION, IT HAS BEEN HELD THAT ASSESSEE IS NOT A CONTRACTOR. 2009 EXPLANATION IS VERY MUCH SIMILAR TO 2007 EXPLANATION AND HENCE, IN SUBSTANCE , THERE IS NO CHANGE IN FACTS OR LAW FROM THE DECISION OF TRIBUNAL IN A.Y. 2003-04 AND 2004-05. - IN ANY CASE, AS STATED HEREINABOVE, THE QUESTION AS TO WHETHER THE ASSESSEE IS A DEVELOPER OR A CONTRACTOR IS PURELY A QUESTION OF FACT AND HAS TO BE DECIDED ON THE BASIS OF FACTS OF EACH CASE. IN THE PRESENT CASE, THIS ISSUE HAS ALREADY BEEN DECIDED I N FAVOUR OF THE ASSESSEE BY THIS VERY BENCH OF THE TRIBUNAL. - INTERESTINGLY, IN THE ABOVE REFERRED DECISION OF BOMBAY HIGH COURT, RENDERED MUCH AFTER THE RETROSPECTIVE EXPLAN ATION OF 2009 BROUGHT ON THE STATUTE BOOK, IT HAS BEEN HELD THAT A PERSON PROVIDING CRANE TO THE PORT AUTHORITY IS A DEVELOP ER. (PARA 7, 8 ON PG.395, PARA 18 ON PG. 400). THE LAW LAID DOWN BY BOMBAY HIGH COURT BY THEIR JUDGMENT DATED 29.03.2011, MUCH AFTE R FINANCE ACT, 2009, HAS TO BE CONSIDERED AS THE FINAL WORD AS OF NOW. RELIANCE IS PLACED, IN THIS REGARD, ON THE RECENT SPECIAL BENCH DECISION IN THE CASE OF TATA COMMUNICATIONS LTD. [130 ITD 19 (MUM)( B)](PG. 425 OF PB 3). - FURTHER, IT IS SUBMITTED THAT THE EXPLANATION INS ERTED IN THE YEAR 2007 AND AMENDED THEREAFTER IN THE YEAR 2009 SHOULD BE INTERPRETED KEEPING IN MIND THE LEGISLATIVE INTENT AS MANIFEST IN THE MEMORANDUM EXPLAINING THE PROVISIONS. IT HAS BEEN STATED IN THE CBDT CIRCULAR (289 ITR (ST.) 312), EXPLAINING 2007 EXPLANATION AS UNDER : THE TAX BENEFIT WAS INTRODUCED FOR THE REASON TH AT INDUSTRIAL MODERNIZATION REQUIRES A MASSIVE EXPANSION OF, AND QUALITATIVE IMPROVEMENT IN, INFRASTRUCTURE (VIZ., EXPRESSWAYS, HIGHWAYS, 14 AIRPORTS, PORTS AND RAPID URBAN RAIL TRANSPORT SYST EMS) WHICH WAS LACKING IN OUR COUNTRY. THE PURPOSE OF THE TAX BEN EFIT HAS ALL ALONG BEEN FOR ENCOURAGING PRIVATE SECTOR PARTICIPATION B Y WAY OF INVESTMENT IN DEVELOPMENT OF THE INFRASTRUCTURE SEC TOR AND NOT FOR THE PERSONS WHO MERELY EXECUTE THE CIVIL CONSTRUCTI ON WORK OR ANY OTHER WORKS CONTRACT. ACCORDINGLY, IT IS PROPOSED TO CLARIFY THAT THE PRO VISIONS OF SECTION 80-IA SHALL NOT APPLY TO A PERSON WHO EXECUTES A WO RKS CONTRACT ENTERED INTO WITH THE UNDERTAKING OR ENTERPRISE REF ERRED TO IN THE SAID SECTION. THUS, IN A CASE WHERE A PERSON MAKES THE INVESTMENT AND HIMSELF EXECUTES THE DEVELOPMENT WORK I.E., CAR RIES OUT THE CIVIL CONSTRUCTION WORK, HE WILL BE ELIGIBLE FOR TA X BENEFIT UNDER SECTION 80-IA. IN CONTRAST TO THIS, A PERSON WHO E NTERS INTO A CONTRACT WITH ANOTHER PERSON [I.E., UNDERTAKING OR ENTERPRISE REFERRED TO IN SECTION 80-IA] FOR EXECUTING WORKS C ONTRACT, WILL NOT BE ELIGIBLE FOR THE TAX BENEFIT UNDER SECTION 80-IA . - FURTHER, IT HAS BEEN STATED IN CBDT CIRCULAR (314 ITR (ST.) 200) EXPLAINING PROVISIONS OF 209 EXPLANATION, THAT THE AMENDMENT IS CLARIFICATORY AND CARRIED OUT WITH A VIEW TO PREVEN T MISUSE OF THE PROVISION. - THUS, KEEPING IN MIND THE LEGISLATIVE INTENT, IT CAN BE SAID THAT THE EXPLANATION MERELY DEBARS THOSE ASSESSEES WHO ARE C ARRYING ON INSIGNIFICANT OR NON-CORE ACTIVITY WITHOUT TAKING A NY RISK OR REWARD OF THE DEVELOPMENT. WRITTEN SUBMISSION OF LD. CIT D/R : MAY IT PLEASE YOUR HONOURS : IN RESPECT OF THE ABOVE APPEAL THE FOLLOWING WRITTE N ARGUMENTS ARE SUBMITTED IN ADDITION TO THE VERBAL ARGUMENTS TO BE TAKEN DURING THE COURSE OF HEARING : THIS APPEAL HAS BEEN FILED BY THE ASSESSEE AGAINST AN ORDER OF LD. CIT (A) PASSED UNDER SECTION 250 ON 13.04.2010. 15 GROUND NO. 1: IN THIS GROUND THE ASSESSEE HAS CHALL ENGED THE DECISION OF LD. CIT (A) IN CONFIRMING THE DISALLOWANCE OF DEDUCTION U/S 80 IA(4) OF THE I.T. ACT 1961 AMOUNTING TO RS. 16,89,16,692/-. 1) THE FACTS OF THIS DEDUCTION U/S 80IA(4) CLAIMED BY THE ASSESSEE ARE DISCUSSED IN PARA 2.1 OF THE ORDER OF THE A.O. AT P AGE NO. 2. IN THE RETURN OF INCOME FILED THE ASSESSEE CLAIMED A DEDUCTION OF RS . 16,89,16,692/- U/S 80 IA(4) IN RESPECT OF GOSHI KHURD PROJECT. THE GOSHI KHURD PROJECT IS AN IRRIGATION PROJECT PROMOTED BY THE GOVT. OF MAHARASHTRA. THIS IRRIGATION PROJECT IS BEING CONSTRUCTED ON RIVER BANNGANGA IN BHANDARA DISTRICT OF MAHARASHTRA STATE. THE PROJECT ENVISAGES CONSTRUCTION OF EARTHEN DAM OF 1 1.35 KM. THIS DAM IS BEING CONSTRUCTED FOR PROVIDING IRRIGATION TO BHANDARA, N AGPUR AND CHANDRAPUR DISTRICTS OF MAHARASHTRA AND ALSO PROVIDES DRINKING WATER TO VARIOUS PLACES. THE CONSTRUCTION OF THE PROJECT STARTED IN THE YEAR 198 1 AND IS PROPOSED TO BE COMPLETED BY 2008. THE PROJECT IS BEING IMPLEMENTE D BY THE VIDHARBHA IRRIGATION DEVELOPMENT CORPORATION, NAGPUR (A GOVT. OF MAHARASHTRA UNDERTAKING)(HEREINAFTER REFERRED TO AS VIDC). DIF FERENT CONTRACTORS HAVE BEEN AWARDED SPECIFIC WORKS WITH REGARD TO THE EXECUTION OF THIS PROJECT BY VIDC. THE CONSTRUCTION OF THE EARTHEN DAM IS BEING DONE BY M/ S PRADHAN CONSTRUCTION CO., PUNE, THE CONSTRUCTION OF THE EARTHEN DAM IS BEING DONE BY M/S. H.C.C. LTD., MUMBAI, THE CONSTRUCTION OF RBC AND LBC IS BEING DO NE BY M/S. SANCHIT CONSTRUCTION CO. AND M/S. Y.R. REDDY CONSTRUCTION C O. RESPECTIVELY. THE WORK OF DESIGNING, MANUFACTURE, SUPPLY AND ERECTION OF 3 3 RADIAL GATES WITH HOIST, EMBEDDED PARTS, AND ANCILLARY EQUIPMENTS FOR SPILLW AY GATES WAS AWARDED TO THE ASSESSEE IN JOINT VENTURE WITH M/S. SUBHASH PROJECT S AND MARKETING LTD. ON 28.09.2001 FOR CONTRACT AMOUNT OF RS. 135.85 CRORES . THIS JOINT VENTURE WAS DISSOLVED AND NOW THE WORK IS SOLELY DONE BY THE AS SESSEE. THUS, IT CAN BE SEEN THAT THE DEVELOPER OF THE GO SHI KHURD PROJECT IS VIDHARBHA IRRIGATION DEVELOPMENT CORPORATION (VIDC) , NAGPUR (A GOVT. OF MAHARASHTRA UNDERTAKING ) AND ASSESSEE IS ONLY ONE OF THE MANY CONTRACTORS TO WHOM SPECIFIC WORK OF ERECTION OF RADIAL GATES HAS BEEN ASSIGNED. THUS, THE 16 ASSESSEE IS MERELY A WORKS CONTRACTOR FOR THE DEVE LOPER VIDC, NAGPUR. THIS FACT BECOMES CLEAR FROM PAGE 39 OF THE PAPER BOOK OF THE ASSESSEE ALSO WHEREIN IN LINE NO. 2 IT IS CLEARLY MENTIONED THAT THE ASSESSEE IS A CONTRACTOR. BY THE FINANCE ACT, 2009, THE FOLLOWING EXPLANATION WAS ADDED WITH RETROSPECTIVE EFFECT FROM 1.04.2000 AND THEREFORE, THE SAME HAS TO BE READ INTO THE PROVISIONS FOR SECTION 80IA FOR A.Y. 07-08 : AFTER SUB-SECTION (13) FOR THE EXPLANATION, THE F OLLOWING EXPLANATION SHALL BE SUBSTITUTED AND SHALL BE DEEMED TO HAVE BE EN SUBSTITUTED WITH EFFECT FROM THE 1 ST DAY OF APRIL, 2000, NAMELY :- EXPLANATION : FOR T HE REMOVAL OF DOUBTS IT IS HEREBY DECLARED THAT NOTHIN G CONTAINED IN THIS SECTION SHALL APPLY IN RELATION TO A BUSINESS REFER RED TO IN SUB-SECTION (4) WHICH IS IN THE NATURE OF A WORKS CONTRACT AWARDED BY ANY PERSON (INCLUDING THE CENTRAL OR STATE GOVT.) AND EXECUTED BY THE UNDERTAKING OR ENTERPRISE REFERRED TO IN SUB-SECTION (1). IN VIEW OF THIS PROVISION INTRODUCED WITH RETROSPEC TIVE EFFECT FROM 1.04.2000, IT IS CLEAR THAT THE BUSINESS OF THE ASS ESSEE RELATED TO GOSHI KHURD PROJECT BEING IN THE NATURE OF WORKS CONTRACT AWARD ED BY VIDC (AN UNDERTAKING OF MAHARASHTRA GOVT.) WILL NOT BE ELIGIBLE FOR DEDU CTION U/S 80IA(4). 2) IN THE GROUNDS OF APPEAL THE ASSESSEE HAS ALSO REFERRED TO THE DECISIONS OF THE HONBLE ITAT, JAIPUR BENCH IN THE CASE OF THE A SSESSEE FOR A.Y. 2003-04 TO 2006-07. IT HAS BEEN CLAIMED THAT IN THESE A.YS HON BLE ITAT HAS ALLOWED THE DEDUCTION U/S 80IA(4) ON THE INCOME OF THE GOSHI KH URD PROJECT BY TREATING IT AS INFRASTRUCTURAL DEVELOPMENT PROJECT OF THE ASSESSEE COMPANY. IN THIS RESPECT IT IS SUBMITTED THAT THIS ISSUE OF ALLOWABILITY OF DEDUCTION U/S 80IA(4) WAS DECIDED BY HONBLE ITAT FOR A.YS 20 03-04 & 2004-05 VIDE A COMMON ORDER DATED 31.12.2008. THE ISSUE WAS DECIDE D FOR A.YS 2005-06 & 2006-07 VIDE A COMMON ORDER OF HONBLE ITAT DATED 2 4.07.2009. ON EXAMINATION OF THE ORDER OF A.YS 2005-06 & 2006-07, IT IS SEEN THAT IT IS BASED ON 17 THE DECISION OF HONBLE ITAT FOR A.YS 2003-04 AND 2 004-05 AS THE DECISION HAS BEEN REPRODUCED IN PARA 5 OF THIS ORDER ON PAGE 4. FOR A.Y. 2003-04 AND 2004- 05, HONBLE TRIBUNAL HAS DISCUSSED ITS DECISION IN PARA 10. IT IS SEEN THAT HONBLE TRIBUNAL HAS GIVEN ITS DECISION ON THE BASIS OF DEC ISION OF HONBLE MUMBAI BENCH OF ITAT IN THE CASE OF PATEL ENGINEERING CO. LTD. V S. ACIT 94 ITD 411 AND HAS EXTENSIVELY REPRODUCED THIS DECISION IN ITS ORDER O N PAGE 17 TO 22. THUS, IT CAN BEEN SEEN THAT THESE TWO DECISIONS OF HONBLE ITAT, JAIPUR ARE BASED ON THE DECISION OF THE HONBLE MUMBAI TRIBUNAL IN THE CASE OF PATEL ENGINEERING CO. LTD. (SUPRA). HOWEVER, NOW THIS VERY DECISION OF PA TEL ENGINEERING CO. LTD. HAS BEEN OVERRULED BY LARGER BENCH OF ITAT MUMBAI IN TH E CASE OF B.T. PATIL & SONS BELGAUM CONSTRUCTION PVT. LTD. VIDE AN ORDER D ATED 26.10.2009. THE LARGER BENCH OF THE TRIBUNAL HAVE DISCUSSED THE CASE AT GR EAT LENGTH AND HAVE ALSO CONSIDERED THE DECISION OF TRIBUNAL IN THE CASE OF PATEL ENGINEERING LTD. AND FOUND THAT THIS DECISION IS NOT IN ACCORDANCE WITH LAW. ACCORDINGLY, THE LARGER BENCH HELD THAT DEDUCTION U/S 80IA(4) CANNOT BE ALL OWED IN CASE OF CIVIL CONTRACTORS ENGAGED IN THE CONSTRUCTION OF VARIOUS PROJECTS OF GOVT. OF MAHARASHTRA, GOVT. OF KARNATAKA AND VARIOUS LOCAL A UTHORITIES. IN THE PRESENT CASE ALSO THE ASSESSEE IS EXECUTING CONTRACT WORK IN RES PECT OF THE GOSHI KHURD PROJECT DEVELOPED BY VIDC, NAGPUR, AN UNDERTAKING OF MAHARA SHTRA GOVT. THEREFORE, THE CASE OF THE ASSESSEE IS ALSO COVERED BY THE DEC ISION OF B.T. PATIL & SONS BELGAUM CONSTRUCTION PVT. LTD. HENCE, LD. CIT (A) HAS CORRECTLY UPHELD THE DISALLOWANCE OF DEDUCTION OF RS. 16,89,16,692- CLAI MED BY THE ASSESSEE U/S 80 IA(4) IN RESPECT OF WORKS EXECUTED BY IT FOR GOSHI KHURD PROJECT. 3. IT MAY NOT BE OUT OF CONTEXT TO MENTION HERE THA T HONBLE ITAT JAIPUR BENCH ITSELF HAS TAKEN NOTE ON THE DECISION OF LARG ER BENCH, MUMBAI IN THE CASE OF B.T. PATIL & SONS AND HAS GIVEN A DECISION IN FA VOUR OF THE REVENUE IN ITA NO. 676/JP/2009, A.Y. 2006-07 IN THE CASE OF DCIT CIR.1 , AJMER VS. SHIVA CONSTRUCTION PVT. LTD., AJMER IN ITS ORDER DATED 11 .06.2010. GROUND NO. 2 & 3 : IN RESPECT OF THESE GROUNDS, THE DECISION OF LD. CIT (A) IS RELIED ON. 18 SD/- (SUNIL MATHUR ) DATED : 13.07.2011. CIT DR(1), ITAT, JAIPUR. 9. WE HAVE HEARD RIVAL SUBMISSIONS AND CONSIDERED T HEM CAREFULLY. WE HAVE ALSO PERUSED THE MATERIAL ALONG WITH THE VARIOUS CASE LA WS ON WHICH ATTENTION OF THE BENCH WAS DRAWN AND RELIANCE WAS PLACED BY THE RESPECTIVE PARTIES. THE CASE OF THE DEPARTMENT IS THAT THE EXPLANATION ADDED TO SECTION 80IA(4) BY FINANCE ACT, 2007 WITH RETROSPECTIVE EFFECT FROM 1.4.2000 AND THEREAFTER AMENDED BY FINA NCE ACT, 2009 WITH RETROSPECTIVE EFFECT FROM 1.4.2000 IS APPLICABLE. SINCE THE EXPLA NATION TO SECTION 80IA(4) HAS BEEN ADDED AND AS PER EXPLANATION IF ANY WORK IS ALLOTTE D TO AN ASSESSEE ON CONTRACT BASIS THEN NO DEDUCTION UNDER SECTION 80IA(4) IS ALLOWABLE. I N VIEW OF THE DEPARTMENT THE ASSESSEE IS A CONTRACTOR WHO ENTERED INTO CONTRACT WITH VIDH ARBHA IRRIGATION DEVELOPMENT CORPORATION, NAGPUR (A GOVT. OF MAHARASHTRA UNDERTA KING) (HEREINAFTER REFERRED TO AS VIDC) TO EXECUTE SPECIFIC WORK OF ERECTION OF RADIA L GATES. THE ASSIGNMENT OF THE WORK IS ON CONTRACT BASIS, THEREFORE, ASSESSEE IS A CONT RACTOR AND DEDUCTION IS NOT ALLOWABLE. WHEREAS, ASSESSEES CASE IS THAT ASSESSEE IS A DEVE LOPER AND TRIBUNAL IN CASE OF ASSESSEE ITSELF WHILE DECIDING THE APPEALS FOR ASSESSMENT; Y EARS 2003-04 TO 06-07 HAS HELD THAT THE ASSESSEE IS A DEVELOPER AND ONCE ASSESSEE HAS BEEN FOUND AS A DEVELOPER THEN IN THE YEAR UNDER CONSIDERATION A DIFFERENT VIEW CANNOT BE TAKE N. IT IS THE CASE OF THE ASSESSEE ALSO THAT EVEN EXPLANATION ADDED TO SECTION 80IA(4) HAS BEEN CONSIDERED BY THE TRIBUNAL WHILE DISPOSING THE APPEALS FOR ASSESSMENT YEARS 2003-04 AND 04-05 ALSO AND THERE IS NO MATERIAL DIFFERENCE IN THE AMENDED EXPLANATION BY F INANCE ACT, 2009 AS WORDS CENTRAL OR STATE GOVT. HAS BEEN ADDED, OTHERWISE, THE LANGUAGE IS THE SAME. 19 9.1. BEFORE PROCEEDING FURTHER, WE WOULD LIKE TO ME NTION HERE THE EXPLANATION ADDED BY FINANCE ACT, 2007 AND AMENDED BY FINANCE ACT, 20 09. FINANCE ACT, 2007 : EXPLANATION : FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLAR ED THAT NOTHING CONTAINED IN THIS SECTION SHALL APPLY TO A PERSON W HO EXECUTES A WORKS CONTRACT ENTERED INTO WITH THE UNDERTAKING OR ENTERPRISE, AS THE CASE MAY BE. FINANCE ACT, 2009 : EXPLANATION : FOR THE REMOVAL OF DOUBTS, IT IS HEREBY DECLAR ED THAT NOTHING CONTAINED IN THIS SECTION SHALL APPLY IN RELATION T O A BUSINESS REFERRED TO IN SUB- SECTION (4) WHICH IS IN THE NATURE OF A WORKS CONTR ACT AWARDED BY ANY PERSON (INCLUDING THE CENTRAL OR STATE GOVERNMENT) AND EXE CUTED BY THE UNDERTAKING OR ENTERPRISE REFERRED TO IN SUB-SECTION (1). 10. NOW WE WOULD LIKE TO EXAMINE THE DECISION OF TH E TRIBUNAL FOR ASSESSMENT YEARS 2003-04 TO 06-07, COPY OF WHICH IS PLACED ON RECORD . 11. THE TRIBUNAL DECIDED THE APPEAL OF THE ASSESSEE IN ITA NOS. 722 & 723/JP/2008 FOR ASSESSMENT YEAR 2003-04 AND 2004-05 VIDE ITS O RDER DATED 31.12.2008, COPY OF THE SAME IS PLACED AT PAPER BOOK-I AT PAGES 1 TO 24. T HE AO DISALLOWED THE CLAIM OF DEDUCTION UNDER SECTION 80IA(4) AT RS. 94,39,081/- FOR ASSESSMENT YEAR 2003-04 AND RS. 2,38,27,475/- FOR ASSESSMENT YEAR 2004-05 IN RESPEC T OF THE SAME PROJECT I.E. GOSHI KHURD PROJECT. THE AO ALLOWED THE CLAIM OF DEDUCTION TO THE ASSESSEE WHILE PASSING ASSESSMENT ORDER UNDER SECTION 143(3). THEREAFTER, ON EXAMINI NG THE ASSESSMENT RECORD, THE LD. CIT INITIATED PROCEEDINGS UNDER SECTION 263 AND SET ASI DE THE ORDER OF AO. WHILE SETTING ASIDE THE ORDER OF AO, THE LD. CIT OPINED THAT THE ENTERPRISES CARRYING ON THE BUSINESS OF DEVELOPING THE INFRASTRUCTURE FACILITY WAS ELIGIB LE FOR DEDUCTION BUT ONLY THE PROFIT 20 EARNED FROM OPERATING AND MAINTAINING THE INFRASTR UCTURE FACILITY WAS EXEMPT AND NOT THE PROFIT DERIVED FROM DEVELOPING THE INFRASTRUC TURE FACILITY. HE WAS OF THE VIEW THAT THE ASSESSEE COMPANY IS ONLY A CONTRACTOR CARRYING OUT SPECIFIC WORK WITH RESPECT TO THE IRRIGATION PROJECT AND IS NOT THE DEVELOPER OF IR RIGATION PROJECT. THE LD. CIT REFERRED THE AMENDMENT INTRODUCED BY FINANCE ACT, 2007 WITH RETROSPECTIVE EFFECT FROM 1.4.2000 WHEREIN POSITION HAS BEEN CLEARED IN THE EXPLANATIO N THAT NOTHING CONTAINED IN THIS SECTION SHALL APPLY TO A PERSON WHO EXECUTES WORKS CONTRACT ENTERED INTO WITH THE UNDERTAKING OR THE ENTERPRISES, AS THE CASE MAY BE. ACCORDINGLY, A SHOW CAUSE NOTICE WAS ISSUED UNDER SECTION 263. ASSESSEE FILED DETAI LED WRITTEN SUBMISSION ALONG WITH THE DECISION OF TRIBUNAL IN CASE OF PATEL ENGINEERING C O, 84 TTJ 646 (MUM.). HOWEVER, THE LD. CIT WAS NOT SATISFIED AS THE DECISION OF PATEL ENGINEERING CO. WAS BEFORE THE EXPLANATION ADDED TO SECTION 80IA(4) BY THE FINANCE ACT, 2007. ACCORDINGLY THE ORDER OF THE AO WAS SET ASIDE AND THE AO WAS DIRECTED TO RE- COMPUTE THE INCOME ACCORDINGLY. ASSESSEE PREFERRED APPEAL BEFORE THE TRIBUNAL AGAIN ST THE ORDER UNDER SECTION 263 PASSED BY LD. CIT. DETAILED WRITTEN SUBMISSIONS WERE FILE D. THE AMENDED PROVISIONS OF SECTION 80IA(4) BY FINANCE ACT, 2007 WITH RETROSPECTIVE EFF ECT FROM 1.4.2000 WERE EXPLAINED. ATTENTION OF THE BENCH WAS DRAWN ON THE CLAUSES OF AGREEMENT AS WELL AS THE DESIGN DEVELOPED BY THE ASSESSEE AND ACCORDINGLY IT WAS SU BMITTED THAT THE ASSESSEE IS NOT MERELY A CONTRACTOR BUT IT IS A DEVELOPER. RELIANC E WAS PLACED AGAIN ON THE DECISION OF PATEL ENGINEERING CO. LTD. BY WHICH DEFINITION OF DEVELOPER AND CONTRACTOR WAS DISCUSSED AND THEREAFTER THE ISSUE WAS DECIDED BY T HE MUMBAI BENCH OF THE TRIBUNAL IN FAVOUR OF ASSESSEE. RELIANCE WAS PLACED ON VARIOUS CASES MENTIONED IN THE ORDER OF THE TRIBUNAL AT PAGES 4 & 5. IN PARA 5 OF THE ORDER OF THE TRIBUNAL, THE TRIBUNAL HAS 21 DISCUSSED THE WORK DONE BY THE ASSESSEE IN RESPECT TO DEVELOPMENT OF THE DESIGN IN THE GOSHI KHURD PROJECT, A GOVERNMENT OF MAHARASHTRA UN DERTAKING, WHO INVITED THE TENDER WITH GENERAL AND TECHNICAL SPECIFICATIONS OF WORK. IT HAS BEEN CLEARLY MENTIONED IN THE CLAUSES OF AGREEMENT THAT THE ASSESSEE HAS TO DEVEL OP THE DESIGN OF GATES AND THEN HAS TO FIX AS PER ASSIGNMENT GIVEN TO THE ASSESSEE AND THE REAFTER MAINTAIN THE SAME FOR TWO YEARS. IT WAS EXPLAINED THAT THE TERM DEVELOPMENT IS HAVING HIGHER DEGREE OF INVOLVEMENT THAN MAINTENANCE AND OPERATION. THE WO RD CONTRACTOR IS NOT OPPOSITE TO DEVELOPER. A CONTRACTOR IS A PERSON WHO ACCEPTS THE TERMS AND CONDITIONS OF WORKING AND A DEVELOPER IS A PERSON WHO EXECUTES THE CONTRA CT. IN PARA 6 OF THE ORDER OF THE TRIBUNAL THE SUBMISSIONS OF THE ASSESSEE REGARDING DEVELOPER WITH REFERENCE TO INFRASTRUCTURE FACILITY, INDUSTRIAL PARK ETC. FOR T HE PURPOSE OF SECTION 80IA HAS BEEN EXPLAINED. IT WAS EXPLAINED THAT IN THIS STATUTE I T HAS BEEN PROPOSED TO CLARIFY THAT THE PROVISIONS OF SECTION 80IA SHALL NOT APPLY TO A PER SON WHO EXECUTES A WORK CONTRACT ENTERED INTO WITH THE UNDERTAKING OR ENTERPRISE REF ERRED TO IN THE SAID SECTION. THUS IN CASE WHEN A PERSON MAKES THE INVESTMENT AND HIMSELF EXECUTES THE DEVELOPMENT WORK I.E. CARRIES OUT THE CIVIL CONSTRUCTION WORK, HE WILL BE ELIGIBLE FOR TAX BENEFIT UNDER SECTION 80IA. THEREAFTER IT HAS BEEN EXPLAINED HOW THE A SSESSEE IS A DEVELOPER BY DEVELOPING THE DESIGN OF THE GATE AND THEREAFTER TO FIX THOSE GATES AS PER ASSIGNMENT. THE DECISION WAS RELIED UPON IN CASE OF BHARAT UDYOG LTD., 24 SO T 412 (MUMBAI). 12. ON THE OTHER HAND, THE LD. D/R ON BEHALF OF THE DEPARTMENT HAS SUPPORTED THE ORDER OF LD. CIT. IT WAS STATED THAT LD. CIT HAS G IVEN THE DIRECTION TO THE AO TO MAKE A FRESH ORDER IN THE LIGHT OF DISCUSSION IN HIS ORDER AFTER GIVING DUE OPPORTUNITY TO THE ASSESSEE IN RESPECT OF CLAIM OF DEDUCTION UNDER SEC TION 80IA(4). THEREFORE, IT WAS 22 SUBMITTED THAT IT IS CLEAR THAT LD. CIT IN THE IMPU GNED ORDER HAS NOT DIRECTED THE DISALLOWANCE OF DEDUCTION UNDER SECTION 80IA(4) BUT HAS MERELY DIRECTED THE AO TO MAKE A FRESH ASSESSMENT AFTER CONSIDERING THE VARIOUS FA CTS OF THE CASE AND PROVISIONS OF LAW PARTICULARLY THE RETROSPECTIVE AMENDMENT BROUGHT IN TO THE SAID SECTION BY THE FINANCE ACT, 2007 WITH RETROSPECTIVE EFFECT. RELIANCE WAS PLACED ON VARIOUS CASE LAWS BY LD. CIT D/R. 13. ON MERITS ALSO, THE ARGUMENTS WERE ADVANCED ON BEHALF OF THE DEPARTMENT AND IT WAS SUBMITTED THAT THE ISSUE AS TO WHETHER THE CONT RACTORS ASSOCIATED WITH THE INFRASTRUCTURE PROJECT WERE ELIGIBLE FOR THE DEDUCT ION OR NOT HAD BECOME DEBATABLE AND IN ORDER TO PUT SUCH DEBATES TO REST, BY THE FINANCE A CT, 2007, AN EXPLANATION WAS ADDED WITH RETROSPECTIVE EFFECT FROM 1.4.2000 AND, THEREF ORE, THE SAME HAS TO BE READ INTO THE ABOVE PROVISIONS DURING ASSESSMENT YEARS 2003-04 AN D 2004-05. 14. REGARDING THE DECISION OF MUMBAI BENCH OF THE T RIBUNAL IN CASE OF PATEL ENGINEERING CO. LTD., IT WAS SUBMITTED THAT AFTER T HE AMENDED PROVISIONS OF LAW THE DECISION OF HONBLE BOMBAY HIGH COURT DOES NOT HOLD GOOD. THEREAFTER THE TRIBUNAL AFTER DISCUSSING THE ARGUMENT OF BOTH THE SIDES AND TAKING INTO CONSIDERATION THE AMENDED PROVISIONS OF SECTION 80IA(4) AND ALSO TAKING INTO CONSIDERATION THE DECISION OF THE TRIBUNAL IN CASE OF PATEL ENGINEERING CO. LTD (SUPR A) HELD THAT ASSESSEE IS A DEVELOPER AND THEREFORE ENTITLED TO DEDUCTION UNDER SECTION 8 0IA(4). THE FOLLOWING FINDINGS HAVE BEEN GIVEN BY THE TRIBUNAL RECORDED IN PARAS 10 & 1 1 AT PAGES 12 TO 24 :- 10. AFTER CONSIDERING THE ABOVE SUBMISSIONS THE ISSUE EMERGES FOR OUR ADJUDICATION IS AS TO WHETHER THE ASSESSMEN T ORDER WAS ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT EREST OF THE REVENUE AS; HELD BY THE LD. CIT. FOR DECIDING THIS ISSUE, WE HAVE TO 23 EXAMINE THE ELIGIBILITY OF ASSESSEE FOR CLAIMING DE DUCTION UNDER SECTION 80IA DURING THE YEARS UNDER CONSIDERATION. THE ASSESSEE HAS CLAIMED TO HAVE DEVELOPED TWO PROJECTS I.E. GOS HI KHURD PROJECT UNDER AN AGREEMENT WITH VIDHARBHA IRRIGATIO N DEVELOPMENT CORPORATION (A GOVERNMENT OF MAHARASHTR A UNDERTAKING) AND THE VIJAYWADA PROJECT UNDER AN AGR EEMENT WITH THE GOVERNMENT OF ANDHRA PRADESH (IRRIGATION AND CO MMAND AREA DEVELOPMENT DEPARTMENT). REGARDING THE ALLOWABILIT Y OF DEDUCTION UNDER SECTION 80IA(4) ON THE ABOVE PROJEC TS AND OTHER DEDUCTIONS, THE AO SOUGHT DIRECTIONS UNDER SECTION 144A OF THE ACT FROM LD. ADDITIONAL CIT, WHICH WAS RESPONDED IN DETAILS. THE AO HAS REPRODUCED THESE DIRECTIONS OF LD. ADDITIONA L CIT AT PAGE 3 OF THE ASSESSMENT ORDER. AFTER DISCUSSING THE ISSU E AT PAGES 18 & 19 OF THE ASSESSMENT ORDER, THE AO DISALLOWED THE C LAIMED DEDUCTION UNDER SECTION 80IA(4) IN RESPECT OF VIJAY WADA PROJECT ON THE BASIS THAT NO NEW INFRASTRUCTURE FACILITY HA D BEEN DEVELOPED. NO GRIEVANCE HAS BEEN EXPRESSED BY THE ASSESSEE IN THIS REGARD BEFORE THE TRIBUNAL. THE SOLE GRIEVANCE OF THE ASS ESSEE BEFORE US IS SETTING ASIDE UNDER THE REVISIONAL ORDER THE CLA IM OF DEDUCTION UNDER SECTION 80IA(4) ON GOSHI KHURD PROJECT ALLOWE D BY THE AO AFTER DISCUSSING THE ISSUE IN DETAIL AT PAGES 12 TO 18 OF THE ASSESSMENT ORDER. 10.1. ON PERUSAL OF REVISIONAL ORDER UNDER SECTION 263 IN QUESTION, WE FIND THAT REASONS FOR TREATING THE ASS ESSMENT ORDERS FOR THE YEARS UNDER CONSIDERATION ON THE ISSUE AS ERRON EOUS SO FAR AS IT IS PREJUDICIAL TO THE INTEREST OF REVENUE AND SETTI NG ASIDE OF THESE ORDERS REMAINED AS UNDER :- (I) AS PER THE PROVISIONS OF SECTION 80IA(4), FOR T HE RELEVANT PREVIOUS YEAR, THE ENTERPRISE CARRYING ON BUSINESS OF DEVELOPING 24 THE INFRASTRUCTURE FACILITY WAS ELIGIBLE FOR DEDUCT ION ONLY ON THE PROFIT EARNED FROM OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY ; (II) THE ENTERPRISE WAS NOT ELIGIBLE FOR DEDUCTION ON THE PROFIT DERIVED FROM DEVELOPING THE INFRASTRUCTURE FACILI TY ; (III) THE COMPANY IS ONLY A CONTRACTOR CARRYING OUT A SPECIFIC WORK WITH RESPECT TO THE IRRIGATION PROJECT AND IS NOT THE DEVELOPER OF THE IRRIGATION PROJECT ; AND (IV) THIS VIEW HAS BEEN CLARIFIED BY THE EXPLANATIO N INSERTED BY THE FINANCE ACT, 2007. 11. THE LD. CIT ALSO DISAGREED WITH THE ASSESSEE TH AT DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF PATE L ENGINEERING CO. LTD. VS. ACIT (SUPRA) COVERS THE ISSUE. HE OBSE RVED THAT THE CITATION IS MISPLACED AS THIS DECISION RELATES TO A SSESSMENT YEAR 2000-01, WHEREIN THE PROVISIONS OF SECTION 80IA(4) WERE DIFFERENT. THE LD. CIT NOTED FURTHER THAT THIS DECISION HAS NO T BEEN ACCEPTED BY THE DEPARTMENT AS APPEAL HAS BEEN PREFERRED BY T HE DEPARTMENT BEFORE THE HONBLE MUMBAI HIGH COURT, WHICH IS PEND ING. THERE IS NO DISPUTE THAT UNDER THE PROVISIONS OF SECTION 263 THE LD. CIT HAS BEEN EMPOWERED WITH SUPERVISORY JURISDICTION AN D IT IS NOT AN ARBITRARY OR UNCHARTERED POWER FOR INVOKING THESE P ROVISIONS UNDER SECTION 263 OF THE ACT. FOR APPLICATION OF PROVISI ONS U/S 263, TWO CONDITIONS ARE REQUIRED TO BE FULFILLED. FIRSTLY, T HE ORDER OF THE AO SOUGHT TO BE REVISED IS ERRONEOUS AND SECONDLY, SUC H ORDER IS PREJUDICIAL TO THE INTEREST OF REVENUE. ERRONEOUS ASSESSMENT REFERS TO AN ASSESSMENT THAT DEVIATES FROM THE LAW, OR, ONE, WHICH HAS BEEN PASSED BY THE AO WITHOUT MAKING ANY ENQUIR Y, OR, IN UNDUE HASTE. AN ORDER CANNOT BE TERMED AS ERRONEO US UNLESS IT IS NOT IN ACCORDANCE WITH LAW OR IT HAS BEEN PASSED WI THOUT MAKING ANY ENQUIRY. AN ASSESSMENT ORDER CANNOT BE TREATED AS ERRONEOUS 25 BY THE LD. COMMISSIONER SIMPLY BECAUSE HE IS NURTUR ING DIFFERENT VIEW ON THE ISSUE THAN THAT OF THE AO. IF AN ORDER IS ERRONEOUS BUT NOT PREJUDICIAL TO THE INTEREST OF THE REVENUE, THEN ALSO, THE POWER OF SUO MUTO REVISION CANNOT BE EXERCISED. TH ERE MUST BE SOME PRIMA FACIE MATERIAL ON RECORD TO SHOW THAT TA X WHICH WAS LAWFULLY EXIGIBLE HAS NOT BEEN IMPOSED, OR THAT BY THE APPLICATION OF RELEVANT STATUTE, ON AN INCORRECT OR INCOMPLETE INTERPRETATION, A LESSER TAX THAN WHAT WAS JUST HAS BEEN IMPOSED. TH E HONBLE BOMBAY HIGH COURT IN THE CASE OF CIT VS. GABRIEL IN DIA LTD., 203 ITR 108 (BOM.) HAS BEEN PLEASED TO HOLD THAT A DECI SION OF THE AO CANNOT BE HELD TO BE ERRONEOUS SIMPLY BECAUSE IN HI S ORDER HE DID NOT MAKE AN ELABORATE DISCUSSION ON AN ISSUE. UNDE R THIS BACKGROUND, WE HAVE TO NOW EXAMINE AS TO WHETHER TH E ASSESSMENT ORDERS WERE ERRONEOUS IN SO FAR AS IT IS PREJUDICIA L TO THE INTEREST OF THE REVENUE JUSTIFYING THE REVISIONAL ACTION UNDER SECTION 263 OF THE ACT IN QUESTION BY THE LD. CIT. IN THIS REGARD WE FIRST PREFER TO EXAMINE THE ELIGIBILITY OF ASSESSEE TO CLAIM DEDUCT ION UNDER SECTION 80IA(4) OF THE ACT. IN THIS REGARD WE HAVE TO EXAM INE ALSO AS TO HOW THE PROVISIONS OF SECTION 80IA(4) IN ASSESSMENT YEAR 2003-04 ARE DIFFERENT FROM THOSE IN ASSESSMENT YEAR 2000-01 AND HOW THAT DIFFERENCE ADVERSELY AFFECTS THE CLAIM OF DEDUCTION OF THE ASSESSEE AS PER THE COMPARATIVE CHART OF THE PROVISIONS OF S ECTION 80IA(4), PLACED AT PAGE 24 OF THE PAPER BOOK-I AND PAGE 277 OF THE PAPER BOOK-III. IT EMERGES THAT THE JOURNEY OF THIS PROV ISION STARTED FROM THE ASSESSMENT YEAR 1995-96 ONWARDS. THE COMPARATI VE CHART ALSO SUGGEST THAT THE PROVISIONS HAVE BEEN GRADUALLY LIB ERALIZED WITH EVERY AMENDMENT. IN THE ASSESSMENT YEAR 2001-02 THE DEDUCTION UNDER SECTION 80IA(4)(I), SUBJECT TO FULFILLMENT OF PRESCRIBED OTHER CONDITIONS WAS AVAILABLE TO ANY ENTERPRISE CARRYING ON THE BUSINESS OF (I) DEVELOPING, (II) MAINTAINING AND OPERATIN G OR (III) DEVELOPING, MAINTAINING AND OPERATING ANY INFRAST RUCTURE FACILITY. 26 AS PER CLAUSE (C) TO THIS SECTION WATER SUPPLY PROJ ECT, WATER TREATMENT SYSTEM, IRRIGATION PROJECT, SANITATION AN D SEWERAGE SYSTEM OR SOLID WASTE MANAGEMENT SYSTEM WERE ALSO I NCLUDED IN INFRASTRUCTURE FACILITY. IN ASSESSMENT YEAR 2002-0 3 THE WORD OR WAS INTRODUCED IN BETWEEN LIKE (I) DEVELOPING OR (I I) OPERATING AND MAINTAINING OR (III) DEVELOPING, OPERATING AND MAIN TAINING ANY INFRASTRUCTURE FACILITY. IN ASSESSMENT YEARS 2003- 04 TO 06-07 THERE WAS NO CHANGE IN THE SAID PROVISION. IN THE ASSESS MENT YEAR 2006- 07 IN CLAUSE (A) TO THAT SECTION I.E. ONE OF THE OT HER CONDITIONS REQUIRED TO BE FULFILLED FOR CLAIMING THE DEDUCTION THE WORDINGS IT IS OWNED BY A COMPANY REGISTERED IN INDIA OR BY CON SORTIUM OF SUCH COMPANIES WERE EXTENDED BY ADDING WORDINGS . OR BY AN AUTHORITY OR A BOARD OR A CORPORATION OR ANY OTH ER BODY ESTABLISHED OR CONSTITUTED UNDER ANY CENTRAL OR STA TE ACT . BY THE FINANCE ACT, 2007, AN EXPLANATION WAS INTRODUCED AT THE BOTTOM OF THE SECTION 80IA WITH RETROSPECTIVE EFFECT FROM 1.4 .2000. VIDE THIS EXPLANATION MEANT FOR REMOVAL OF DOUBT, IT HAS BEEN DECLARED THAT NOTHING CONTAINED IN THIS SECTION SHALL APPLY TO A PERSON WHO, EXECUTES A WORKS CONTRACT ENTERED INTO WITH THE UND ERTAKING OR ENTERPRISES, AS THE CASE MAY BE. REFERRING THIS EX PLANATION, THE SUBMISSION OF THE LD. D/R REMAINED THAT ASSESSEE IS NOT THE DEVELOPER OF INFRASTRUCTURE PROJECT AND ACTUALLY M/ S. VIDHARBHA IRRIGATION DEVELOPMENT CORPORATION, NAGPUR IS THE D EVELOPER OF THE PROJECT AND ASSESSEE IS A MERE CONTRACTOR PERFO RMING SPECIFIC WORK FOR THE CORPORATION. WE DO NOT AGREE WITH THI S PLEA OF THE LD. D/R AS IF THE SAME IS ACCEPTED, THEN THE VERY PURPO SE OF LEGISLATURE TO EXTEND INCENTIVE FOR DEVELOPMENT OF INFRASTRUCTU RE WILL BE FRUSTRATED. AS PER DICTIONARY AND JUDICIAL MEANING OF THE WORDS DEVELOP, DEVELOPER AND DEVELOPMENT AS PER THE MATERIAL PLACED ON RECORD ON BEHALF OF THE ASSESSEE IT COMES OUT THAT DEVELOPER MEANS A PERSON WHO MAKES THE THINGS HAP PEN. IT IS THE 27 ASSESSEE IN THE PRESENT CASE WHO MOBILIZING AND SYN THESIZING PEOPLE, PLANS, TECHNICAL EXPERTISE, SUPERVISION, CO -ORDINATION AND CONTROL ETC. DEVELOP AND CREATE THE INFRASTRUCTURE FACILITY AND M/S. VIDHARBHA IRRIGATION DEVELOPMENT CORPORATION, NAGPU R ( A GOVERNMENT OF MAHARASHTRA UNDERTAKING) AS EVIDENT F ROM THE CONTENTS OF THE TENDER FLOATED BY THEM PLACED AT PA GES 58 TO 250 OF THE PAPER BOOK-II, IS MERELY THE SPONSOR OF THE PRO JECT. THE TERM CONTRACTOR IS NOT ESSENTIALLY CONTRADICTORY TO TH E TERM DEVELOPER. ON THE CONTRARY, THE SECTION 80IA(4) ITSELF PROVIDES THAT THE ASSESSEE SHOULD DEVELOP THE INFRASTRUCTURE FACILITY AS PER THE AGREEMENT WITH THE GOVERNMENT. IN OUR VIEW EVE N THE INSERTION OF EXPLANATION 2 TO SECTION 80IA VIDE FIN ANCE ACT, 2007, AS DISCUSSED ABOVE, HAS NOT ALTERED THIS SITUATION. THE SAID AMENDMENT DOES NOT APPLY TO A WORKS CONTRACT ENTERE D INTO BY THE GOVERNMENT AND THE ENTERPRISE. IT ONLY APPLIES TO A WORK CONTRACT ENTERED INTO BETWEEN THE ENTERPRISE AND OTHER PARTY THE SUB- CONTRACTOR. THIS AMENDMENT MERELY AIMS AT DENYING DEDUCTION TO THE SUB-CONTRACTOR WHO EXECUTES A WORKS CONTRACT WI TH THE ENTERPRISE. IN FACT, THE INSERTION OF THE EXPLANA TION SUPPORTS THE CASE OF THE ASSESSEE THAT THE ENTERPRISE EARNING PR OFIT FROM THE PROJECT AS A INFRASTRUCTURE DEVELOPER-CONTRACTOR. T HE MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF PATEL ENGINEER ING CO. LTD. VS. ACIT (SUPRA) RELIED UPON BY THE AO VIDE PARA 8 THER EOF, UNDER ALMOST SIMILAR FACTS AND CIRCUMSTANCES HAS HELD THA T THE ASSESSEE THEREIN WAS THE DEVELOPER OR INFRASTRUCTURE PROJECT AND ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA. AS PER THE LAW DICTI ONARY, THE TERM DEVELOPMENT IS BRINGING INTO BEING, CONVERTI NG NATURAL RESOURCES, LIKE LAND INTO A SPECIFIC PURPOSE BY BUI LDING EXTENSIVELY, REALIZING AND MAKING REAL THE POTENTIAL OF NATURAL RESOURCES, AND BRING TO A MORE ADVANCED OR EFFECTIVE STAGE ETC. F OR A READY 28 REFERENCE, WE ARE REPRODUCING HERE UNDER PARA 47 OF THE SAID DECISION IN THE CASE OF PATEL ENGINEERING CO. LTD. :- THERE HAS ALSO BEEN THE CONTENTION OF THE REVENUE THAT THE ASSESSEE IS A CONTACTOR, EXECUTING CIVIL CONTRA CT AND SO IT CANNOT BE THE DEVELOPER AS SUCH. HOWEVER, WE ARE UN ABLE TO AGREE WITH THIS CONTENTION OF THE REVENUE. A PERSO N, WHO ENTERS INTO A CONTRACT WITH ANOTHER PERSON WILL BE A CONTRACTOR NO DOUBT; AND THE ASSESSEE HAVING ENTERE D INTO AN AGREEMENT WITH THE GOVERNMENT OF MAHARASHTRA AND ALSO WITH APSEB FOR DEVELOPMENT OF THE INFRASTRUCTURE PR OJECTS, IS OBVIOUSLY A CONTRACTOR BUT THAT DOES NOT DEROGAT E THE ASSESSEE FROM BEING A DEVELOPER AS WELL. THE TERM CONTRACTOR IS NOT ESSENTIALLY CONTRADICTORY TO TH E TERM DEVELOPER. ON THE OTHER HAND, RATHER SECTION 80IA (4) ITSELF PROVIDES THAT ASSESSEE SHOULD DEVELOP THE INFRASTRUCTURE FACILITY AS PER AGREEMENT WITH THE C ENTRAL GOVERNMENT, STATE GOVERNMENT OR A LOCAL AUTHORITY. SO, ENTERING INTO A LAWFUL AGREEMENT AND THEREBY BECOMI NG A CONTRACTOR SHOULD, IN NO WAY, BE A BAR TO THE ONE B EING A DEVELOPER. THE ASSESSEE, PRESENTLY UNDER CONSIDERA TION BEFORE US, HAS DEVELOPED INFRASTRUCTURE FACILITY AS PER AGREEMENT WITH MAHARASHTRA STATE GOVERNMENT/APSEB. THEREFORE, MERELY BECAUSE, IN THE AGREEMENT FOR DEVELOPMENT OF INFRASTRUCTURE FACILITY, ASSESSEE IS REFERRED TO AS CONTRACTOR OR BECAUSE SOME BASIC SPECIFICATIO NS ARE LAID DOWN, IT DOES NOT DETRACT THE ASSESSEE FROM TH E POSITION OF BEING A DEVELOPER, NOR WILL IT DEBAR THE ASSESSE E FROM CLAIMING DEDUCTION UNDER SECTION 80IA(4). DISCUSSED/CONSIDERED AS ABOVE, WE HOLD THAT THE ASS ESSEE HAVING CARRIED OUT THE WORK OF CONSTRUCTING THE ABO VE 29 MENTIONED TWO PROJECTS, NAMELY SRISAILAM PROJECT AN D KOYANA PROJECT, AS DETAILED ABOVE, IS APPROPRIATELY A DEVELOPER OF THE SAID TWO INFRASTRUCTURE FACILITIES , AND IN TURN IS ENTITLED, AND ENTITLED JUSTIFIABLY, TO CLAI M DEDUCTION UNDER SECTION 80IA(4). THIS ACTION ITSELF CONSIDERS DEVELOPMENT OF WATER S UPPLY AND IRRIGATION PROJECT AS INFRASTRUCTURE FACILITY. THE WORK WHICH THE ASSESSEE HAS PERFORMED, IN OUR VIEW, IS UNDOUBTEDLY SPECIALI ZED WORK FOR WHICH CONTRACT WAS ENTERED INTO. IN THE PRESENT CASE THE ASSESSEE HAS MANUFACTURED AND INSTALLED DAM GATES, RADICAL GATES , STOP LOCK AS PER THE SPECIFICATIONS AGREED UPON IN THE CONTRACT INVOLVIN G HUGE AMOUNT. THE ASSESSEE HAD ESTABLISHED WORKSHOP FOR MANUFACTURING OF GATE PANELS, HYDRAULIC GIRDERS, CHECKERED PLATES, DRAIN HOIST AN D EMBEDDED PARTS ETC. AFTER MANUFACTURING THESE ITEMS BY THE ASSESSEE THE SE WERE ASSEMBLED AND INSTALLED AT DAM SITE. FOR MANUFACTURING OF THESE A RTICLES, THERE IS A REQUIREMENT OF WELL EQUIPPED MECHANIZED WORK SHOP A ND EMPLOYMENT OF EXPERTS. THE TERM CONTRACTOR IS NOT ESSENTIALLY CONTRADICTORY TO THE TERM DEVELOPER. ON THE CONTRARY, THE SAID SECTION ITSE LF PROVIDES THAT THE ASSESSEE SHOULD DEVELOP THE INFRASTRUCTURE FACILITY AS PER THE AGREEMENT WITH THE GOVERNMENT. ONE OF THE OTHER CONDITIONS I N THE SECTION IS THAT THE ENTERPRISE SHOULD ENTER INTO AN AGREEMENT WITH THE CENTRAL GOVERNMENT OR STATE GOVERNMENT OR A LOCAL AUTHORITY OR ANY OTHER STATUTORY BODY FOR (I) DEVELOPING OR (II) OPERATING AND MAINTAINING OR (I II) DEVELOPING, OPERATING AND MAINTAINING A NEW INFRASTRUCTURE FACILITY. THU S THERE HAS TO BE AN AGREEMENT BETWEEN THE ENTERPRISE DEVELOPER AND THE GOVERNMENT. WE THUS FIND SUBSTANCE IN THE CONTENTION OF THE LD. A/R THA T ASSESSEE IS A DEVELOPER AND IS NOT A SUB-CONTRACTOR, WHO AS PER THE EXPLANA TION INSERTED IN THE SECTION VIDE FINANCE ACT, 2007 IS NOT ELIGIBLE TO C LAIM DEDUCTION. 30 11.1. SO FAR AS THE CONTENTION OF THE LD. D/R IS CO NCERNED REGARDING THAT THE ASSESSEE IS NOT THE DEVELOPER OF IRRIGATION PROJECT SINCE UNDER SECTION 80IA(4) DEVELOPER WHO DO NOT OPERA TE AND MAINTAIN THE INFRASTRUCTURE FACILITIES ARE NOT ELIGIBLE FOR THE DEDUCTION, WE DO NOT AGREE WITH. SINCE IN OUR VIEW THE WORD OR HAS BEEN INS ERTED IN SECTION 80IA(4)(I) AS ANY ENTERPRISE CARRYING ON THE BUSINE SS OF (I) DEVELOPING, OR (II) OPERATING AND MAINTAINING OR (III) DEVELOPING, OPERATING AND MAINTAINING ANY INFRASTRUCTURE FACILITY HAS BEEN IN TRODUCED BY THE LEGISLATURE FROM ASSESSMENT YEAR 2002-03 ONLY TO RE MOVE THE AMBIGUITY. HENCE THE INSERTION OF WORD OR WAS CLARIFICATORY IN NATURE. THIS AMENDED PROVISIONS OF SECTION WERE VERY MUCH IN OPE RATION IN THE ASSESSMENT YEARS 2003-04 AND 2004-05 UNDER CONSIDER ATION. THE PLEA OF THE LD. CIT THAT AS PER THE PROVISIONS OF SECTION 8 0IA(4), FOR THE RELEVANT PREVIOUS YEAR, THE ENTERPRISE CARRYING ON BUSINESS OF DEVELOPING THE INFRASTRUCTURE FACILITY WAS ELIGIBLE FOR DEDUCTION ONLY ON THE PROFIT EARNED FROM OPERATING AND MAINTAINING THE INFRASTRUCTURE FACILITY AND THAT THE ENTERPRISE WAS NOT ELIGIBLE FOR DEDUCTION ON THE PR OFIT DERIVED FROM DEVELOPING THE INFRASTRUCTURE FACILITY IS OVER LAP PING IS NOT ACCEPTABLE. THE LD. CIT, IN OUR VIEW, HAS MIS-READ THE PROVISIO N BY FORMING A VIEW THAT A PERSON WHO EARNS PROFIT FROM PROJECTS SECURE D UNDER A WORKS CONTRACT IS NOT ELIGIBLE FOR DEDUCTION UNDER SECTIO N 80IA(4). A PERUSAL OF THE SAID SECTION, HOWEVER, INDICATES THAT THERE IS NO SUCH MANDATE IN THE SECTION. THE TERM CONTRACTOR IS NOT ESSENTIALLY CONTRADICTORY TO THE TERM DEVELOPER. ON THE CONTRARY, THE SAID SECTION ITS ELF PROVIDES THAT THE ASSESSEE SHOULD DEVELOP THE INFRASTRUCTURE FACILITY AS PER THE AGREEMENT WITH THE GOVERNMENT. FOR FACILITY LIKE WATER SUPPL Y OR IRRIGATION OR ROAD PROJECT, RAIL SYSTEM, THE SPECIFICATION CAN BE ONLY THROUGH A FACILITY SPECIFIC TENDER. THE SPECIFICATIONS ENSURE THAT T HE DEVELOPMENT CARRIED OUT BY THE ASSESSEE FITS INTO THE OVER ALL REQUIREM ENT FLOATED BY THE GOVERNMENT FOR A PARTICULAR INRASTRUCTURE. FOR EXA MPLE, THE GOVERNMENT HAS CERTAIN SPECIFICATIONS IN MIND IN RESPECT OF FU LL LENGTH WATER SUPPLY OR 31 IRRIGATION SYSTEM AND THESE HAVE TO BE SPECIFIED TO EACH SEGMENT DEVELOPER. HAVING GONE THROUGH THE DECISION CITED BY THE PARTIES, WE FIND THAT THE DECISION OF MUMBAI BENCH OF THE TRIBUNAL I N THE CASE OF PATEL ENGINEERING CO. LTD. (SUPRA) FULLY COVERS THE ISSUE RAISED HEREIN, AS THERE IS NO MAJOR CHANGE IN THE PROVISIONS OF THIS SECTIO N. FROM THE ASSESSMENT YEAR 2000-01 TO WHICH THAT DECISION BELONGS TO AND IN THE ASSESSMENT YEARS 2003-04 AND 2004-05 UNDER CONSIDERATION RATHER INSE RTION OF THE WORD OR IN BETWEEN DEVELOPING, OPERATING AND MAINT AINING AND DEVELOPING, OPERATING AND MAINTAINING ANY INFRAST RUCTURE FACILITY DURING THE YEARS UNDER CONSIDERATION IN THE PROVISIONS HAS BROUGHT THE ASSESSEE IN A BETTER POSITION DEVOID OF ANY AMBIGUITY TO CLAIM THE DEDUCTION. PARAS 44, 45 AND 46 OF THE SAID DECISION IN THE CASE OF P ATEL ENGINEERING CO. LTD. (SUPRA) SUPPORTS THE CASE OF ASSESSEE ACCEPTING WHI CH, IN OUR VIEW THE AO HAD RIGHTLY ALLOWED THE CLAIMED DEDUCTION TO THE AS SESSEE WHILE PLACING RELIANCE ON THE SAID DECISION. FOR A READY REFERENC E THESE PARAS ARE BEING REPRODUCED HEREUNDER :- 44. WE HAVE CONSIDERED THE RIVAL CONTENTIONS AS A LSO THE RELEVANT MATERIAL ON RECORD. FROM THE PERUSAL OF RE CORD, WE FIND THAT IN THE SRISAILAM PROJECT, THE ASSESSEE COMPANY HAS CONSTRUCTED AN UNDERGROUND TUNNEL TO PROVIDE WATER SUPPLY BY CO NNECTING THE RIVER KRISHNA TO THE POWER HOUSE. THE ASSESSEE HAS ALSO CONSTRUCTED UNDERGROUND SPECIALIZED STRUCTURES SUCH AS SURGE CHAMBER, DRAFT TUBE TUNNELS, TAIL RACE TUNNEL WHICH TAKES THE WATER BACK TO THE RIVER FOR USE FOR IRRIGATION, ETC. SIMI LARLY, FOR KOYNA PROJECT, THE ASSESSEE CONSTRUCTED INLET TUNNEL FOR WATER SUPPLY UPTO THE POINT OF POWER HOUSE. THE ABOVE CONSTRUCTION WO RK WOULD, IN OUR CONSIDERED OPINION, AMOUNT TO DEVELOPMENT, AS A NEW FACILITY HAS BEEN DEVELOPED. IN FACT, WE MAY NOTE THAT THE R EVENUE AUTHORITIES TOO HAVE NOT DENIED THE FACTUM OF DEVEL OPMENT HAVING TAKEN PLACE; HOWEVER, THE CONTENTION OF THE REVENUE HAS BEEN THAT THE DEVELOPER IS NOT THE ASSESSEE BUT THE GOVERNMEN T OF MAHARASHTRA IN RESPECT OF KOYNA PROJECT AND PSEB IN RESPECT OF THE SRISAILAM PROJECT, BECAUSE, THE INVESTMENTS HAV E BEEN MADE BY THEM. 45. IN THE CIRCUMSTANCES, AS PER THE CONTENTIONS RAISED BEFORE US ORALLY AS ALSO IN WRITING BY THE TWO RIVAL REPRESENTATIVES , THE MOOT 32 QUESTION THAT POSES ITSELF FOR OUR CONSIDERATION IS AS TO WHETHER THE ASSESSEE CAN BE SAID TO BE DEVELOPER WHEN THE AMOUN T HAS BEEN PAID TO THE ASSESSEE FOR THE DEVELOPMENT WORK CARRI ED OUT BY THE ASSESSEE. IN ORDER TO PROPERLY APPRECIATE THIS QUE STION, IT WOULD BE RELEVANT, AND NO LESS BENEFICIAL, TO REFER TO THE L EGISLATIVE HISTORY OF SECTION 80-IA. AS WE HAVE NOTED EARLIER, THE AMENDM ENT IN SECTION 80-IA WAS BROUGHT ABOUT BY FINANCE ACT, 1955 W.E.F. 1 ST APRIL, 1996. BY VIRTUE OF THIS AMENDMENT, EXEMPTION UNDER SECTION 80- IA WAS PROVIDED TO ANY ENTERPRISE CARRYING ON THE B USINESS OF DEVELOPING, MAINTAINING AND OPERATING ANY INFRASTRU CTURE FACILITY. THUS TO BE ELIGIBLE FOR THIS DEDUCTION, AN ASSESSEE WAS REQUIRED TO CARRY OUT ALL THE THREE ACTIVITIES, I.E., (I) TO DE VELOP, (II) TO MAINTAIN, AND (III) TO OPERATE. AFTER THE MODIFICATION EFFECT ED BY FINANCE ACT, 1999, W.E.F. 1 ST APRIL, 2000, DEDUCTION UNDER SECTION 80IA(4) HAS BECOME AVAILABLE TO ANY ENTERPRISE CARRYING ON THE BUSINESS OF (I) DEVELOPING, OR (II) MAINTAINING AND OPERATING, OR ( III) DEVELOPING, MAINTAINING AND OPERATING ANY INFRASTRUCTURE FACILI TY. THEREFORE, FROM ASSESSMENT YEAR 2000-01, DEDUCTION IS AVAILABL E IF THE ASSESSEE CARRIES ON THE BUSINESS OF ANY ONE OF THE ABOVE MENTIONED THREE TYPES OF ACTIVITIES, AND ACCORDINGLY ALSO WHE N THE ASSESSEE IS CARRYING ON THE ACTIVITY OF ONLY DEVELOPING. WHEN AN ASSESSEE IS ONLY DEVELOPING AN INFRASTRUCTURE FACILITY/PROJECT AND IS NOT MAINTAINING NOR OPERATING IT, OBVIOUSLY SUCH AN ASS ESSEE WILL BE PAID FOR THE COST INCURRED BY IT; OTHERWISE, HOW WI LL THE PERSON, WHO DEVELOPS THE INFRASTRUCTURE FACILITY PROJECT, R EALIZE ITS COST? IF THE INFRASTRUCTURE FACILITY IS, JUST AFTER ITS DEVE LOPMENT, RANSFERRED TO THE GOVERNMENT, NATURALLY THE COST WOULD BE PAID BY THE GOVERNMENT. THEREFORE, MERELY BECAUSE THE MAHARASHT RA GOVERNMENT OR APSEB HAS PAID FOR THE DEVELOPMENT OF INFRASTRUCTURE FACILITY CARRIED OUT BY THE ASSESSEE , IT CANNOT BE SAID THAT THE ASSESSEE DID NOT DEVELOP THE INFRASTRUCTUR E FACILITY. IF THE INTERPRETATION CANVASSED BY THE REVENUE AUTHORITIES IS ACCEPTED, NO ENTERPRISE, CARRYING ON THE BUSINESS OF ONLY DEVELO PING THE INFRASTRUCTURE FACILITY, WOULD BE ENTITLED TO DEDUC TION UNDER SECTION 80IA(4). 46. WE HAVE NOTICED ABOVE THAT THE AMENDMENT BROUGHT I N BY THE FINANCE ACT, 1999 WAS WITH THE SOLE INTENTION/PURPO SE OF PROVIDING DEDUCTION UNDER SECTION 80-IA TO THE PERSON, WHO ON LY DEVELOPS OR WHO ONLY MAINTAINS AND OPERATES AN INFRASTRUCTURE F ACILITY. IF A PERSON WHO ONLY DEVELOPS THE INFRASTRUCTURE FACILIT Y IS NOT PAID BY THE GOVERNMENT, THE ENTIRE COST OF DEVELOPMENT WOUL D BE A LOSS IN THE HANDS OF THE DEVELOPER AS HE IS NOT OPERATING T HE INFRASTRUCTURE FACILITY. WHEN THE LEGISLATURE HAS PROVIDED THAT TH E INCOME OF THE DEVELOPER OF THE INFRASTRUCTURE PROJECT WOULD BE EL IGIBLE FOR DEDUCTION, IT PRESUPPOSES THAT THERE CAN BE INCOME TO DEVELOPER, 33 I.E., TO THE PERSON WHO IS CARRYING ON THE ACTIVITY OF ONLY DEVELOPING INFRASTRUCTURE FACILITY. OBVIOUS AS IT IS, A DEVELOPER WOULD HAVE INCOME ONLY IF HE IS PAID FOR DEVELOPMEN T OF INFRASTRUCTURE FACILITY, FOR THE SIMPLE REASON THAT HE IS NOT HAVING THE RIGHT/AUTHORIZATION TO OPERATE THE INFRASTRUCTU RE FACILITY AND TO COLLECT TOLL THEREFROM, HAS NO OTHER SOURCE OF RECO UPMENT OF HIS COST OF DEVELOPMENT. CONSIDERED AS SUCH, WE NOTE TH AT THE BUSINESS ACTIVITY OF THE NATURE OF BT (BUILD AND TRANSFER) ALSO FALLS WITHIN ELIGIBLE CONSTRUCTION ACTIVITY THAT IS ACTIVITY ELI GIBLE FOR DEDUCTION UNDER SECTION 80-IA INASMUCH AS MERE DEVELOPMENT AS SUCH AND UNASSOCIATED/UNACCOMPANIED WITH OPERATE AND MAIN TENANCE ALSO FALLS WITHIN SUCH BUSINESS ACTIVITY AS IS ELIG IBLE FOR DEDUCTION UNDER SECTION 80IA. IN THE CASE OF SUCH A CONSTRUC TION ACTIVITY, WHICH DOES NOT INVOLVE THE OPERATE ASPECT, THE QU ESTION OF AN ASSESSEE ENGAGED IN SUCH ACTIVITY (OF BT CARRYING ON ONLY DEVELOPMENT) TO RECOVER HIS COSTS OF CONSTRUCTION OF HIS OWN FROM THE INFRASTRUCTURE PROJECT/FACILITY ITSELF DOE S NOT ARISE, AND SO FOR THE RECOUPMENT OF THE COSTS, THE SAME HAVE TO B E PAID WHETHER THROUGH RUNNING BILLS OR OTHERWISE; AND CONSIDERING THE LARGENESS/HUGENESS OF THE TOTAL FINANCIAL INVESTMEN T INVOLVED, SOME ADVANCE IF PAID AT SOME POINT OF TIME, WILL NOT, IN OUR VIEW, CHANGE THE BASIC NATURE/FEATURE OF THE ASSESSEES BUSINESS ACTIVITY. THEREFORE, MERELY BECAUSE THE PRESENT ASSESSEE WAS PAID BY THE GOVERNMENT, FOR DEVELOPMENT WORK, IT CANNOT BE DENI ED DEDUCTION UNDER SECTION 80-IA(4) OF THE ACT. THE ILLUSTRATIO N OF THE ARTIST, GIVEN BY THE ASSESSEES COUNSEL DURING THE COURSE O F HIS ARGUMENTS, IS APTLY ILLUSTRATIVE AND BEFITTING. IF AN ARTIST I S ASKED TO PAINT A BEAUTIFUL PICTURE AND FOR SUCH PAINTING, PAYMENT IS MADE BY ANOTHER PERSON, THE CREATOR OF THE PAINTING WILL BE THE ARTIST AND NOT THE PERSON WHO PAID FOR IT. WE HAVE ALSO NOTED THAT THE NATIONAL WATER POLICY DOCUMENT FURNISHED BY THE ASSESSEE, ON P. 225 OF ITS PAPER BOOK-1, INDICATES THE PURPOSE OF PRIVATE SECT OR PARTICIPATION. IT STATES THAT PRIVATE SECTOR PARTICIPATION MAY HEL P IN INTRODUCING INNOVATIVE IDEAS, GENERATING FINANCIAL RESOURCES AN D INTRODUCING CORPORATE MANAGEMENT AN D IMPROVING SERVICE EFFICIE NCY AND ACCOUNTABILITY TO USERS. IT IS REVEALED FROM RECORD AND HAS ALSO NOT BEEN DISPUTED BY THE REVENUE THAT BOTH THE PROJECTS EXECUTED BY THE ASSESSEE WERE HIGHLY TECHNICAL AND SPECIALIZED, AS ALSO EXTREMELY TRICKY AND DID INVOLVE HUGE RISKS AS WELL . IT IS ALSO REVEALED FROM RECORD THAT FOR EXECUTING SUCH PROJEC TS, THE ASSESSEE HAS DEPLOYED PEOPLE, PLANT AND MACHINERY, TECHNICAL EXPERTISE, KNOW-HOW AND THE FINANCIAL RESOURCES AS HAS ALSO BE EN THE SPECIFIC CONTENTION OF THE LEARNED AUTHORIZED REPRESENTATIVE OF ASSESSEE AS NOTED BY US ABOVE. 34 THE TRIBUNAL IN THAT DECISION HAS SPECIFICALLY REJE CTED THE CONTENTION OF THE REVENUE THAT THE DEVELOPER IS NOT THE ASSESSEE BUT THE GOVERNMENT OF MAHARASHTRA AND APSEB, THE FACT OF TH AT CASE ARE SIMILAR TO THE FACT OF THE PRESENT CASE AND THE ONLY DIFFER ENCE IS THAT IN THE PRESENT CASE THE GOVERNMENT AUTHORITY IS VIDHARBHA IRRIGATI ON DEVELOPMENT CORPORATION. ON PERUSAL OF THE ASSESSMENT ORDERS I N QUESTION, WE FIND THAT THE AO HAS GIVEN CATEGORICAL FINDING ON THE ISSUE A FTER DISCUSSING THE SAME IN DETAIL AS EVIDENT FROM CONTENTS OF PAGES 12 TO 1 8 OF THE ASSESSMENT ORDER. IN OUR VIEW, HE HAS ALSO RIGHTLY FOLLOWED T HE DECISION OF THE TRIBUNAL ON AN IDENTICAL ISSUE UNDER THE SIMILAR FA CTS AND CIRCUMSTANCES IN THE CASE OF PATEL ENGINEERING CO. LTD. VS. ACIT (SU PRA) RELIED UPON BY THE ACIT BEFORE HIM IN SUPPORT OF THEIR SUBMISSIONS. T HE ASSESSMENT ORDER, THEREFORE, CANNOT BE HELD AS ERRONEOUS MERELY BECAU SE THE LD. CIT NURTURING A DIFFERENT VIEW ON THE ISSUE. HENCE THE SAID ASSESSMENT ORDERS ON THE ISSUE, WHICH IS NOT ERRONEOUS EVEN IF IT IS PREJUDICIAL TO THE INTEREST OF REVENUE CANNOT BE MADE A SUBJECT MATTER OF REVIS ION UNDER SECTION 263 OF THE ACT. THERE IS ALSO NO SUBSTANCE IN THE CONT ENTION OF THE LD. D/R THAT THE ASSESSMENT ORDERS ON THE ISSUE HAVE ONLY BEEN S ET ASIDE BY THE LD. CIT VIDE THE IMPUGNED ORDER AND THE ASSESSEE WILL BE AT LIBERTY TO AVAIL THE OPPORTUNITY TO PRESENT ITS CASE ON THE ISSUE BEFORE THE AO IN A FRESH ASSESSMENT SO DIRECTED BY THE LD. CIT, BECAUSE IT C ANNOT BE A ACCEPTABLE REASON FOR JUSTIFICATION OF INVOCATION OF PROVISION S OF SECTION 263 OF THE ACT. THE REQUIREMENT, AS DISCUSSED ABOVE, FOR INVO CATION OF THE PROVISIONS OF SECTION 263 OF THE ACT IS THAT THE ASSESSMENT OR DER ON THE ISSUE MUST BE ERRONEOUS IN SO FAR AS IT IS PREJUDICIAL TO THE INT EREST OF REVENUE AND MERE MENTIONING OF THE SAID TWO INGREDIENTS WILL NOT EXT END ANY JURISDICTION TO THE LD. CIT TO INVOKE THE SUPERVISORY PROVISIONS UN DER SECTION 263 OF THE ACT. THE DECISION OF THE SPECIAL BENCH OF THE TRIBU NAL IN THE CASE OF IVRCL INFRASTRUCTURE & PROJECTS LTD. VS. ACIT (SUPR A) RELIED UPON BY THE LD. D/R IS ALSO NOT HELPFUL TO THE REVENUE BECAUSE ISSUE HAS NOT BEEN DECIDED IN THAT CASE FOR WANT OF VERIFICATION OF SO ME ADDITIONAL EVIDENCE 35 AND THUS MATTER WAS SET ASIDE TO THE FILE OF THE AO TO DECIDE THE ISSUE AFRESH IN THE LIGHT OF FRESH EVIDENCE. UNDER THESE FACTS AND CIRCUMSTANCES, WE ARE OF THE VIEW THAT THE ASSESSMENT ORDERS IN QU ESTION ON THE ISSUE WERE NEITHER ERRONEOUS NOR PREJUDICIAL TO THE INTEREST O F REVENUE HENCE THE LD. CIT WAS NOT JUSTIFIED IN SETTING ASIDE THE SAME. T HE ASSESSMENT ORDERS ON THE ISSUE FOR THE ASSESSMENT YEARS UNDER CONSIDERAT ION ARE RESTORED WHILE SETTING ASIDE THE REVISIONAL ORDER UNDER SECTION 26 3 IN QUESTION. THE ISSUE IS DECIDED IN FAVOUR OF THE ASSESSEE. GROUNDS RAISI NG THE ISSUE ARE ACCORDINGLY ALLOWED. THIS ORDER HAS BEEN FOLLOWED BY THE TRIBUNAL WHILE DECIDING THE APPEALS FOR ASSESSMENT YEARS 2005-06 AND 06-07 DECIDED IN ITA NO. 1438 AND 1439/JP/2008 VIDE ORDER DATED 24.7.2009. 14.1. AFTER GOING THROUGH THE AMENDED PROVISIONS OF SECTION 80IA(4) WITH RETROSPECTIVE EFFECT FROM 1.4.2000 AND TAKING INTO CONSIDERATION THE DECISION OF TRIBUNAL FOR A.YS. 2003-04 TO 06-07 IT IS SEEN THAT THE TRIBUNAL WHILE DISPOSING THE APPEALS OF THE ASSESSEE HAS TAKEN INTO CONSIDERATION THE EXPLANATION ADDED TO SECTION 80IA. THE LD. CIT D/R HAS STATED THAT THE EXPLANATION ADDED TO SECTION 80IA H AS NOT BEEN TAKEN INTO CONSIDERATION BUT THE TRIBUNAL HAS DECIDED THE ISSUE FOLLOWING TH E DECISION OF MUMBAI BENCH OF THE TRIBUNAL IN THE CASE OF PATEL ENGINEERING CO. LTD ( SUPRA), IN OUR VIEW THE CONTENTION OF LD. CIT D/R IS NOT CORRECT. WHOLE OF THE FINDING O F THE TRIBUNAL HAS TO BE TAKEN INTO CONSIDERATION AND NOT ONLY THE RATIO OF THE DECISIO N OF TRIBUNAL WHICH HAS BEEN TAKEN INTO CONSIDERATION BY THE BENCH. THE TRIBUNAL HAS TAKEN INTO CONSIDERATION THE EXPLANATION ADDED TO SECTION 80IA AS WELL AS THE DECISION OF TH E TRIBUNAL IN THE CASE OF PATEL ENGINEERING CO. LTD. THE DECISION OF THE TRIBUNA L IN CASE OF PATEL ENGINEERING CO. LTD. 36 WAS TAKEN INTO CONSIDERATION BY THE BENCH FOR THE P URPOSE OF DRAWING INFERENCE THAT WHETHER ASSESSEE IS A CONTRACTOR OR A DEVELOPER . ON THE FACTS OF THE CASE INVOLVED IN CASE OF PATEL ENGINEERING CO. LTD. AS COMPARED TO T HE FACTS OF THE CASE IN HAND, THE TRIBUNAL DREW A CONCLUSION THAT FACTS ARE SIMILAR A ND, THEREFORE, THE ASSESSEE IS A DEVELOPER. THE EXPLANATION ADDED TO SECTION 80IA DO NOT BAR THE DEDUCTION IN CASE OF A DEVELOPER AS IT BARS THE DEDUCTION IN THE CASE OF C ONTRACTOR ONLY. THE TRIBUNAL HAS GIVEN A CATEGORICAL FINDING THAT ASSESSEE IS A DEVELOPER. 14.2. ONCE IN A PARTICULAR YEAR AN ASSESSEE HAS BEE N DECLARED AS A DEVELOPER THEN ON THE SAME SET OF FACTS THE ASSESSEE CANNOT BE HELD AS A CONTRACTOR IN A SUBSEQUENT YEAR. THEREFORE, THE CONTENTION OF LD. A/R THAT ONCE ASSE SSEE HAS BEEN HELD AS A DEVELOPER THEN IN NEXT YEAR OR THE YEAR UNDER CONSIDERATION IT CAN NOT BE HELD AS A CONTRACTOR, IS ACCEPTABLE. 14.3. WE HAVE SEEN THE EXPLANATION ADDED TO SECTIO N 80IA BY FINANCE ACT, 2007 AND AMENDED BY FINANCE ACT 2009 AND FOUND THAT THERE IS NO MATERIAL DIFFERENCE IN THE LANGUAGE OF EXPLANATION ADDED BY FINANCE ACT, 2007 AND AMENDED BY FINANCE ACT, 2009. THERE IS ONLY DIFFERENCE OF WORDS I.E. THE CENTRAL OR STATE GOVERNMENT WERE INCLUDED BY THE FINANCE ACT, 2009. OTHERWISE, THE LANGUAGE IS SAME. THE LANGUAGE OF THE EXPLANATION SAYS THAT IF THE ENTERPRISE IS A CONTRA CTOR THEN DEDUCTION UNDER SECTION 80IA (4) WILL NOT BE ALLOWABLE. SINCE THE TRIBUNAL HAS A LREADY HELD THAT ASSESSEE IS NOT MERELY A CONTRACTOR BUT A DEVELOPER, THEREFORE, THE EXPLANAT ION ADDED BY FINANCE ACT, 2007 OR AMENDED BY FINANCE ACT, 2009 SHALL HAVE NO EFFECT O N THE ALLOWABILITY OF DEDUCTION IN THE CASE OF ASSESSEE. 37 15. FOR THE SAKE OF FURTHER CLARIFICATION, WE WOULD LIKE TO SEE THE MAIN CLAUSES OF THE TENDER AND AGREEMENT WHEREIN IT HAS BEEN PROVIDED T HAT ASSESSEE HAS TO DEVELOP THE DESIGN OF THE GATE AS THE VIDC IS NOT HAVING SUCH I NFRASTRUCTURE OR KNOWLEDGE OF THE DESIGNS. A COPY OF THE DETAILED TENDER NOTICE/INFO RMATION AND INSTRUCTIONS FOR TENDERERS HAS BEEN PLACED IN THE PAPER BOOK-I AT PAGES 41 TO 75. CLAUSE (F) OF THE DETAILED TENDER NOTICE AT PAGE 4 READS AS UNDER :- (F) CONTRACTOR SHALL MEAN THE PERSON, FIRM OR COMPANY WHO ENTERS INTO CONTRACT, WITH THE CORPORATION & SHALL INCLUDE THEIR EXECUTORS, ADMINISTRATORS, SUCCESSORS AND SUBMITTED ASSIGNEES. AT PAGE 61 OF THE PAPER BOOK-I AND INTERNAL PAGE 21 OF THE DETAILED TENDER NOTICE THE CLAUSE 1.4 READS AS UNDER :- 1.4. THE SPILLWAY CREST GATES OF GOSIKHURD PROJEC T ARE VERY LARGE WITH SUBMERGED TRUNIONS AND THE DESIGN, MANUFACTURE, ERE CTION, OPERATION & MAINTENANCE KNOW-HOW IS NOT READILY AVA ILABLE. IT IS THEREFORE NECESSARY TO DEVELOP SUCH KNOW-HOW FOR SU CH LARGE GATES, WHICH WILL DICTATE TO ROPE IN ALL THESE KNOW -HOW FROM VARIOUS EXPERTS AND CONSULTANTS IN THESE FIELDS BY INVITING THE PUBLIC OFFERS IN THIS WEEK. IT IS ABSOLUTELY NECESSARY TO HAVE A LIAISON IN DES IGN MANUFACTURE, ERECTION, OPERATION & MAINTENANCE AS WELL THESE ACT IVITIES ARE INNOVATIVE AND, THEREFORE, AN INTEGRAL PACKAGE FOR THIS WORK IS NEED OF THIS WORK. THE ENTIRE PACKAGE RECEIVED FROM CONSULTANTS/AGENCI ES/EXPERTS CAN BE STUDIED AND EVALUATED, TO THE REQUIRED NEEDS WIT H ITS APPROPRIATE WEIGHTAGE TO SUIT THE PROJECT REQUIREMENTS AND THIS WORK WILL BE DONE THROUGH FIELD OFFICERS WITH THE HELP OF CENTRA L DESIGN ORGANISATION, NASIK AND PANEL OF EXPERTS ALREADY APPOINTED BY VIDARBHA IRRIGATION DEVELOPMENT CORPORATION. 38 GENERAL CONDITIONS OF THE CONTRACT HAVE ALSO BEEN P ROVIDED IN THE DETAILED TENDER NOTICE WHICH STARTS FROM INTERNAL PAGE 39. CLAUSE 2.6 IS ABOUT PERFORMANCE SECURITY. BY THIS CLAUSE SUCCESSFUL BIDDER SHALL HAVE TO FURNISH A PE RFORMANCE SECURITY, EQUIVALENT TO 10% OF THE CONTRACT AMOUNT AS SPECIFIED. THEREAFTER, I N SUB-CLAUSE (A) OF CLAUSE 2.6 IT HAS BEEN PROVIDED THAT THE BANK GUARANTEE OR IRREVOCABLE LET TER OF CREDIT ISSUED BY A NATIONALIZED/SCHEDULED BANK LOCATED IN STATE OF MAH ARASHTRA HAS TO BE PROVIDED. AT INTERNAL PAGE 67 THE PAYMENT SCHEDULE HAS BEEN PRES CRIBED IN PARA 3.9.3 AND A SPECIFIC PAYMENT HAS BEEN GIVEN @ 2% ON ACCOUNT OF DESIGN DE VELOPMENT AND 4.5% IS FOR OPERATION AND MAINTENANCE FOR SUBSEQUENT THREE YEAR S AFTER 1 ST YEAR OF RESERVOIR FILLING AND IT IS ALSO PROPOSED THAT THIS PAYMENT SHALL BE RELEASED ON QUARTERLY BASIS. AT PAGE 128 TO 269 OF PAPER BOOK-II THE DETAILED TECHNICAL SPEC IFICATION HAS BEEN PLACED. THESE DETAILED TECHNICAL SPECIFICATIONS ARE AFTER ACCEPTI NG THE TENDER BY THE MAHARASHTRA GOVERNMENT. CLAUSE 11.1.0 AT INTERNAL PAGES 135 (PA GE 261) OF PAPER BOOK-II READ AS UNDER :- 11.1.0. RESPONSIBILITY FOR DESIGN THE DRAWINGS SHOW GENERAL ARRANGEMENT DATA FOR THE EQUIPMENT CALLED FOR. THE CONTRACTOR SHALL PREPARE HIS OWN DETAILED DESIGNS AND DRAWINGS AND SHALL SUBMIT THE SAME ALONGWITH THE DESIGN COMPUTATIONS FOR THE APPROVAL OF THE ENGINEER-IN- CHARGE BEFORE PROCEEDING WITH THE FABRICATIONS OF THE EQUIPMENT. THE CONTRACTOR SHALL BE FULLY RESPONSIBLE FOR THE CORRECTNESS AND ADEQUACY OF THE DESIGN. THE CONTRACTOR SHALL PREPARE ALL NECESSARY SHOP DRAWINGS COVERING THE MATERIALS AND EQUIPMENT TO BE FURNISHED UNDER THESE SPECIFICATIONS AND SHALL BE RESPONSIBLE FOR THE CORRECT FITTING OF THE PARTS. 39 AT PAGE 285 OF THE PAPER BOOK II AND INTERNAL PAG E 15 WHICH IS OF BID SCHEDULE AND CONDITIONS OF CONTRACT, IT HAS BEEN PROVIDED BY CLA USE NO. 8 THAT - NO PAYMENT SHALL BE MADE FOR ANY WORK ESTIMATED TO COST LESS THAN RUPEES ONE THOUSAND TILL AFTER TH E WHOLE OF WORK SHALL HAVE BEEN COMPLETED AND A CERTIFICATE OF COMPLETION GIVEN. 15.1. AFTER GOING THROUGH CLAUSES OF AGREEMENT AND THE CLAUSES OF TENDER NOTICE, IT IS AMPLY PROVED THAT VIDC IS NOT HAVING KNOW HOW OF DESIGN AND, THEREFORE, A SPECIFIC CLAUSE WAS PUT IN THE TENDER NOTICE THAT THE CONTRA CT AWARDEE HAS TO DEVELOP THE DESIGN AND HAS TO BE APPROVED BY THE ENGINEER-IN-CHARGE OF THE VIDC AND THEREAFTER THE MANUFACTURING OF GATE HAS TO BE STARTED. 15.2. THERE IS A SECURITY GUARANTEE CLAUSE ALSO AND THERE IS A PAYMENT CLAUSE ALSO AND IN FINAL SCHEDULE OF THE CONTRACT AWARDED TO THE AS SESSEE AGAIN THIS CLAUSE HAS BEEN PROVIDED AS TABULATED ABOVE. 15.3. PAYMENT SCHEDULE HAS ALSO BEEN PROVIDED. IT SHOWS THAT FIRST ASSESSEE HAS TO FILE THE TENDER AS PER SPECIFICATIONS OF THE VIDC, THEN THERE IS ACCEPTANCE OF TENDER AND AFTER ACCEPTING THE TENDER ON BEHALF OF THE AWARDEE, 10% OF THE COST OF CONTRACT AS SECURITY HAS TO BE PROVIDED BY WAY OF BANK GUARANTEE. IN THIS, A SPECIFIC CLAUSE IS THERE THAT 2% OF THE PAYMENT WILL BE GIVEN ON ACCOUNT OF DEVELOPMENT OF DESIGN. IT MEANS THE AWARDEE HAS TO DEVELOP THE DESIGN ITSELF. IF THERE WAS NO DEVE LOPMENT OF DESIGN OR THERE WAS NO NEED OF DEVELOPMENT OF DESIGN THEN THERE COULD NOT HAVE BEEN PAYMENT ON ACCOUNT OF DEVELOPMENT OF DESIGN. TENDER SPECIFICATIONS SPECI FICALLY PROVIDE THE COST OF DESIGN WHICH IS 2%. THERE IS ALSO CLAUSE OF PAYMENT ON AC COUNT OF MAINTENANCE AND RUNNING AND FROM ALL THESE CLAUSES IT IS ESTABLISHED THAT A SSESSEE IS NOT MERELY A CONTRACTOR BUT A DEVELOPER ALSO AND AS PER EXPLANATION ADDED TO SECT ION 80IA THE DEVELOPER IS NOT BARRED 40 FOR DEDUCTION UNDER SECTION 80IA(4). THEREFORE, IN OUR VIEW THE ASSESSEE IS ENTITLED FOR DEDUCTION UNDER SECTION 80IA(4) AS ASSESSEE IS A DE VELOPER. 16. THE LD. CIT D/R HAS RELIED ON THE DECISION OF S PECIAL BENCH IN THE CASE OF B.T. PATIL & SONS AND ON THE DECISION OF JAIPUR BENCH OF THE TRIBUNAL IN THE CASE OF M/S. SHIVA CONSTRUCTION PVT. LTD. DECIDED IN ITA NO. 676 /JP/2009 DATED 11.6.2010 BY WHICH THE DEDUCTION UNDER SECTION 80IA(4) WAS DENIED FOLL OWING THE DECISION OF SPECIAL BENCH IN CASE OF B.T. PATIL & SONS (SUPRA). THIS DECISIO N OF SPECIAL BENCH IN THE CASE OF B.T. PATIL & SONS HAS BEEN OVER RULED NOW BY THE HONBLE BOMBAY HIGH COURT IN THE CASE OF ABG HEAVY INDUSTRIES LTD. (ABG), 322 ITR 323. THER EFORE, THE DECISION OF B.T. PATIL & SONS AND THE DECISION OF THE JAIPUR BENCH OF THE TR IBUNAL IN THE CASE OF M/S. SHIVA CONSTRUCTION PVT. LTD. DOES NOT HOLD GOOD NOW. 16.1. THE LD. D/R HAS STATED THAT THE FACT BEFORE T HE HONBLE BOMBAY HIGH COURT AND THE FACTS BEFORE THE SPECIAL BENCH WERE DIFFERENT. HOWEVER, WE HAVE GONE THROUGH THE ORDER OF SPECIAL BENCH IN CASE OF B.T. PATIL & SONS AND THE HONBLE BOMBAY HIGH COURT IN CASE OF ABG. WE FIND THAT THE ISSUE BEFORE THE HONBLE BOMBAY HIGH COURT WAS IN RESPECT TO DEDUCTION UNDER SECTION 80IA(4) AND THE HONBLE BOMBAY HIGH COURT HAS CLEARLY HELD THAT M/S. ABG IS A DEVELOPER AND ENTIT LED FOR DEDUCTION UNDER SECTION 80IA(4). THIS DECISION OF HONBLE BOMBAY HIGH COUR T HAS BEEN RENDERED ON 29.3.2011 I.E. AFTER THE EXPLANATION ADDED TO SECTION 80IA(4) BY FINANCE ACT, 2007 AND AMENDED BY FINANCE ACT, 2009. 16.2. IN THIS CASE THE ASSESSEE M/S. ABG WAS AWARDE D A CONTRACT FOR SUPPLYING, INSTALLATION, TESTING, COMMISSIONING AND MAINTENANC E OF CONTAINER HANDLING EQUIPMENT ON LEASE FOR A PERIOD OF 10 YEARS FOR LOADING AND UNLO ADING OF CONTAINERS AT THE PORT AND THAT 41 THE CRANES THAT WERE TO BE SUPPLIED BY THE ASSESSEE FORMED A INTEGRAL PART OF THE PORT. THE AO DENIED DEDUCTION UNDER SECTION 80 IA(4) ON ACCOU NT OF CRANES SUPPLIED BY THE ASSESSEE. THE TRIBUNAL ALLOWED THE ISSUE IN FAVOUR OF THE ASSESSEE AND THEREAFTER THE HONBLE BOMBAY HIGH COURT FOLLOWING THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF BAJAJ TEMPO, 188 ITR 23 HELD THAT ASSESSEE IS ENTITLED FOR DEDUCTION UNDER SECTION 80-IA(4) ON ACCOUNT OF SUPPLY OF CRANES. IT HAS BEEN SPECIFICALLY HELD BY HONBLE HIGH COURT THAT ASSESSEE DEVELOPED THE FACILITY ON BOLT BASIS UNDER CONTRACT WITH JNPT. ON THE FULFILLMENT OF THE LEASE OF TEN YEARS, THERE WAS A VESTING IN THE JNPT FREE OF COST. THE FINDING THAT THE ASSESSEE HAS DEVELOPED THE INF RASTRUCTURE FACILITY AND THAT IT WAS ENGAGED IN OPERATING THE CRANES WAS, THEREFORE, BAS ED ON THE MATERIAL ON RECORD. THE FACT THAT THE ASSESSEE WAS ALSO MAINTAINING THE CRANES W AS NOT DISPUTED. THEREFORE, THE ASSESSEE WAS ENTITLED TO THE SPECIAL DEDUCTION UNDE R SECTION 80 IA(4). THE VIEW OF THE AO THAT ASSESSEE WAS MERELY ENGAGED IN THE BUSINESS OF SUPPLY/INSTALLING/TESTING/COMMISSIONING AND MAINTAI NING CRANES AT THE PORT WAS NOT IN THE BUSINESS OF DEVELOPING, MAINTAINING, OPERATING A PO RT WAS FOUND INAPPLICABLE BY THE HONBLE HIGH COURT AS THE HONBLE HIGH COURT HAS HE LD THAT ASSESSEE IS A DEVELOPER. THE ISSUE HAS BEEN DISCUSSED AT GREAT LENGTH BY THE HON BLE HIGH COURT AND THE FACTUAL FINDING HAS BEEN GIVEN IN PARA 25 WHICH READS AS UN DER :- IN THE VIEW WHICH WE HAVE TAKEN, ALL THE ASSESSM ENT YEARS IN QUESTION TO WHICH THIS BATCH OF APPEALS RELATES WOU LD BE GOVERNED BY THE SAME PRINCIPLE. THE SUBSEQUENT AMENDMENT OF SECTION 80- IA(4A) OF THE ACT TO CLARIFY THAT THE PROVISION WOU LD APPLY TO AN ENTERPRISE ENGAGED IN (I) DEVELOPING ; OR (II) OPER ATING AND MAINTAINING ; OR (III) DEVELOPING, OPERATING AND MA INTAINING AN INFRASTRUCTURE FACILITY WAS REFLECTIVE OF A POSITIO N WHICH WAS 42 ALWAYS CONSTRUED TO HOLD THE FIELD. BEFORE THE AME NDMENT THAT WAS BROUGHT ABOUT BY PARLIAMENT BY THE FINANCE ACT OF 2 001, WE HAVE ALREADY NOTED THAT THE CONSISTENT LINE OF CIRCULARS OF THE BOARD POSTULATED THE SAME POSITION. THE AMENDMENT MADE B Y PARLIAMENT TO SECTION 80-IA(4) OF THE ACT SET THE MATTER BEYON D ANY CONTROVERSY BY STIPULATING THAT THE THREE CONDITION S FOR DEVELOPMENT, OPERATION AND MAINTENANCE WERE NOT INT ENDED TO BE CUMULATIVE IN NATURE. FROM THE ABOVE OBSERVATION OF HONBLE HIGH COURT, I T IS CLEARLY AND AMPLY PROVED THAT IF OUT OF THREE CONDITIONS ONE IS SATISFIED EVEN THEN THE ASSESSEE IS ENTITLED FOR DEDUCTION. SUPPOSING AN ENTERPRISE IS A DEVELOPER AND NOT DOIN G THE WORK OF OPERATION AND MAINTENANCE EVEN THEN ENTERPRISE IS ENTITLED FOR DE DUCTION UNDER SECTION 80 IA(4). THEREFORE, IT IS INCORRECT TO SAY THAT THE DECISION OF B.T. PATIL & SONS HAS NOT BEEN OVER RULED BY THE HONBLE BOMBAY HIGH COURT. THE SAME I SSUE WAS BEFORE THE SPECIAL BENCH. THE ISSUE WAS IN RESPECT TO DEDUCTION UNDER SECTION 80IA(4) AND BEFORE THE HONBLE HIGH COURT THE ISSUE WAS IN RESPECT TO DEDUCTION UNDER S ECTION 80 IA(4). THE SPECIAL BENCH IN THAT PARTICULAR CASE I.E. IN CASE OF B.T. PATIL & S ONS HAS HELD THAT ASSESSEE IS NOT ENTITLED FOR DEDUCTION FOR ASSESSMENT YEARS 2000-01 AND 01-0 2. HOWEVER, IT HAS BEEN STATED THAT AFTER ASSESSMENT YEAR 2000-01 THE CASE HAS TO BE SE EN ON THE FACT OF THAT CASE. FOR THESE TWO YEARS, THE SPECIAL BENCH HAS HELD THAT THE ASSE SSEE WAS CONTRACTOR AND, THEREFORE, NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80 IA(4). WHER EAS THE HONBLE BOMBAY HIGH COURT HAS CLEARLY HELD THAT M/S. ABG IS A DEVELOPER WHO I S SUPPLYING THE CRANES AT PORT FOR HANDLING OF SHIPMENTS AND, THEREFORE, THE ASSESSEE IS ENTITLED FOR DEDUCTION UNDER SECTION 80IA(4) BEING A DEVELOPER. 43 17. HERE, IN THE PRESENT CASE THE FACTS ARE ON MORE STRONGER FOOTING AS ASSESSEE HAS TO DEVELOP THE DESIGN OF GATES OF DAM AND THEREAFTER T HEY HAVE TO FIX THE GATES IN THE DAM AND THEY HAVE TO OPERATE AND LOOK AFTER THE MAINTEN ANCE ALSO FOR TWO YEARS. THEREFORE, IN OUR HUMBLE VIEW THE ASSESSEE IS ENTITLED FOR DEDUCT ION UNDER SECTION 80 IA(4) EVEN AFTER THE DECISION OF SPECIAL BENCH IN CASE OF M/S. B.T. PATIL & SONS. 17.1. THE LD. CIT D/R HAS ARGUED THAT THE ASSESSEE IS NOT A DEVELOPER AS HE IS JUST A CONTRACTOR BECAUSE HE PREPARES THE GATES AS PER DES IGN GIVEN BY THE CORPORATION AND THEREAFTER IT FITS THE GATE AND OPERATES ONLY FOR T WO YEARS MEANING THEREBY HE IS JUST FITTING THE GATES AND OPERATING FOR TWO YEARS JUST TO TRAIN THE STAFF OF THE CORPORATION. 17.2. WE HAVE ANALYZED THIS ARGUMENT ALSO AND FOUND THAT THIS ARGUMENT DOES NOT HAVE ANY WEIGHT. FIRST OF ALL IT IS SEEN THAT AS PER CL AUSES OF DETAILED TENDER NOTICE AND AGREEMENT SCHEDULE THE ASSESSEE HAS TO DEVELOP THE DESIGN AS THE CORPORATION DOES NOT HAVE KNOW HOW OF DESIGN OF GATES ON ITS OWN. THERE AFTER THE ASSESSEE FITS THE GATE AND OPERATE AND MAINTAIN FOR TWO YEARS TO TRAIN THE STA FF OF THE CORPORATION. THIS VERY FACT PROVES THAT THE DESIGN IS DEVELOPED BY THE ASSESSEE AND DEVELOPED DESIGN HAS TO BE PERFORMED ON THE SITE BY GIVING TRAINING TO THE STA FF TO OPERATE AND TO MAINTAIN THE GATES FITTED IN THE DAM. THIS PROVES THAT THE VERY DESIG N WAS NOT AVAILABLE WITH THE CORPORATION AND ASSESSEE HAS DEVELOPED ITS OWN DESIGN AND OPERA TING AND MAINTAINING FOR TWO YEARS SO THAT THE STAFF OF THE CORPORATION CAN LEARN THE OPERATION AND MAINTENANCE OF THE SAME. FROM THIS FACT IT IS PROVED BEYOND DOUBT THAT ASSES SEE IS A DEVELOPER AND OPERATING AND MAINTAINING THE SPECIFIED GATES DESIGNED BY THE ASS ESSEE. 17.3. THE LD. D/R HAS ALSO TAKEN A GROUND THAT ASSE SSEE HAS NOT INVESTED ITS OWN FUNDS AS THEY WERE TAKEN FROM THE VIDC. WE HAVE DISCUSSE D VARIOUS CLAUSES OF DETAILED 44 TENDER NOTICE AND THEREAFTER SCHEDULE OF CONTRACT A ND FOUND THAT ON ALLOTTING THE CONTRACT TO THE ASSESSEE, THE ASSESSEE HAS TO GIVE A SECURI TY OF 10% EQUAL TO THE COST OF CONTRACT BEFORE STARTING THE WORK ON THE CONTRACT AWARDED TO THE ASSESSEE. THEREAFTER THE ASSESSEE HAS INVESTED ITS OWN MONEY IN DEVELOPING THE DESIGN OF GATES AND MANUFACTURING THE GATES AFTER APPROVAL OF THE ENGINEER-IN-CHARGE OF T HE VIDC AND THEREAFTER ERECTING THE GATES FOR APPROVAL OF PERFORMANCE OF GATES AND THE N HAS RAISED ITS BILL FOR MAKING THE PAYMENT. AFTER GETTING SATISFIED, THEN ONLY PAYMEN T IS TO BE APPROVED AND MADE. THEREFORE, THIS IS NOT A CASE OF FINANCING THE PROJ ECT BY THE CORPORATION OR REIMBURSEMENT OF EXPENSES BY THE CORPORATION. IT IS THE INVESTME NT OF THE ASSESSEE ONLY AND, THEREFORE, THE ARGUMENT OF LD. D/R DOES NOT HAVE WEIGHT ON THI S POINT ALSO. 17.4. THE LD. COUNSEL HAS EXPLAINED THE VARIOUS PAR AS OF SPECIAL BENCH DECISION AND SHOWED THAT SOME OF THE PARAS ARE CONTRADICTORY WIT H EACH OTHER AND HAS ALSO EXPLAINED VARIOUS DISCREPANCIES. WE ARE NOT HERE TO SEE THE CONTRADICTION OR DISCREPANCIES IN THE DECISION OF SPECIAL BENCH. THEREFORE, WE ARE NOT IN CLINED TO COMMENT ON THOSE CONTRADICTIONS AND THE DISCREPANCIES POINTED OUT BY THE LD. A/R, AS WE HAVE TO SEE THE RATIO OF THE DECISION AND THE RATIO OF THE DECISION WAS AGAINST THE ASSESSEE. IF THE DECISION OF HONBLE BOMBAY HIGH COURT IS NOT THERE THEN PERH APS THE DECISION OF SPECIAL BENCH MAY HAVE MUCH WEIGHT FOR DECIDING THE ISSUE HERE IN HAND. HOWEVER, NOW AS THE DECISION OF SPECIAL BENCH HAS BEEN OVER RULED BY HONBLE BOM BAY HIGH COURT, THEREFORE, WE FIND THAT EVEN ON LEGAL ASPECT THE ASSESSEE IS ENTITLED FOR DEDUCTION UNDER SECTION 80IA(4) AS WE HAVE HELD THAT ASSESSEE IS A DEVELOPER. 17.5. WE FURTHER NOTED THAT THE RAJKOT BENCH OF THE TRIBUNAL IN THE CASE OF KCL BEL TARMAT JV. VS. ITO DECIDED IN ITA NO. 1112/RJT/2010 FOR ASSESSMENT YEAR 2007-08 VIDE 45 ITS ORDER DATED 23.9.2010 HAVE HELD THAT THE ASSESS EE IS ENTITLED FOR DEDUCTION UNDER SECTION 80 IA(4). WHILE DECIDING THE ISSUE IN FAVO UR OF THE ASSESSEE, THE RAJKOT BENCH HAS TAKEN INTO CONSIDERATION THE DECISION OF SPECIA L BENCH IN CASE OF B.T. PATIL & SONS, 126 TTJ 577 AND OTHER DECISIONS. THE TRIBUNAL HAS ALSO TAKEN INTO CONSIDERATION THE EXPLANATION ADDED TO SECTION 80IA(4) BY FINANCE ACT , 2007 AND AMENDED BY FINANCE ACT, 2009 WHILE DECIDING THE ISSUE IN FAVOUR OF THE ASSESSEE. WHILE DECIDING THE APPEAL, THE TRIBUNAL HAS ALSO TAKEN INTO CONSIDERATION THE DECISION OF JAIPUR BENCH IN CASE OF ASSESSEE FOR A.Y. 2003-04 AND 2004-05 AND AT PAGE 1 0 HAS OBSERVED THAT IN CASE OF M/S. OM METALS INFRA PROJECTS LTD. (SUPRA) IT IS HELD TH AT IF IT IS THE ASSESSEE MOBILIZING PEOPLE, PLANTS, TECHNICAL EXPERTISE ETC., THE ASSESSEE CAN BE SAID TO BE A DEVELOPER AND THAT THE ASSESSEE CANNOT BE DENIED DEDUCTION FROM THE PROFIT S OF DEVELOPING THE INFRASTRUCTURE FACILITY THOUGH IT MAY NOT OPERATE OR MAINTAIN THE SAME, PARTICULARLY IN VIEW OF THE INSERTION OF THE WORD OR IN SECTION 80IA(4). THE DECISION OF HONBLE SUPREME COURT IN THE CASE OF GUJARAT INDUSTRIAL DEVELOPMENT CORPORAT ION AND OTHERS, 227 ITR 414 (SC) (AT PAGE 417) WAS ALSO TAKEN INTO CONSIDERATION, COPY O F THE DECISION OF THE TRIBUNAL AS WELL AS THE DECISION OF HONBLE SUPREME COURT ARE PLACED IN THE PAPER BOOK AT PAGES 406 TO 423. 17.3. IN CASE OF GUJARAT INDUSTRIAL DEVELOPMENT COR PORATION AND ORS, 227 ITR 414 (SC), THE HONBLE SUPREME COURT HAS OBSERVED THAT T HE WORD DEVELOPMENT IN SECTION 10(20A) OF THE I.T. ACT SHOULD BE UNDERSTOOD IN ITS WIDE SENSE. THERE IS NO WARRANT TO EXCLUDE ALL DEVELOPMENT PROGRAMMES RELATING TO ANY INDUSTRY FROM THE PURVIEW OF THE WORD DEVELOPMENT IN THE SAID CLAUSE. THERE IS NO INDICATION IN THE ACT THAT DEVELOPMENT ENVISAGED THEREIN SHOULD BE CONFIRMED T O NON-INDUSTRIAL ACTIVITIES. 46 DEVELOPMENT OF A PLACE CAN BE ACCELERATED THROUGH V ARIETIES OF SCHEMES AND ESTABLISHMENT OF INDUSTRIES IS ONE OF THE MODES OF DEVELOPING AN AREA. 17.4. IT HAS BEEN FURTHER OBSERVED THAT ONE OF THE REASONS FOR INCORPORATING A SPECIFIC PROVISION FOR EXEMPTION FROM INCOME-TAX SUCH AS SEC TION 10(20A) IS TO PROTECT PUBLIC BODIES CREATED UNDER LAW FOR ACHIEVING THE PURPOSE OF DEVELOPING URBAN OR RURAL AREAS FOR PUBLIC GOOD. WHEN THE OBJECT IS SUCH, AN INTERPRET ATION WHICH WOULD PRESERVE IT SHOULD BE ACCEPTED EVEN IF THE PROVISION IS CAPABLE OF MOR E THAN ONE INTERPRETATION. THEREAFTER, THE HONBLE APEX COURT BY REVERSING THE DECISION OF HONBLE HIGH COURT HAS HELD THAT THE SCHEME OF THE GUJARAT INDUSTRIAL DEVELOPMENT AC T, 1962, INDICATED THAT A CORPORATION SET UP THEREUNDER WAS TO CHALK OUT PLANS FOR DEVELO PMENT OF INDUSTRIAL AREAS AND INDUSTRIAL ESTATES IN DIFFERENT PLACES WHICH MIGHT BE LOCATE D IN CITIES, TOWNS OR VILLAGES. SUCH SCHEMES NORMALLY INVOLVED PLANNING AND DEVELOPMENT OF SUCH AREAS. THEREFORE, THE AUTHORITIES CONSTITUTED BY LAW FOR FACILITATING ALL KINDS OF DEVELOPMENT OF CITIES, TOWNS AND VILLAGES FOR PUBLIC PURPOSES SHOULD NOT BE SUBJECTE D TO THE LIABILITY TO PAY INCOME-TAX.. THEREFORE, THE STATE INDUSTRIAL DEVELOPMENT CORPORA TION WAS ENTITLED TO EXEMPTION FROM TAX UNDER SECTION 10(20A) OF THE I.T. ACT. 17.5. IN THIS CASE THE AO DISALLOWED THE CLAIM OF E XEMPTION UNDER SECTION 10(20A) OF THE ACT. THE AAC ALLOWED THE CLAIM OF THE ASSESSEE . HOWEVER, THE TRIBUNAL REVERSED THE ORDER OF APPELLATE ASSISTANT COMMISSIONER AND T HE HONBLE HIGH COURT CONFIRMED THE ORDER OF THE TRIBUNAL ON THE GROUND THAT THOUGH INDUSTRIAL ACTIVITY WAS ONE OF THE FACETS OF GENERAL DEVELOPMENT, SINCE DEVELOPMENT OF AN AREA WOULD REQUIRE ROADS, BUILDINGS, SANITATION, PARKS, SPOTS, EDUCATIONAL IN STITUTIONS AND SEVERAL OTHER AMENITIES, A 47 CITY OR TOWN OR VILLAGE COULD BE WELL DEVELOPED WIT HOUT ANY INDUSTRY. THIS FINDING OF HONBLE GUJARAT HIGH COURT HAS BEEN REJECTED BY THE HONBLE APEX COURT AS ABOVE. 17.6. AFTER GOING THROUGH THE DECISION OF HONBLE A PEX COURT IT IS SEEN THAT THE HONBLE APEX COURT HAS ALLOWED THE EXEMPTION TO THE STATE INDUSTRIAL DEVELOPMENT CORPORATION BY HOLDING THAT THE INDUSTRIES DOING TH E WORK OF DEVELOPMENT OF AN AREA. THE RATIO OF THE DECISION CAN BE APPLIED ON THE FAC TS OF THE PRESENT CASE ALSO AS THE INTERPRETATION OF PROVISIONS OF EXPLANATION TO SECT ION 80IA HAS TO BE SEEN IN A BROADER SPECTRUM. INTERPRETATION OF EXPLANATION SHOULD BE INTERPRETED IN A HARMONIOUS WAY AND NOT ON A RIGID WAY. THE ASSESSEE IS DEVELOPING THE DESIGN OF GATES AND THEREAFTER GATES ARE ERECTED ON THE GATES OF DAM AND THEY ARE OPERAT ED AND MAINTAINED BY THE ASSESSEE FOR TWO YEARS. THEREFORE, IN OUR VIEW, IN VIEW OF THE RATIO OF HONBLE SUPREME COURT ALSO THE CLAIM OF THE ASSESSEE IS ALLOWABLE. 18. WE FURTHER NOTED THAT THE PUNE BENCH OF THE TRI BUNAL IN THE CASE OF M/S. LAXMI CIVIL ENGG. PVT. LTD. IN ITA NO. 766/PN/2009 AND OT HERS, HAS DECIDED THE ISSUE IN FAVOUR OF THE ASSESSEE BY FOLLOWING THE DECISION OF HONBL E BOMBAY HIGH COURT IN THE CASE OF M/S. ABG (SUPRA). THE DECISION OF SPECIAL BENCH IN CASE OF B.T. PATIL & SONS WAS CITED BEFORE THE PUNE BENCH AND IT WAS HELD THAT THE DECI SION OF SPECIAL BENCH HAS BEEN REVERSED BY THE HONBLE BOMBAY HIGH COURT IN THE CA SE OF M/S. ABG AND, THEREFORE, THE ASSESSEE IS ENTITLED FOR DEDUCTION UNDER SECTION 80 IA(4). IN THIS CASE ALSO THE DEPARTMENT DISALLOWED DEDUCTION UNDER SECTION 80IA(4) BY HOLDI NG THAT ASSESSEE IS A CONTRACTOR AND FAILED TO COMPLY WITH ALL THE CONDITIONS SPECIFIED IN SUB CLAUSE OF SECTION 80 IA(4). THEREAFTER MATTER REACHED TO THE TRIBUNAL AND THE T RIBUNAL TAKING INTO CONSIDERATION THE 48 DECISION OF SPECIAL BENCH IN CASE OF B.T. PATIL & S ONS AND THE DECISION OF HONBLE BOMBAY HIGH COURT IN CASE OF M/S. ABG HELD THAT THE ASSESSEE IS A DEVELOPER AND ENTITLED FOR DEDUCTION UNDER SECTION 80IA(4). THIS DECISION WAS RENDERED ON 8.6.2011 WHICH IS AFTER THE EXPLANATION ADDED BY FINANCE ACT , 2007 AND AMENDED BY FINANCE ACT, 2009. 19. WE HAVE ALSO CONSIDERED THE BOARD CIRCULAR ALSO AND FOUND THAT THE BOARD CIRCULAR ALSO DOES NOT SAY THAT THE ENTERPRISES WHO ARE DEVELOPER ARE NOT ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA(4) EVEN AFTER THE EXPL ANATION ADDED BY FINANCE ACT, 2007 AND AMENDED BY FINANCE ACT, 2009. THE CONTENTS OF BOARD CIRCULAR HAVE BEEN REPRODUCED SOMEWHERE ABOVE IN THIS ORDER WHILE TAK ING INTO CONSIDERATION THE WRITTEN SUBMISSIONS OF THE LD. A/R. 19.1. IN VIEW OF ALL THESE FACTS AND CIRCUMSTANCES AND IN VIEW OF THE VARIOUS JUDICIAL PRONOUNCEMENTS DISCUSSED ABOVE, WE ARE OF THE CONSI DERED VIEW THAT ASSESSEE IS A DEVELOPER AND ELIGIBLE FOR DEDUCTION UNDER SECTION 80IA(4) EVEN AFTER EXPLANATION ADDED IN SECTION 80IA(4) BY FINANCE ACT, 2007 AND AMENDED BY FINANCE ACT, 2009 WITH RETROSPECTIVE EFFECT FROM 1.4.2000. ACCORDINGLY WE ALLOW THIS GROUND OF THE ASSESSEE AND DIRECT THE DEPARTMENT TO ALLOW THE DEDUCTION CLAIME D UNDER SECTION 80IA(4) TO THE ASSESSEE. 20. GROUND NO. 2 RELATES TO CONFIRMING THE DISALLO WANCE OF RS. 1,00,000/- ON ACCOUNT OF TRAVELING EXPENSES AND RS. 1,00,000/- ON ACCOUNT OF TELEPHONE EXPENSES AND GROUND NO. 3 RELATES TO CONFIRMING THE DISALLOWANCE OF RS. 1,22,000/- BEING PRIOR PERIOD EXPENSES. 49 21. RS. 1,00,000/- EACH ON ACCOUNT OF TRAVELING EXP ENSES AND TELEPHONE EXPENSES WERE DISALLOWED BY THE AO OUT OF TOTAL EXPENSES OF RS. 1 ,56,76,474/- ON ACCOUNT OF TRAVELING EXPENSES AND RS. 48,69,874/- ON ACCOUNT OF TELEPHON E EXPENSES RESPECTIVELY. THE LD. CIT (A) CONFIRMED THESE DISALLOWANCES. 22. AFTER CONSIDERING THE ORDERS OF THE AO AND LD. CIT (A) WE FIND THAT AO HAS DISALLOWED THESE EXPENSES OF RS. 1,00,000/- EACH ON ACCOUNT OF TRAVELING EXPENSES AND TELEPHONE EXPENSES ON THE GROUND THAT ASSESSEE COUL D NOT PROVE THAT ENTIRE EXPENSES WERE FOR THE PURPOSE OF BUSINESS ONLY. HOW THE EXPENSES ARE NOT FOR BUSINESS PURPOSES, AO HAS NOT BROUGHT ANY MATERIAL ON RECORD. THE EXPENS ES INCURRED BY ASSESSEE ARE HUGE I.E. RS. 1.56 CRORES OR ODD ON ACCOUNT OF TRAVELING EXPE NSES AND RS. 48.69 LACS OR ODD ON ACCOUNT OF TELEPHONE EXPENSES. FULL DETAILS WERE F ILED. THEREFORE, WITHOUT ANY MATERIAL, ADHOC DISALLOWANCE OF RS. 1,00,000/- EACH, IN OUR V IEW IS WITHOUT ANY BASIS. THEREFORE, WE ALLOW BOTH THESE GROUNDS OF THE ASSESSEE BY DELE TING THE ADDITION OF RS. 1,00,000/- EACH ON ACCOUNT OF TELEPHONE AND TRAVELING EXPENSES . 23. REGARDING DISALLOWANCE OF EXPENSES BEING PRIOR PERIOD EXPENSES, THE ASSESSEE WAS CALLED FOR DETAILS WITH EVIDENCE IN SUPPORT OF THE CLAIM. HOWEVER, ASSESSEE DID NOT PRODUCE ANY EVIDENCE IN SUPPORT OF HIS CLAIM. THERE FORE, THE EXPENDITURES WERE DISALLOWED BY AO AND CONFIRMED BY LD. CIT (A). 24. AFTER CONSIDERING THE SUBMISSIONS, WE FIND NO INFIRMITY IN THE FINDING OF LD. CIT (A) AS NO DETAILS HAVE BEEN FURNISHED IN RESPECT TO PRIOR PERIOD EXPENSES THAT WHETHER THEY WERE CLAIMED IN EARLIER YEAR. THEREFORE, WITH OUT GOING INTO DETAIL FURTHER, WE CONFIRM THE ORDER OF LD. CIT (A) IN THIS RESPECT. 25. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWE D IN PART. 50 26. THE ORDER IS PRONOUNCED IN THE OPEN COURT ON 05 .08.2011. SD/- SD/- ( N.L. KALRA ) ( R.K. GUPTA ) ACCOUNTANT MEMBER JUDICIAL MEMBER JAIPUR, D/- COPY FORWARDED TO :- OM METALS INFRAPROJECTS LTD., JAIPUR. THE ADDL.CIT RANGE-2, JAIPUR. THE CIT (A) THE CIT THE D/R GUARD FILE (ITA NO. 911/JP/2010) BY ORDER, AR ITAT JAIPUR. 51 ITA 911-10 D/R THE LD. CIT D/R HAS ARGUED THAT THE ASSESSEE IS NO T A DEVELOPER AS HE IS JUST A CONTRACTOR BECAUSE HE PREPARES THE GATES AS PER DES IGN GIVEN BY THE CORPORATION AND THEREAFTER HE FITS THE GATE AND OPERATES ONLY FOR T WO YEARS MEANING THEREBY HE IS JUST FITTING THE GATES AND OPERATING FOR TWO YEARS JUST TO TRAIN THE STAFF OF THE CORPORATION. WE HAVE ANALYZED THIS ARGUMENT AND FOUND THAT THIS ARG UMENT DOES NOT HAVE ANY WEIGHT. FIRST OF ALL IT IS SEEN THAT AS PER CLAUSES OF DETA ILED TENDER NOTICE AND AGREEMENT SCHEDULE THE ASSESSEE HAS TO DEVELOP THE DESIGN AS THE CORPO RATION HAS NO DESIGN OF ITS OWN. THEREAFTER THE ASSESSEE FITS THE GATE AND OPERATE A ND MAINTAIN FOR TWO YEARS TO TRAIN THE STAFF OF THE CORPORATION. THIS VERY FACT PROVES TH AT THE DESIGN IS DEVELOPED BY THE ASSESSEE AND DEVELOPED DESIGN HAS TO BE PERFORMED O N THE SITE BY GIVING TRAINING TO THE STAFF TO OPERATE AND TO MAINTAIN THE DESIGN DEVELOP ED BY THE ASSESSEE IN RESPECT TO GATES FITTED IN THE DAM. THIS PROVES THAT THE VERY DESIG N WAS NOT AVAILABLE WITH THE CORPORATION AND ASSESSEE HAS DEVELOPED ITS OWN DESIGN AND OPERA TING AND MAINTAINING FOR TWO YEARS SO THAT THE STAFF OF THE CORPORATION CAN LEARN THE OPERATION AND MAINTENANCE OF THE SAME. FROM THIS FACT IT IS PROVED BEYOND THAT ASSESSEE IS A DEVELOPER AND OPERATING AND MAINTAINING THE SPECIFIED GATES DESIGNED BY THE ASS ESSEE. 52 ITA 911-10 GROUND NO. 2 RELATES TO CONFIRMING THE DISALLOWAN CE OF RS. 1,00,000/- ON ACCOUNT OF TRAVELING EXPENSES AND RS. 1,00,000/- ON ACCOUNT OF TELEPHONE EXPENSES AND GROUND NO. 3 RELATES TO CONFIRMING THE DISALLOWANCE OF RS. 1,22,000/- BEING PRIOR PERIOD EXPENSES. RS. 1,00,000/- EACH ON ACCOUNT OF TRAVELING EXPENS ES AND TELEPHONE EXPENSES WERE DISALLOWED BY THE AO OUT OF TOTAL EXPENSES OF RS. 1 ,56,76,474/- ON ACCOUNT OF TRAVELING EXPENSES AND RS. 48,69,874/- ON ACCOUNT OF TELEPHON E EXPENSES RESPECTIVELY. THE LD. CIT (A) CONFIRMED THESE DISALLOWANCES. AFTER CONSIDERING THE ORDERS OF THE AO AND LD. CIT (A) WE FIND THAT AO HAS DISALLOWED THESE EXPENSES OF RS. 1,00,000/- EACH ON ACCOUNT OF TRAVELING EXPENSES AND TELEPHONE EXPENSES ON THE GROUND THAT ASSESSEE COUL D NOT PROVE THAT ENTIRE EXPENSES WERE FOR THE PURPOSE OF BUSINESS ONLY. HOW THE EXPENSES ARE NOT FOR BUSINESS PURPOSES, AO HAS NOT BROUGHT ANY MATERIAL ON RECORD. THE EXPENS ES INCURRED BY ASSESSEE ARE HUGE I.E. RS. 1.56 CRORES OR ODD ON ACCOUNT OF TRAVELING EXPE NSES AND RS. 48.69 LACS OR ODD ON ACCOUNT OF TELEPHONE EXPENSES. FULL DETAILS ARE PR EPARED. THEREFORE, WITHOUT ANY MATERIAL, ADHOC DISALLOWANCE OF RS. 1,00,000/- EACH , IN OUR VIEW IS WITHOUT ANY BASIS. THEREFORE, WE ALLOW BOTH THESE GROUNDS OF THE ASSES SEE BY DELETING THE ADDITION OF RS. 1,00,000/- EACH ON ACCOUNT OF TELEPHONE AND TRAVELI NG EXPENSES. 53 REGARDING DISALLOWANCE OF EXPENSES BEING PRIOR PER IOD EXPENSES, THE ASSESSEE WAS CALLED FOR DETAILS WITH EVIDENCE IN SUPPORT OF THE CLAIM. HOWEVER, ASSESSEE DID NOT PRODUCE ANY EVIDENCE IN SUPPORT OF HIS CLAIM. THERE FORE, THE EXPENDITURES WERE DISALLOWED BY AO AND CONFIRMED BY LD. CIT (A). AFTER CONSIDERING THE SUBMISSIONS, WE FIND NO INF IRMITY IN THE FINDING OF LD. CIT (A) AS NO DETAILS HAVE BEEN FURNISHED IN RESPECT TO PRIOR PERIOD EXPENSES THAT WHETHER THEY WERE CLAIMED IN EARLIER YEAR. THEREFORE, WITH OUT GOING INTO DETAIL FURTHER, WE CONFIRM THE ORDER OF LD. CIT (A) IN THIS RESPECT. IN THE RESULT, APPEAL OF THE ASSESSEE IS ALLOWED I N PART. 54 PARA 1. IN CASE OF GUJARAT INDUSTRIAL DEVELOPMENT CORPORAT ION AND ORS, 227 ITR 414 (SC), THE HONBLE SUPREME COURT HAS OBSERVED THAT T HE WORD DEVELOPMENT IN SECTION 10(20A) OF THE I.T. ACT SHOULD BE UNDERSTOOD IN ITS WIDE SENSE. THERE IS NO WARRANT TO EXCLUDE ALL DEVELOPMENT PROGRAMMES RELATING TO ANY INDUSTRY FROM THE PURVIEW OF THE WORD DEVELOPMENT IN THE SAID CLAUSE. THERE IS NO INDICATION IN THE ACT THAT DEVELOPMENT ENVISAGED THEREIN SHOULD BE CONFIRMED T O NON-INDUSTRIAL ACTIVITIES. DEVELOPMENT OF A PLACE CAN BE ACCELERATED THROUGH V ARIETIES OF SCHEMES AND ESTABLISHMENT OF INDUSTRIES IS ONE OF THE MODES OF DEVELOPING AN AREA. // IT HAS BEEN FURTHER OBSERVED THAT ONE OF THE REA SONS FOR INCORPORATING A SPECIFIC PROVISION FOR EXEMPTION FROM INCOME-TAX SUCH AS SEC TION 10(20A) IS TO PROTECT PUBLIC BODIES CREATED UNDER LAW FOR ACHIEVING THE PURPOSE OF DEVELOPING URBAN OR RURAL AREAS FOR PUBLIC GOOD. WHEN THE OBJECT IS SUCH, AN INTERPRET ATION WHICH WOULD PRESERVE IT SHOULD BE ACCEPTED EVEN IF THE PROVISION IS CAPABLE OF MOR E THAN ONE INTERPRETATION. THEREAFTER, THE HONBLE APEX COURT BY REVERSING THE DECISION OF HONBLE HIGH COURT HAS HELD THAT THE SCHEME OF THE GUJARAT INDUSTRIAL DEVELOPMENT AC T, 1962, INDICATED THAT A CORPORATION SET UP THEREUNDER WAS TO CHALK OUT PLANS FOR DEVELO PMENT OF INDUSTRIAL AREAS AND INDUSTRIAL ESTATES IN DIFFERENT PLACES WHICH MIGHT BE LOCATE D IN CITIES, TOWNS OR VILLAGES. SUCH SCHEMES NORMALLY INVOLVED PLANNING AND DEVELOPMENT OF SUCH AREAS. THEREFORE, THE 55 AUTHORITIES CONSTITUTED BY LAW FOR FACILITATING ALL KINDS OF DEVELOPMENT OF CITIES, TOWNS AND VILLAGES FOR PUBLIC PURPOSES SHOULD NOT BE SUBJECTE D TO THE LIABILITY TO PAY INCOME-TAX.. THEREFORE, THE STATE INDUSTRIAL DEVELOPMENT CORPORA TION WAS ENTITLED TO EXEMPTION FROM TAX UNDER SECTION 10(20A) OF THE I.T. ACT. IN THIS CASE THE AO DISALLOWED THE CLAIM OF EXEMPT ION UNDER SECTION 10(20A) OF THE ACT. THE AAC ALLOWED THE CLAIM OF THE ASSESSEE . HOWEVER, THE TRIBUNAL REVERSED THE ORDER OF APPELLATE ASSISTANT COMMISSIONER AND T HE HONBLE HIGH COURT CONFIRMED THE ORDER OF THE TRIBUNAL ON THE GROUND THAT THOUGH INDUSTRIAL ACTIVITY WAS ONE OF THE FACETS OF GENERAL DEVELOPMENT, SINCE DEVELOPMENT OF AN AREA WOULD REQUIRE ROADS, BUILDINGS, SANITATION, PARKS, SPOTS, EDUCATIONAL IN STITUTIONS AND SEVERAL OTHER AMENITIES, A CITY OR TOWN OR VILLAGE COULD BE WELL DEVELOPED WIT HOUT ANY INDUSTRY. THIS FINDING OF HONBLE GUJARAT HIGH COURT HAS BEEN REJECTED BY THE HONBLE APEX COURT AS ABOVE. AFTER GOING THROUGH THE DECISION OF HONBLE APEX C OURT IT IS SEEN THAT THE HONBLE APEX COURT HAS ALLOWED THE EXEMPTION TO THE STATE INDUSTRIAL DEVELOPMENT CORPORATION BY HOLDING THAT THE INDUSTRIES DOING TH E WORK OF DEVELOPMENT OF AN AREA. THE RATIO OF THE DECISION CAN BE APPLIED ON THE FAC TS OF THE PRESENT CASE ALSO AS THE INTERPRETATION OF PROVISIONS OF EXPLANATION TO SECT ION 80IA HAS TO BE SEEN IN A BROADER SPECTRUM. INTERPRETATION OF EXPLANATION SHOULD BE INTERPRETED IN A HARMONIOUS WAY AND NOT ON A RIGID WAY. THE ASSESSEE IS DEVELOPING THE DESIGN OF GATES AND THEREAFTER GATES ARE ERECTED ON THE GATES OF DAM AND THEY ARE OPERAT ED AND MAINTAINED BY THE ASSESSEE FOR TWO YEARS. THEREFORE, IN OUR VIEW, IN VIEW OF THE RATIO OF HONBLE SUPREME COURT ALSO THE CLAIM OF THE ASSESSEE IS ALLOWABLE. 56 PARA 2. THE LD. D/R HAS TAKEN A GROUND THAT ASSESSEE HAS N OT INVESTED ITS OWN FUNDS AS THEY WERE TAKEN FROM THE VIDC. WE HAVE DISCUSSED V ARIOUS CLAUSES OF DETAILED TENDER NOTICE AND THEREAFTER SCHEDULE OF CONTRACT AND FOUN D THAT ON ALLOTTING THE CONTRACT TO THE ASSESSEE, THE ASSESSEE HAS TO GIVE A SECURITY OF 1 0% EQUAL TO THE COST OF CONTRACT BEFORE STARTING THE WORK ON THE CONTRACT AWARDED TO THE AS SESSEE. THEREAFTER THE ASSESSEE HAS INVESTED ITS OWN MONEY IN DEVELOPING THE DESIGN AND GATES AND MANUFACTURING THE GATE AFTER APPROVAL OF THE ENGINEER-IN-CHARGE OF THE VID C AND THEREAFTER ERECTING THE GATES FOR APPROVAL OF PERFORMANCE OF GATES AND THEN HAS RAISED ITS BILL FOR MAKING THE PAYMENT. AFTER GETTING SATISFIED, THEN ONLY PAYMENT IS TO BE APPROVED AND THEN THE PAYMENT IS MADE. THEREFORE, THIS IS NOT A CASE OF FINANCING T HE PROJECT BY THE CORPORATION OR REIMBURSEMENT OF EXPENSES BY THE CORPORATION. IT I S THE INVESTMENT OF THE ASSESSEE ONLY AND, THEREFORE, THE ARGUMENT OF LD. D/R DOES NOT HA VE MUCH WEIGHT ON THIS POINT. 57 FINANCE ACT, 2007 : EXPLANATION : FOR THE REMOVAL OF DOUBTS, IT IS HE REBY DECLARED THAT NOTHING CONTAINED IN THIS SECTION SHALL APPLY TO A PERSON WHO EXECUTES A WORKS CONTRACT ENTERED INTO WITH THE UNDERTAKING OR ENTERPRISE, AS THE CASE MAY BE. FINANCE ACT, 2009 : EXPLANATION : FOR THE REMOVAL OF DOUBTS, IT IS HE REBY DECLARED THAT NOTHING CONTAINED IN THIS SECTION SHALL APPLY IN RELATION TO A BUSINESS REFERRED TO IN SUB-SECTION (4) WHICH IS IN THE NATURE OF A WORKS CONTRACT AWARDED BY ANY PERSO N (INCLUDING THE CENTRAL OR STATE GOVERNMENT) AND EXECUTED BY THE UNDERTAKING OR ENTE RPRISE REFERRED TO IN SUB-SECTION (1).
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