DCIT Vs Eco Protection Engineers Private Limited (ITAT Chennai)
EPC Contractor Is Not a “Mere Contractor” Where It Designs, Develops and Bears Project Risks – Section 80-IA Deduction Allowed
Summary: The Chennai Bench of the Income Tax Appellate Tribunal has held that an enterprise executing Government infrastructure projects cannot be denied deduction under Section 80-IA(4) merely because it is described as a “contractor” in the agreement. Where the assessee undertakes the complete responsibility for design, engineering, procurement, construction, erection, testing, commissioning and maintenance, and also bears substantial financial, technical and performance risks, it performs the role of a developer of infrastructure facilities and not that of a mere works contractor.
The assessee, Eco Protection Engineers Private Limited, was engaged in executing multidisciplinary engineering and turnkey contracts in the field of water supply, sewage treatment and industrial effluent management. For Assessment Year 2017-18, it filed its return declaring a total income of Rs.4.75 crore and book profit of Rs.6.54 crore under Section 115JB. The assessee claimed deduction of Rs.1,96,78,063 under Section 80-IA(4) in respect of profits earned from four infrastructure projects executed at Rajkot, Periyakulam, Aizawl and Agartala for Government and State Government agencies. The gross receipts from these eligible projects aggregated to approximately Rs.32.01 crore. The prescribed audit report in Form 10CCB had also been filed within the due date.
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