CIT Vs Patel Engg. Ltd. (Bombay High Court)
The appeals before the Bombay High Court arose from orders of the Income Tax Appellate Tribunal (ITAT) allowing deduction under Section 80-IA(4) of the Income Tax Act, 1961 to the assessee for Assessment Years 2000–01 and 2001–02. The central issue was whether the assessee qualified as a “developer” of infrastructure facilities and was thus eligible for deduction, or whether it was merely a contractor executing works, as contended by the Revenue.
The assessee, engaged in civil engineering projects, undertook construction activities relating to the Koyna Project in Maharashtra and the Srisailam Project in Andhra Pradesh. It claimed deduction under Section 80-IA(4) on profits derived from these projects, asserting that they were infrastructure projects developed by it. The Assessing Officer rejected the claim, stating that the assessee did not satisfy the statutory conditions. The Revenue argued that the projects were owned and funded by the respective State Governments, and the assessee was only a contractor paid periodically for execution of work, without ownership, investment risk, or control over the infrastructure.
The Commissioner of Income Tax (Appeals) upheld the disallowance, agreeing that the assessee had not entered into agreements for developing infrastructure facilities as contemplated under the provision and had not undertaken development on its own. However, the ITAT reversed these findings and allowed the deduction, holding that the assessee fulfilled the conditions under Section 80-IA(4).
